A term commonly referenced in regard to the
ability or right to buy or borrow in return
for a promise to pay later. For accounting
purposes, credit refers to an entry on the
right-hand side of an account. A credit
records increases in liabilities,
shareholder’s (owner’s) equity, revenues,
and gains, and decreases in assets and
expenses.
A central clearing house, also referred to
as a credit investigating agency , for all
types of credit related information.
Essentially, companies involved in lending
money provide the bureau with customer
information and, in return, have access to
the files established for each consumer.
Credit reports are provided on request. The
credit bureau receives information not only
from lenders (credit grantors), but also
from public record sources (judgments,
bankruptcies). Most companies using credit
cards within Canada, such as financial
institutions, oil companies, and department
stores, use the service. Selected banks
input information and the major
Canadian-based automobile financing
companies are also part of the system.
The credit bureau provides information that
is usually updated on a 60-day basis. This
varies depending on how information is
transmitted between individual lenders and
the bureau. Often, information is sent
electronically which has improved both the
accuracy and timeliness. Of course, the
consumer has the ability not only to verify
information being held on file but also to
dispute or alter incorrect data.
Credit bureaus only compile information
relating to credit. No data is collected
relating to personal habits, affiliations,
political, or social connections. Further,
not all credit information about an
individual will be found in the records. The
completeness of data is limited by the
number of lenders that participate as
members with the bureau in any particular
locale. The report on an individual may be
limited but still a useful indicator of the
positive and negative aspects of a personal
credit history.
Credit bureaus in Canada produce reports
using a common or standardized language to
ensure that reporting is consistent and that
all credit grantors use the same terms to
describe specific types of pay habits. The
common language is broken into three parts:
Kind of Business:
In most instances, the first letter of
the business is shown on the report,
e.g., automotive is A, banks are B,
clothing is C, etc. The business
classification is combined with the
member number. The two in concert make
up the trade source information, e.g.,
A-1111 refers to Automotive member
number 1111.
Usual Manner of Payment:
Payment history is detailed on a sliding
scale of 0–9, where 0 indicates too new
to rate; 1 pays within 30 days of
billing/pays account as agreed; and 9
indicates bad debt, placed for
collection.
Terms of Sale:
Reference to the type of account: O is
an open account that is normally
expected to be paid in full within 30 to
90 days with no interest or service
charge; R is a revolving account with
regular monthly payments for a balance
due; and I refers to an installment
account with a fixed number of payments
that are specifically itemized.
A report on the credit position of a
borrower that is in conformity with
applicable provincial legislation relating
to the gathering and reporting of credit
information.
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