What is the function of a credit report?
A credit report is an essential tool for financial institutions and individuals when it comes to managing their financial situation. In this article, we will explore in detail the function of a credit report and how it is used to assess a person’s creditworthiness.
We will also discuss the different ways to review one’s credit report, the factors considered during a credit inquiry, and the criteria for determining an acceptable credit score.
Credit report: definition and function
A credit report is a crucial document that compiles a set of information reflecting a person’s financial behavior. It contains data on current loans, repayments made, outstanding debts, and other relevant information regarding the individual’s financial management.
Lending institutions use the credit report to assess a borrower’s creditworthiness when they apply for credit.
Function of the credit report

The primary function of a credit report is to help lenders determine if a borrower is likely to repay their debts on time and according to the agreed-upon terms. By reviewing an individual’s report, lenders can assess their ability to manage their finances and fulfill their financial obligations. In this way, lenders can minimize the risks associated with granting credit and make informed decisions about approving or denying a credit application.
The report also serves as a basis for calculating a person’s credit score, which is a key indicator of their creditworthiness. The credit score is a number that summarizes an individual’s credit risk and is based on credit history, credit length, type of credit, and other factors.
The higher the credit score, the more creditworthy and reliable a person is considered for repaying their debts. A good credit score can help secure more favorable loan terms, such as lower interest rates and higher loan amounts.
How to review your credit report?
It is essential to regularly check your credit report to ensure its accuracy and up-to-date information. In Canada, you can access your report for free once a year from credit rating agencies such as Equifax and TransUnion. You can also request a copy of your report from these agencies at other times, but fees may apply.
To review your credit report in Canada, you can fill out an online form on the Equifax or TransUnion websites or send a written request to the concerned agency. The information typically required to access your report includes your name, address, date of birth, and Social Insurance Number (SIN).
It is also possible to request your credit report by phone by contacting the credit rating agencies. Keep in mind that, for security reasons, some additional information may be required to verify your identity.
By regularly reviewing your credit report, you can quickly detect any errors or suspicious activity and take steps to protect your credit score and your identity.
Credit inquiry: what factors are considered?

When a credit application is submitted, lenders conduct a credit inquiry to assess the borrower’s creditworthiness. Here are some factors considered during a credit inquiry:
Credit history: Lenders examine the length and quality of the borrower’s credit history to determine their debt repayment behavior.
- Outstanding debt: Lenders take into account the total amount of the borrower’s outstanding debt, including personal loans, credit cards, and mortgages.
- Debt-to-income ratio: This is the ratio between the borrower’s monthly debts and their monthly income. A high debt-to-income ratio may indicate an increased risk of defaulting on payments.
- Employment and income: Lenders review the borrower’s employment stability and income to determine their ability to repay the loan. Stable employment and regular income are positive factors for lenders.
- Payment history: Late payments or missed payments are negative elements in a person’s credit report. Lenders take these into account when assessing the borrower’s risk of defaulting on payments.
How to find out your credit score?
In Canada, the credit score is a numerical indicator that reflects an individual’s creditworthiness. It typically ranges between 300 and 900 points, and the higher the score, the more reliable the borrower is considered by lenders. To find out your credit score in Canada, you can turn to the two main credit rating agencies: Equifax and TransUnion.
What is an acceptable credit score?
An acceptable credit score depends on each lender’s criteria and the type of credit being requested. Generally, a credit score above 700 is considered acceptable for most loans. However, some financial institutions may accept borrowers with slightly lower credit scores, depending on their overall financial situation and the collateral they can provide.
To improve your credit score, it is essential to meet payment deadlines, limit the use of new credit, and maintain a reasonable debt-to-income ratio.