Credit, in everyone’s mind, has quickly become one of the most discussed topics in the world of personal finance. There is a good chance that the subject will come up if you discuss personal finances. Credit file, credit check, and free credit rating. Credit is the backbone of your financial life. It dictates whether you will be approved for your first mortgage (or your second, or third, etc.), what interest rates will be offered to you, whether you will have the opportunity to drive a new car or rent the apartment. your dreams. With this recent credit crunch, consumers are increasingly interested in checking their credit and knowing exactly what it means to have their credit checked by an outside company. We think this is great, credit learning is so important. So, if you are interested in knowing all this information, you are in the right place.
What is a credit check?
A credit check occurs when an organization or individual contacts a credit reporting agency to access the credit information of a specific consumer. Typically, the primary purpose of a credit check is to assess the creditworthiness of a consumer during an application process.
There are two types of credit checks in Canada, primary and secondary.
A primary demand is when a potential lender or creditor (someone who is in touch with you through the credit) communicates with one of the two credit reporting agencies to check your credit report. The information will then be used to assess your creditworthiness. This type of verification will negatively impact your credit score by a few points for a short period of time. But that requires your permission. Since your credit rating will be affected, you must be aware when this happens.
Quick Tip: Making multiple requests for financial products in a short period of time will lower your credit score by more than a few points. It is best to keep your credit applications to a minimum, as a lower credit rating could affect your ability to be approved in the near future.
A secondary demand is when a business or organization that has a non-credit relationship with you check your credit report. A secondary audit has no effect on your credit rating and will not appear in your credit report.
When you request a copy of your credit report for free from credit bureaus, this is also considered a secondary demand.
A non-credit relationship can be:
- For identity verification purposes
- A potential employer
- An owner
- Insurance companies
- For the protection of fraud
Quick Tip: Since a secondary demand has no effect on your credit rating, there is no reason not to check your credit history yourself and to know about your financial trip, whatever it may be. is.
Who can check your credit?
The two credit reporting agencies in Canada (Equifax and TransUnion) create a file for each Canadian who has used or is currently using a type of credit product. This folder contains all the information related to your credit history. The following people or organizations are legally authorized to check your credit (with your permission):
You can check your credit at any time of the year for a fee, but every Canadian has the right to request a free credit report from Equifax and TransUnion each year. If you are interested in obtaining a copy of your credit report to verify the information or simply to maintain a healthy financial life, we highly recommend it.
Credit card companies
When you apply for a new credit card, you should expect to undergo a credit check so that the credit card provider can assess your creditworthiness. You will need to approve the credit check and will be approved or rejected based on what the credit card company thinks about your credit history.
Most lenders will check your credit before approving you for a loan. However, be aware that there are a variety of alternative lenders like Payday! who does not check credit as part of their approval process? So, if you feel that your credit can hinder your ability to be approved, you can do research on lenders without credit checks.
When you apply for any type of loan or credit product from a bank (mortgages, second mortgages, lines of credit, personal loans, commercial loans, etc.), your credit is always verified. Banks use several methods to assess your creditworthiness, but often your credit report and credit rating are very important in the approval process.
Whether you’re moving alone for the first time or just looking to relocate, your new landlord will require you to submit to a credit check. Your landlord will look for a healthy credit history that portrays a financially responsible person. We are looking for someone who always makes payments on time and who does not have a serious debt problem.
A potential employer
One thing many Canadian consumers do not know is that a potential employer may want to check credit before giving a job. This is not a common practice but depending on the job you are interested in, a healthy credit history could be an asset that will make you a better candidate.
Who can not check your credit?
Credit checks are for people who are interested in a financial relationship with you. However, this does not mean that anyone can do the main audit and so affect your credit rating. Any business or organization that wants to check your credit must first get your permission. This means that you always have the last word when it comes to your credit. Just be aware that if you refuse a credit check, you will not be approved for a loan, product, or lodging when you apply.