Credit is getting money, goods, or services now in exchange for your promise to pay them back later. Rent payments, phone bills, utility bills, loans, and money you borrow on a credit card or a line of credit, are common types of credit.
Credit counselling is a service for people with money problems. It helps you find the best way to reduce your debt or pay it off. You can also learn how to make a budget and keep to it, and how to improve your credit report and credit score. There are non-profit and for-profit credit counselling services.
Credit history, also known as a consumer report or consumer information, is the information a consumer reporting agency has about:
- the money you’ve borrowed from businesses, such as credit card companies or banks
- the bills that you pay regularly, like your rent or your hydro bill
For example, if you have a mortgage, the credit reporting agency will have detailed information about the money you borrowed and the bills you pay, including:
- the amount of your mortgage or line of credit
- the interest rate you pay on your borrowed money
- the repayment schedule for the borrowed money
- if you paid your bills in full and on time
A credit limit is the total amount of money you can borrow from a lender. This term is most often used for credit card limits. For example, a credit card may have a credit limit of $5,000.
A credit report, sometimes called a consumer report, shows details of your credit history. For example, it shows whether you have paid back money you owe or paid your bills on time. It will also say if you’ve filed for bankruptcy, or have been discharged from bankruptcy in the last 6 years. A credit report is not the same as a credit score.
A credit score is a number given to you by a consumer reporting agency. Creditors check your score to see how likely you are to pay back your debts. They use it to decide whether to lend you money. Your credit score is based on the information in your credit report.
High credit scores are good, and low credit scores are bad. Usually, the lowest score you can have is around 300, and the highest around 850. Good credit is usually considered 700 or more. Sometimes, credit scores are turned into a letter and number combination. In this system, R9 is the worst credit rating and R1 is the best.
A creditor is a person or business you owe money to. For example, this could be:
- the bank that gave you a mortgage loan
- the credit card company that lets you pay for things on credit
- your landlord, if you owe rent
- your utility company, if you pay for hydro or gas