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7 Common Credit Score Myths

Common credit score and credit report myths in Canada.Did you know that you have more than one credit score? Did you know that your income doesn’t affect your credit score at all? If this is news to you, read on as we expose seven common myths about credit scores.

Myth No 1 - Each Person has Only One Credit Score

In Canada there are two credit reporting agencies, Equifax and TransUnion. These agencies create credit reports and credit scores for Canadian consumers based on the information that creditors supply to them. Unfortunately, not every creditor reports their information to each of these agencies. A creditor may report to one agency and not the other. Creditors may also only update the credit agencies with your current information once a month—or less often in some cases. Consequently, Equifax and TransUnion may not have exactly the same credit information about you, nor do they use the exact same software to calculate credit scores. This will mean that each of these agencies will generate a different credit score for you based on the information that they have on record for you and how their software evaluates the information they do have for you.

Myth No 2 - You Can Get Your Credit Score for Free Once Each Year

You can get a free credit report each year from both Equifax and TransUnion, but you have to pay to find out your credit score. If you don’t want to pay, but you would like a rough idea of what your credit score is, you can get a general idea with this credit score estimator tool. A number of organizations are now offering credit scores for free. These include Credit Karma (in exchange, they share your financial information with advertisers) and RBC (the Royal Bank) who is providing their clients with free credit scores.

Whenever you apply for credit or open a new bank account, the banker will ask for permission to check your credit. At this time you can ask them what your credit score is. You can also ask them to tell you the strengths and weaknesses they see on your credit report if you want to improve your credit score. To get your free credit report right now, click here to find out how.  

Myth No 3 - Having a Good Job or Earning Good Money Will Strengthen Your Credit Score

Your occupation and your income are not part of the credit scoring formula. Even if you are rich and famous, it doesn’t matter. Your occupation may or may not be reported to the credit reporting agencies when a creditor or lender requests a copy of your credit report, and your income is never reported—there isn’t even a place to put it on your credit report. Having a stable job and a good income is very important to lenders, but it has nothing to do with your credit report or your credit score. Your credit report only shows your payment history and credit behaviour, not your payment potential.

Myth No 4 - Spouses Have the Same Credit Score

The credit reporting system is similar to the driver’s licensing system in that everyone has their own record. No one shares a record. If a policeman pulls you over for speeding, you can’t get the policeman to put the ticket on your spouse’s driving record. It goes on yours if you are at fault. The same is true with your credit report. If the debt is only in your name and you are late with your payments, the late payments are only reflected on your credit report. However, if a debt is joint, then the late payment notation goes onto both credit reports.

If you and your spouse are joint on all of your debts, then it is possible that you will have similar credit scores, but it is still unlikely that your scores will be the same for a number of reasons: the length of time each of you has had credit is probably different, you may have had a debt in only your name within the last 7 years, and not all joint debts always report on each person’s credit report (yes, this is weird. It’s one shortcoming of the system).

Myth No 5 - Your Credit Score is Not Affected by Your Ex-Spouse When You Get Divorced

When a lender grants you and your spouse credit based on a joint application, they are approving the loan credit application based on the fact that two people have promised to repay the debt. Just because you no longer live with your spouse or are divorced from your spouse does not change anything from a lender’s point of view. If you want to change who is responsible for a debt, you or your ex-spouse must either pay out the debt with a new loan or re-qualify for it in only one person’s name. If you don’t do this and leave the debt as it was, you remain fully liable for the repayment of that debt. If you thought that your ex-spouse was making payments on that debt, but the creditor informs you that they have stopped making payments, then it is your responsibility to continue those payments. If it took the creditor a while to track you down, your credit could be damaged by the missed payments that you didn’t know about. So your credit score can be impacted by your ex-spouse if you still have any joint debts with them because a divorce only dissolves a marriage agreement, not a joint borrowing agreement.

Myth No 6 - Bankruptcy Permanently Ruins Your Credit

If you go bankrupt, a record of the bankruptcy will remain on your credit report for 6 to 7 years depending on which province you live in. During that time, the bankruptcy notation will negatively impact your credit score and make it difficult to obtain credit. However, after the 6 or 7 years, the bankruptcy record and all records of bad debts (that are the same age) will usually be removed from your credit report, and this will allow you to get a fresh start. If you are struggling with your debts and are considering filing for bankruptcy, there are many good bankruptcy alternatives that can work out much better for many people. Click here to learn more.

Myth No 7 - Becoming Debt Free Will Give You a Perfect Credit Score

While becoming debt free and staying debt free is a fantastic way to live, it’s not a silver bullet for your credit score. Your credit score is based on your credit behaviour and payment history, not just the amount of debt that you have. Not having any debt will help your credit score as long as you maintain at least one active credit account—like a credit card or a line of credit. If you don’t have any active credit, the credit scoring system doesn’t know how you are currently handling your obligations. If you use one credit card occasionally and pay it off completely every time you get the bill, then the credit scoring system can see that you are using credit responsibly.

Find Out More About Credit Scores and Credit Reporting

Knowing how the credit scoring and credit reporting systems work can help you make borrowing and credit decisions, however, credit scores can change monthly. There's no need to actively seek your credit score on an ongoing basis. Focus instead on managing your money, budget and debt carefully; your score will take care of itself. For more information about how your credit score is calculated, click here

Below are some more credit myths and credit score topics we have addressed on this blog:

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So to clarify re: #5. Let's say two people have a joint credit card that's in arrears (collections), they get divorced, and the credit card debt is divided 50/50 in the divorce. If one spouse manages to pay off their half of that debt and the other spouse does not, is the spouse who paid off their half still affected in terms of their credit score? My boyfriend has terrible credit due to this scenario but what happens when he pays off his half of joint credit card debt? Is his credit basically screwed until his ex pays off her half or at least starts making regular payments?

Yes, unfortunately if one spouse manages to pay off their half of the debt and the other does not, the person that has acted responsibly is still penalized (both on their credit score and by the bank the money is owed to with late fees and extra interest) for the actions of their ex-spouse who did not act responsibly. This may seems terribly unfair and is probably very upsetting. However, from the bank’s point of view, they are not concerned if two people who co-sign a loan or credit card are married or not, and they’re not concerned about any agreement these two have made between themselves. All they’re concerned about is the agreement each of you have made with them. When each of you sign for any form of credit, the bank will hold both of you fully responsible for repayment of any debt incurred regardless of what happens with your relationship with the other person or any arrangements you have made with each other. The bank wants to get paid back, and they’ll pursue collection activity against both parties if the debt isn’t paid as agreed. Because credit scoring systems are automated, they can be very brutal in situations like this. Sometimes, it can be a number of months before someone in this kind of a situation realizes that their ex-spouse is no longer paying a debt they agreed to pay. Unfortunately, the credit reporting system does what it is programmed to do and automatically reports on both people’s credit reports that payments have been missed and that the debt is not being paid as agreed. These kinds of notations cannot be removed from your credit report. The best thing you can do in situations like this is request that the credit card company notify you immediately if a payment is not made on time. You then have to hope that they actually do notify you quickly so that you can take care of any missed payment before it reports on your credit report.

I was at a car dealership for a test drive and left without buying the car, later i found out they pulled my credit score without me signing anything giving permission to do so, what do I do?

Hi Tracy, There are a couple of things we’d suggest you do: 1) contact the car dealership and let management know what happened and that you aren’t pleased about this, and 2) contact the credit report company that shows the enquiry (Equifax or TransUnion) and let them know that the car dealer may have violated their agreement with the credit reporting agency because you did not authorize them to access your credit report. It’s hard to say what will come of either of these actions, but nothing will happen if you do nothing and this then may happen to many other people. As a last resort, if you feel that nothing else worked, you can always leave an online review for the company on Google, Yelp, or Facebook letting others know of your experience.

Why do I have to pay TransUnion or Equifax at all for my own information. Doesn't the fact that this information belongs to me factor into it. I mean there are ways to get the information without paying for it, but if I want to correct errors, I still have to pay them for access. Should access to one's own financial information be a right covered by the freedom of information act?

You only have to pay them if you want your credit score. You are entitled to receive a free copy of your credit report every year for free. You just need to go through their process of requesting your free credit report ( ). If you do want your credit score as well, just bear in mind that what they sell you isn't your real credit score. It's just an estimate of your score, and 25% of the time it's way off.

try its like credit karma in the states. I gives you a monthly credit score through equifax for free. Also some banks (scotiabank and CIBC maybe others) allow you to check your credit score through their mobile apps and online banking.

Does United States debt affect your Canadian credit if they do not have your social insurance number?

The only debt that will show up on a Canadian credit report is Canadian debt, and American debt is the only thing that's going to show on a US credit report. So no, debt in one country won't affect your credit score in the other country. Having said this, creditors aren't dumb. If they know you've lived across the border or have had credit on the other side of the border, they can pull your credit report there to see what things look like. The only way we can think of US debt showing up on a Canadian credit report would be if you didn't pay in the US, the creditor pursued a judgement against you in a Canadian court, and then the judgement was registered on your credit report. gives free monthly credit scores and access to your credit report for free online. Some banks (scotiabank and CIBC possibly others) also allow you to check your credit score through their mobile apps and online banking.

My wife and I have a joint line of credit secured by our house. Why does this only appear on my credit file at both Equifax and Transunion and not the credit files of my wife? Why don't all joints debts appear on both files?

Hi David, Good question. People have been asking this for a long time. For some reason, at times, financial institutions will only report a joint debt to the credit bureaus in the name of the person whose name appears first on the documents for a loan, line of credit, or mortgage. This is happens quite a bit and can become a real problem if the spouse who is first on all debts passes away or the relationship falls apart. In some cases, the spouse who was always second on the debts won't have a credit score and won't naturally be able to qualify for credit on their own. To prevent something like this from happening, it's a good idea for both spouses to pull their credit reports and see if one of them needs some help with their credit score. If they do, getting a financial institution to restructure a debt or credit card so that the other partner's name is first may be a good idea.

I think u are doing a wonderful job who have these kinds of myths. you cover all the point that a normally person want to ask. Thanks for sharing