How to dispute your credit score in Canada

Your credit score is a gauge of how reliable you are with your finances and affects everything from your ability to get a credit card to getting a mortgage on a house.

However, because credit reports are constantly being updated by various parties, there’s no telling what types of inaccuracies might be reported. Therefore, it’s important that consumers know how to detect and dispute any errors that could hurt their credit score.

How is your credit score calculated?

In Canada, lenders report to two credit bureaus: Equifax and TransUnion. Each person has two credit scores as each bureau has its own scoring system and may work with different information since not all lenders report to both bureaus.

Your credit report comprises a range of information and transactions used to calculate your credit score. These include:

• Payment history
• Debt-to-credit ratio
• Number of inquiries, and
• Public records

In general, information that improves your credit score — like a record of paying your bills on time — will remain on your credit report as long as your account remains open or between 10 and 20 years after you close it.

Information that damages your score will usually remain for six to seven years depending on the infringement and which province/territory you live in.

Related: How to read your credit report

How credit scores can affect your ability to qualify for a mortgage in Canada

Your credit score represents the likelihood that you will pay your debts and bills on time. As such, it will be very important when getting approved for or renewing a mortgage. Those with higher credit scores generally qualify for better rates.

When getting a mortgage, credit scores generally fall in to three categories:

Credit scores of 720+

Most Canadians with mortgages fall into this category. Regardless of whether your score is 720 or 800, this group will have access to the best mortgage rates on the market, so long as they meet the lending criteria and have sufficient income.

Credit scores of 650-720

Generally, the minimum credit score to qualify for a mortgage is 650. However, this group will still have access to most mortgage rates on the market, especially those with scores above 680.

Credit scores of 600-649

In July 2021, the Canadian Mortgage and Housing Corporation (CMHC) lowered the minimum rate for clients to qualify for a mortgage from 680 to 600. This was done to provide flexibility for those who are new to Canada and/or are trying to build their credit score. However, 600 is still considered sub-prime and clients may not be able to access the attractive mortgage rates advertised.

How can a mistake on your credit report impact your score?

Errors on your credit report can unjustly lower your credit score, which could cost you a lot in higher rates or affect your ability to qualify for a mortgage. Here are some of the common errors on a credit report that could negatively impact your credit score:

• Errors in personal details: Errors in personal information such as your name, birthday, phone number, address, employment information and social insurance number could signal to lenders that you’re unreliable and damage your credit.
• Incorrect payment history: If your credit report states that you missed or made a late payment when you paid it on time, this could hurt your credit score. That’s why it’s important to verify that all your bill payments were reported correctly.
• Incorrect account status: All your active and closed financial accounts will show up on your credit report. It’s important to check that the status of these accounts is correct. When you close an account, make sure that you pay off the account in full and that this is reflected on your credit report. If your credit report shows an outstanding balance on a closed account that you paid off in full, this may unfairly damage your credit.
• Duplicate accounts: Because lenders have two credit bureaus to report to, you might see one account pop up twice on your credit report. This may give the appearance that you have twice as much debt, which could lower your credit score.
• Identity theft: If you find credit inquiries you didn’t initiate, accounts you didn’t open, or debts that are unaccounted for, these might be signs that someone is trying to steal your identity. This is a major reason why you should check your credit report regularly, to stem any threats of identity theft before they escalate into something bigger.

Read more: How to avoid credit card fraud

How to dispute a credit score

You can review your credit report with Equifax, TransUnion or a third-party provider like your bank. If you find any inaccuracies on your report, you’ll have to gather documentation to substantiate your claim such as receipts, credit card statements, and any other relevant documents.

From there, you can file a dispute with each credit bureau who reported the inaccuracy using Equifax and TransUnion’s online forms. They will then investigate with the lender who reported your claim to verify the inaccuracy and correct it accordingly.

Conclusions: tips on how to stay loan ready

Good credit is built by having good habits such as paying your bills on time and checking your credit report regularly. Doing these things will help ensure that your credit score stays within a healthy range and helps catch identity theft early.

Further, if you’re preparing to apply for a big loan like a mortgage or a car loan, it’s important that you make sure that your information is accurate and up to date. From there, you can shop around to make sure you’re getting the best possible rates for your loan.