What is credit reporting and how does it affect me?
A credit bureau is an information service, where companies that extend credit for loans or purchases share all their experiences with borrowers. When you ask for credit, the lender will want to know the risk that you will not repay them as agreed. They get your “credit report” from the credit bureau, and estimate the risk according to your past borrowing history. To get any significant credit, you need a good borrowing history.
There are two large credit bureaus in Canada, Equifax and Trans Union.
Approximately once each month every major lender in Canada (the banks, credit card companies, finance companies) sends a report about their borrowers to the credit bureaus. Also, the federal Superintendent of Bankruptcy reports a list of everyone who filed a consumer proposal or bankruptcy to the credit bureaus, as well as a list of everyone who has been discharged.
The credit bureaus collect this information, summarize it, and sell it to their members, the lenders.
Credit bureaus maintain accurate databases of borrowing history, but the data is not perfect because it is supplied by humans, who can make mistakes. If your credit report contains an error, you might be denied a loan that you are counting on.
For these reasons, it is important for you to correct any errors on your personal credit report, and you are entitled to obtain your a copy free once each year. It is also important to do what you can to make sure your credit report shows a history of reliable credit repayments, and as few unfavourable repayment incidents as possible.
How long does a bankruptcy or consumer proposal stay on my credit report?
How long bankruptcy stays on your credit report in Canada will depend on the credit bureau that is reporting.
The largest credit bureau in Canada, Equifax, maintains this record on your credit report for a period from the date of your discharge or last payment:
- A consumer proposal for three years after your last payment
- A bankruptcy for six years from the date of your discharge.
- A second bankruptcy for 14 years.
For more detailed information, go to Equifax Canada
The Trans Union web site states that they keep a bankruptcy on your credit file for six to seven years from the date of discharge or fourteen years from the filing date (depending on provincial legislation). For more information, go to Trans Union FAQ page. (Your Internet browser will need to allow pop-ups.)