Moving/ Preparing for your move/ The credit check

Credit files are maintained by credit bureaus, which build a record of your credit history based on information given to them by creditors such as banks and credit card companies.

There are three credit bureaus in Canada: Equifax Canada, Trans Union Canada and Northern Credit Bureaus. The credit bureaus will not release your information without your written consent. With your written permission, a landlord can receive a detailed report from a credit bureau. The report helps the landlord decide if you are a good credit risk, with the prime concern being your ability to pay the rent each month in full and on time.

Understanding your credit rating

You've likely heard people talk about credit ratings, which are numerical scores that creditors use to assess your credit worthiness. Credit ratings are calculated each time someone (a lender or a potential landlord) requests one.

The formula used to calculate your rating is based on the information in your credit file. The scoring systems award points for each demonstration of responsible credit use. Your credit rating is the sum of these points.

Three main systems - Beacon, Empirica, and FICO® Score - can be used to calculate your credit score. The system used will depend upon on which bureau issued your file and who will be using it. Information on Equifax files is calculated as a Beacon score. Information on TransUnion files is calculated as an Empirica score. Banks and other lenders tend to use these scores. A FICO® score is a credit rating provided directly by Equifax to individuals and it allows people to gauge their credit rating for themselves.

No history makes assessment difficult

If you have never had a loan or a credit card, prospective landlords will have little or no information to review in your credit file. Although an empty file is not as bad as a poor credit file, an empty file tells prospective landlords nothing about any possible financial risks of renting to you. That's why establishing a good credit file is crucial.

If you are a first-time renter, have had credit problems in the past or do not have a credit rating, you may need a guarantor's letter from a parent or close friend stating that the guarantor will assume the risk if the you fail to pay the rent.

How do I get a good rating?

Be sure to make loan and bill payments and minimum credit card payments on time. These timely payments will be reflected in your credit file and will demonstrate that you can use credit responsibly. As a result, your credit rating will be favourable each time it's calculated.

Consistently missing payments, or making late payments, will lower your rating. Your credit rating will change over time, based on how you use your money and credit. It may take months or years of demonstrating good credit to fix damage caused by poor credit repayment in the past.

How long is negative information kept on file for?

Each credit agency sets its own timelines for removing information from a file. In general, both positive and negative information remains on file for six years. Information on the date that the credit was granted also remains in your file. In other words, if you have had a credit card for twenty years, only the last six years of your payment history - good and bad - will remain on file. However, since the account's activation date is included in your file, anyone looking at it will be able to see that you have had the credit card account for twenty years.

Negative information, such as court judgements or late debt payments, is typically removed six years after the filing date. However, exceptional conditions are in effect regarding the amount of time that judgements are kept on file in Prince Edward Island (in PEI, information about judgements is either removed seven years after the date satisfied (the date when the money owed has been paid) or ten years from the date filed). Bankruptcies typically remain on file for six years following the date of discharge; however, there is some variance depending on the province or territory in question. In addition, bankruptcy information will remain on file for a longer period of time if there has been more than one bankruptcy.

Checking your file is vital

Because errors and omissions do occur on credit reports, it is a good idea to check your file from time to time. Anyone can request a copy of their credit file from the credit bureaus via mail or fax. Telephone requests are not available, as credit bureaus need to verify your identification. Request forms that can be printed and then mailed or faxed are available on each credit bureau website.

If you find an error or discover that favourable credit information is missing, contact all the credit bureaus to have it corrected to ensure your credit history is accurately represented to creditors and lenders. You will need proof, so be prepared to provide statements or receipts. Each bureau sends its policy for reporting of errors along with the copy of your credit file. Each policy is different, so be sure to review them once you have collected your proof of payment.

A credit bureau will only correct false information in your file. Factual payment information cannot be changed or removed. If you missed a payment by accident, it will be reported as missed on your file and cannot be changed. In this situation, you have the right to have a comment included with your file explaining why you missed the payment. This comment may or may not be considered the next time someone requests your file and generates a score.

Take action

Verify the information in your credit file and get errors corrected before you agree to share its contents with anybody. Contact information for Canadian credit reporting agencies Equifax Canada, TransUnion and Northern Credit Bureau is listed below:

Equifax Canada
Consumer Relations Department
Box 190 Jean Talon Station
Montreal, Quebec
H1S 2Z2
Tel.: 514-493-2314
1-800-465-7166
Fax.: 514-355-8502

Trans Union
Consumer Relations
709 Main Street W, Suite 3201
Hamilton, On
L8S 1A2
Tel.: 1-800-663-9980
Fax.: 905-527-0401

Northern Credit Bureaus
Northern Credit Bureaus
336 Boul. Rideau
Rouyn-Noranda, Quebec
J9X 1P2
Fax.: 1-800-646-5876

Reference and other checks

Beyond the basic credit report, a landlord can determine your suitability as a tenant in other ways. Some landlords will validate all your references and run a thorough check into your rental history. After checking your financial suitability, landlords will want to know what kind of tenant you are. Most often, they will ask former landlords about your character as well as your past rent payment patterns. While some people will check only with your last landlord, others will also check with your past two or three landlords.

In some provinces, rent registries and landlord advocacy groups compile information about delinquent tenants. This information is easily accessible to landlords. Information about past illegal activities may also show up during a landlord's check.