Credit can be a confusing topic, and is often riddled with misinformation and myths. Here, our financial expert answers some familiar questions and addresses misconceptions about credit reports, scores and ratings—yes, they’re all different!
 

1. Are Credit Reports, Scores And Ratings the Same Thing?

No. Your credit report is a detailed history of your credit products and how you’ve handled them. Your credit score is a number between 300 and 900 and is used as a predictor of how likely you are to pay back your debts. Your credit rating, by contrast, is a rating for each product (or trade line on your credit report) you have.

2. If I'm Married/Common-law, is my Credit Score the Same as my Partner's? 

No. Each of you has your own credit report, score and product rating. This information is based on your credit products and how you’ve handled them. You can increase your credit score by paying off your credit products in full each month or paying down your debt. You can lower your score by being late or missing payments.

3. What if my partner and I have joint products or debt?

These debts will report to each of your credit reports individually.

4. What if my partner has a product and I have a companion product, like a credit card?

The lender will report to the primary product’s credit report so, in this instance, your partner’s credit is being reported on, not yours.

5. Why do I need credit in my name?

Remember that your credit report, score and rating are based on you and no one else. If all of your credit products are in someone else’s name, like your part­ ner’s, if the relation­ ship ends through death or dissolution, there will be no history or information reported on you. It will look as though you’ve never had credit before. If you go to make a purchase on credit, there will be little to no history to draw on, which may make approval difficult or unlikely. We see this more often with older women whose hus­ bands had taken care of all of the finances and later died. The wife has no credit history, which in turn, could make getting a routine mortgage renewal a much bigger issue.

6. What should I do?

Consider building your own credit. For some­ one just starting out, there are a couple of simple ways to build credit without getting into trouble, for example, getting a cell phone contract in your name or getting a credit card in your name only. Slowly and surely you’ll build your own credit history by making your payments on time. The payments are noted on the credit report and help to build credit. Another option is to consider a secured credit card. This is where you save up an amount—say $500—and give it to the bank. They will hold it and give you a secured credit card, which you would then use and pay off regu­larily to build your credit. If you miss a payment, your security deposit can be applied to your product. 

7. What can I do if my credit is poor?

The first thing you want to do is request your own credit report to check the state of your financial situa­tion. Start by making all of your payments on time and create a plan to pay down your debt. If you get stuck, connect with your local non-profit credit counselling agency for help. Remember, credit is a tool, if used wisely!