Dealing with debt can be stressful, especially if you’re worried about the potential impact on your credit score. Learn more about how debt can affect your credit score and some ways you can update or change your credit report.
Understanding your credit report and credit score
- Your credit report is a summary of your credit history. It starts when you borrow money for the first time. Lenders send information about your accounts to the credit reporting agencies.
- Your credit score is a three-digit number that is calculated based on the information in your credit report. It shows how risky it would be for a lender to lend you money.
- Your credit report and credit score are used by people and businesses to help make decisions about things like lending money to you, collecting a debt, or renting a property.
How debt impacts your credit score
The Financial Consumer Agency of Canada (FCAC) website says that your credit report can include both positive information (a good repayment history) and negative information (missing payments, previous bankruptcies, or having a debt go to collections), all which impact your credit score. You get points added to your credit score if you use your credit responsibly and lose points if you have trouble managing your credit.
For example, once a payment is overdue on a debt, it may be reported to the credit reporting agency. If a debt has gone to collections, it may also be reported to the credit reporting agency and added to your credit report.
Unless removed by the creditor, a debt will remain on your credit report for 6 years.
If you’re worried about your credit score, don’t lose hope. It can change over time and there are ways to improve it.
For more details about your credit report and credit score, explore these resources from the FCAC:
- Credit report and score basics (including how a credit score is calculated)
- Understanding your credit report
- Improving your credit score
How to update your credit report
Depending on your situation, there are ways you can modify your credit report, remove a debt, or improve your credit score.
Modify your report:
If your credit report shows the wrong information about your debt, you can contact the original creditor to request they make the correction and then ask the credit reporting agency to fix the error.
- You also have the option to enter a 100-word statement on your credit report to explain the error. Contact the reporting agency directly to submit your statement. Keep in mind, this statement will be visible to anyone who views your credit report. Learn more about the rules in BC when it comes to credit reporting
Remove a debt:
If your debt has gone to collections, you can have a debt removed from your credit report if:
- You dispute the debt successfully: If you don’t believe you owe the debt and successfully prove it in court, the creditor will remove it from your credit report. However, the debt will remain on your report while it is in dispute (until proven otherwise). Learn what steps to take to dispute a debt.
- They have the wrong person: Sometimes creditors and collection agencies contact the wrong person. If you notify them that they have the wrong person, they should remove it from your credit report. Like disputing a debt, it will remain on your report until the situation is properly resolved. Learn how to notify a collection agency that you are not the debtor.
Improving your credit score:
Improving your credit score takes consistency and patience and there are several different ways to do it. Learn how to improve your credit score.
How to check your credit report
It’s a good idea to check your credit report every six months so you can keep tabs on your credit, monitor credit score improvement, and be alerted to any fraud. The two credit reporting agencies in BC are Equifax and TransUnion. You can request a free written copy of your credit report directly from either credit reporting agency:
- Request a copy of your credit report from Equifax Canada.
- Request a copy of your credit report from TransUnion.
Where to go for help
Financial advice isn’t something we can help you with directly but there are other options to consider. The Financial Consumer Agency of Canada has tons of information about managing debt and tools to help you learn more about managing your money, including budget planners and budgeting tips.
You may also be interested in speaking to your financial institution or a financial advisor to see if they can offer you personalized advice on your financial situation.
About Consumer Protection BC
We’re a not-for-profit provincial regulator. The laws we oversee capture your rights when it comes to credit reporting, debt collection, payday loans, high-cost loans, and certain aspects of debt repayment services. Find out more about us and the other industries and transactions we oversee by exploring our website.
More debt and borrowing resources
How to make a plan to manage your debt
Comparing different debt relief options
The impact of debt on your credit report
How to improve your credit score
How to build healthy financial habits
Things to think about before you take out a loan
Understanding the cost of your loan
The rules for payday lenders in BC
The risks of borrowing money from unlicensed lenders
Buy now, pay later plans: what you need to know
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