There are many reasons to maintain a good credit rating. It makes it easier to get insurance, qualify for a mortgage or a credit card, or even rent a place to live.
Depending on your line of work, a good credit rating can also make it easier for you to get a job.
Careers where a good credit rating matters
Most employers don’t consider your credit rating, but there are 2 exceptions:
Jobs that require security clearance
Jobs where you are responsible for large sums of money
If you work in one of the following industries, a credit report may be part of the application process, and maintaining good credit may be a condition of employment:
Financial services, including banking and investment
Accounting, auditing, and tax services
Insurance
Government and public service (for jobs that have financial responsibilities or require security clearance)
Law enforcement, the military, and intelligence services
Casinos and gaming
Law, especially in firms that handle large trust accounts
Corporate or executive-level management
What is a good credit rating?
If you’ve ever signed a mortgage, taken out a loan, or used a credit card, it is likely that your lenders have reported your activity to one or both of Canada’s credit bureaus—Equifax and TransUnion. That means these agencies have a credit report on you.
A credit report (also called a consumer disclosure) is a summary of your financial history. It gives lenders a standardized view of how you manage the money you’ve borrowed.
A credit report includes:
Personal information like your name, address, birthdate, and other details
Information about your credit cards, mortgages, and loans, including details about your credit limits, how much you owe, and how promptly you pay
Information about who has pulled a copy of your credit report
Public record information related to insolvency, bankruptcy, or past-due accounts that have been turned over to collection agencies
Credit bureaus use the information on your credit report to calculate your credit score. This is a 3-digit number that rates how you manage your credit and shows how likely you are to repay your debts. Credit scores range from 300 to 900. The higher the number, the better the score.
An excellent credit score (760–900) gets you access to the best available interest rates and terms. Only 25% of Canadians have excellent credit scores.
A good credit score (660–724) means you’ll qualify for credit cards, car loans, and mortgages, although you may not get the best rates. About 60% of Canadians fall into this category.
A poor credit score (300–559) means you have credit problems. You’ll find it hard to borrow money, and if you are approved, you’ll face the highest interest rates.
Credit bureaus also use rating codes on your credit report. Each account on your credit report has its own R-rating (short for “revolving credit rating”), and one bad rating doesn’t affect your other accounts:
R1 is the best possible rating. It means you always pay on time.
R5 is a warning sign. It means your overdue account is about to be sent to a collection agency.
R7 means you’re insolvent and you’re using a structured debt-repayment plan to deal with your situation. This is a serious problem, but it tells lenders you’re working your way out of financial trouble.
R9 is the most serious rating. It tells lenders that you’ve filed for bankruptcy and your debts cannot legally be collected. This makes borrowing money or getting credit extremely hard.
Check out the Credit Resources website for detailed, easy-to-follow articles about credit reports and credit scores.
Who can see your credit report?
You can get your credit report and credit score for free from Equifax no matter where you live in Canada. You can also get a free credit report from TransUnion, but you will need to pay to get your credit score unless you live in Ontario or Quebec. The paid reports you may see on other organizations’ websites are part of their subscription-based credit monitoring services, which you don’t necessarily need. Requesting your credit report does not affect your credit rating.
With your consent, financial institutions, credit card companies, insurance and utilities companies, car-leasing firms, governments, landlords, and employers can request your credit report. They need a valid reason, and they need to pay a fee. Requested reports are customized to protect your privacy, and they only provide information the agency is entitled to see.
Rules for employee credit checks
Note: Employer-requested credit reports are considered “soft inquiries” that do not affect your credit rating. And credit reports provided to employers do not include your credit score.
If your current or prospective employer requires a credit check, they must respect Canadian employment standards, human rights legislation, and privacy laws.
Employers must:
Have a valid reason to request your credit report. You have the right to ask what that reason is.
Obtain your written consent and tell you the purpose of the credit check, which credit bureau will be used, and how the information will be used in the hiring decision.
Allow you the opportunity to review your own credit report before they do.
Inform you if your credit report influenced their decision not to hire you.
Disclose bad credit early
If you have bad credit and you know your employer will check, don’t wait to tell them about your situation. Be honest about what happened, and briefly explain that you took responsibility. Most employers will understand.
Know your rights
In Canada, it’s illegal to fire people or deny them a job just because they have bad credit. Employers must prove that your credit history is directly relevant to your specific job duties. They must also show that your credit issues are a real risk for their organization.
If you feel that an employer has obtained or used your credit information improperly, you can file a complaint with the Office of the Privacy Commissioner of Canada, the Office of the Information and Privacy Commissioner of Alberta, or the Alberta Human Rights Commission.