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Published on November 20th, 2009 | by Canadian Credit Expert


Canadian Consumer Credit

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The secret to getting approved with bad credit in Canada starts with understanding consumer credit and how credit reporting works. Any Bad Credit Canada and its team of bad credit experts have put together several easy to understand consumer credit, bankruptcy and bad credit definitions. Any Bad Credit Canada presents complex Canadian credit and bankruptcy content in plain and easy to understand language. We always uses real world examples to make learning about credit simple.

Before you understand how bad credit can affect you and your Canadian credit score, its important to understand consumer credit.

So What is Consumer Credit?

In its most basic form credit is an agreement between parties, where one party agrees to loan resources to another. The obligations for each party vary.

The loan granter is obligated to provide money, goods or services, while the loan recipient is obligated to pay back an agreed upon sum and specified dates.

Receiving credit allows the recipient to reimburse their lender at a later date. By loaning money or resources, the credit granter is creating a debt, which the borrower is obligated to pay back.


The party lending or loaning resources and generating a debt is known as the creditor. The creditor extends credit in the form a loan to their customer, with a contractual agreement that the loan will be repaid.


The recipient of the loan and debt is aptly named the debtor. The debtor in exchange for being extended credit is obligated to repay their credit. The debtors loan terms and repayment schedule can vary.

Loan Terms

The terms of a loan dictate when how a loan is repaid. For instance a car loan requires a regular fixed payment be made every month until the car loan is paid in full. A credit card however only requires a minimum monthly payment (equivalent to 3% of the credit card balance) each month.

Type of Loans

There are 2 main types of credit in Canada. They are Installment Loans and Revolving loans.

Installment loans require a regular fixed (or installment) payment to be made, usually monthly. Examples of installment loans in Canada include:

Revolving Loans, like installment loans, require a regular payment, however the payments required on a revolving loan are not fixed installments. The required payment on a revolving loan is based on the size of the loan and its balance. Some examples of revolving loans in Canada are:

  • Credit cards
  • Retail credit cards (Future Shop or Canadian Tire credit card)
  • Personal Line of Credit

To learn more about credit and how installment loans and revolving loans report to Canadian Credit Bureaus or how they appear on your credit file, please review the Types of Bad Credit article at Any Bad Credit Canada.

Enforcing Credit

Credit and loans are enforced by a monitored credit history and credit score system. If an individual defaults on their loan and does not live up to their agreement, their credit rating can be harmed which can lead to a bad credit history, making it very difficult to apply for credit in the future.

Visit Check Your Credit First Canada, a free credit report website, for detailed information on credit reporting, credit bureaus and of course a free credit report in Canada.

If you’re ready to learn about bad credit and find out how to get approved with bad credit, check out our Bad Credit Page. For more bad credit advice or questions check out the Any Bad Credit Questions page.

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About the Author

The Canadian Credit Expert most recently worked in sales financing for a major bank in Canada but has done everything from working at a new car dealership to collecting on past due loans for a Canadian auto lender.

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