What is a Credit Rating?

You have probably consented to a credit check in your life, or been told that you should be careful to maintain a “good credit rating”. But what exactly is a credit rating? A credit rating is a measure of an individual’s ability to repay a debt, put together by a credit reporting agency. The credit reporting agency (sometimes called a credit bureau) collects information about you from financial institutions and other members of the agency and compiles it into a file, then does a statistical analysis on the information to determine your ability to repay a loan, and assigns you a rating from 0 to 9. R0 refers to a new account; R1 refers to on-time payments; R9 refers to bad debt.

Before a bank or other lender will loan you money, they assess your ability to repay, relying in part on your credit rating. The credit report helps the lender figure out how risky it might be to lend to you. So you may get a lower interest rate or more favourable terms if your credit report indicates that you have a good debt repayment history and a good credit rating. The interest rate you will be charged may be higher if you have a poor history or poor credit rating, because the lender thinks that there is a bigger risk that you will not pay back the loan.

Members of a credit reporting agency can include retail stores that offer credit cards, landlords, employers, insurance companies, finance companies, car leasing companies, banks, trust companies and other lenders.

Credit grantors update individual credit reports by regularly disclosing personal information about their customers’ credit and payments. The credit reporting agency compiles the information from various sources into a report about you, which is as accurate, up-to-date and complete as possible. Information from collection agencies and information about court-ordered debts (such as damages you have to pay from a lawsuit you lost, or overdue fines) are also collected into your credit report. The credit reporting agency gives the report electronically to members who request it, through a direct electronic network.  This can be done very quickly if necessary – sometimes instantly.

Because all lenders make their decisions on the basis of the information supplied by the credit reporting agency, you should take steps to ensure you check your credit report annually, to make sure it is accurate and complete.  Errors in your credit report could affect your ability to get a mortgage, or a car loan or other loans.

What Laws Apply to a Credit Reporting Agency (Credit Bureau) in BC?

Credit reporting agencies are required to follow the Personal Information Protection Act (PIPA). Part 6 of the Business Practices and Consumer Protection Act (B.C.) specifically regulates credit reporting agencies in BC, and is discussed below.

The Business Practices and Consumer Protection Act (BC) – Part 6

Part 6 of the Business Practices and Consumer Protection Act sets out the rules for credit reporting agencies in BC, and the purposes for which credit reports can be used and disclosed.

An organization can’t get a credit report about you without your consent. (S. 107(1) Business Practices and Consumer Protection Act). A reporting agency is allowed to provide a report about you only to those members it believes intend to use the report in connection with:

  1. extending you credit or collecting a debt from you;
  2. entering into or renewing a tenancy agreement with you;
  3. assessing whether to hire or promote you;
  4. granting you insurance coverage;
  5. determining your eligibility for a benefit, so long as the information relates to a legal requirement associated with the benefit;
  6. a direct business requirement for the report in connection with a transaction; or
  7. any other purpose, with your written consent.

Under the Business Practices and Consumer Protection Act, there is no specific method for getting your consent. The only requirement is that the company has to be able to produce evidence that you consented. Often this is done in the small print on an application form.

For example, one very common way companies get evidence of your consent is to put a notice about the company’s intention to get your credit report onto the application form that you fill out and sign when you are applying to rent an apartment, or for a job or for credit. You should read all application forms carefully.

If a credit reporting agency gives a report to government for any purpose or to a law enforcement agency to assist in an investigation, the report can include only your name, current and former addresses and current and former places of employment, and no other information (including credit information).

What Information Is In Your Credit Report?

The information in your credit report is divided into sections and will include:

  1. your name, address, birthdate, SIN;
  2. details of your debts (such as credit cards, bank loans and other loans) and whether you make payments on time;
  3. information about your bank account and if you have written cheques when you didn’t have the money in the bank to cover the cheque (but it won’t include your bank account numbers);
  4. secured loans, bankruptcies, court judgments and collection agency efforts; and
  5. all inquiries made about your report including all organizations that have made a request for it in the last three years.

There is a space for you to provide a comment about anything in the report.  This is where you can make a written statement about a particular debt or other information. For example, if you were a victim of identity theft and some debts were incurred by others, you would want to make sure your credit report showed that fact.

The information in your credit report must be based on the most reliable sources available. The name and address of the source must be recorded in the file or be easy for you to identify. If the information about a non-credit matter is unfavourable (for example, information about collections agencies, or information obtained verbally) the reporting agency must make a reasonable effort to make sure the information is correct. If the credit reporting agency cannot confirm the accuracy of the information, it must make a note on the file saying so.

What is Not Allowed in Your Credit Report?

The report must not include:

  1. information about a lawsuit that is about something other than a debt, or information about a lawsuit for a debt that is barred by law;
  2. information about a court judgment that is more than six years old, unless the judgment remains unpaid and the creditor has confirmed that fact in the report;
  3. information about your bankruptcy that is more than 6 years old, unless you have been bankrupt more than once;
  4. information about criminal charges unless you have been convicted;
  5. information about your conviction if you have been granted an absolute or conditional discharge or a pardon;
  6. information obtained verbally unless the content of the verbal report is noted in the file;
  7. information about your race, beliefs, sexual orientation, ancestry, ethnic origin or political affiliation;
  8. information about any member of your family other than, in certain circumstances, your spouse;
  9. information about whether you paid fines that were imposed more than six years ago;
  10. information about a legal proceeding 12 months after the date it began, unless the current status of the matter is included in the report; and
  11. any other information that is not in your interest, if it is more than 6 years old (Section 109, Business Practices and Consumer Protection Act (BC).

What Can You Do If the Business Practices and Consumer Protection Act is Violated?

You can lodge a complaint with the Business Practices and Consumer Protection Authority. Your complaint will be reviewed and a decision will be made whether to investigate. If an investigation finds wrongdoing, the authority will decide whether to impose a penalty. Penalties range from a warning letter to an order requiring the business to do a thing required by the Act and reimburse money lost by the consumer. The Business Practices and Consumer Protection Authority also has the power to start a lawsuit.

In very rare cases, an inspector may recommend to a Crown lawyer that criminal charges be laid. The following are offences under the Business Practices and Consumer Protection Act:

  1. to obtain a credit report without consent;
  2. to give or obtain a report in circumstances not permitted under the Act;
  3. to include prohibited information in a report;
  4. to fail to include the individual’s written statement in every copy of the report it provides to a member; and
  5. to knowingly provide false or misleading information for a report.

Individuals can be fined up to $10,000 or imprisoned for up to 12 months or both. Corporations can be fined up to $100,000. A court has the power to increase the fine in some circumstances. You have a right to ask the court to make an order that the defendant has to pay you compensation for any financial losses you suffered as a result of its violation of the Act. You also have a right to sue a defendant for damages, if you do not ask for compensation. You do not have the right to both sue for damages (in civil court) and ask for compensation (in the criminal case).

Lawyer recommended: It is recommended that you consult a lawyer as soon as you believe you have suffered damage and decide you might want to sue.

What You Can Do If a Credit Reporting Agency Violates the Personal Information Protection Act

If you feel that a credit reporting agency has not followed the Personal Information Protection Act (BC), you can complain to the Information and Privacy Commissioner of BC.