In Canada, your credit score — a number between 300 and 900 — influences your mortgage rate, your ability to rent an apartment, your insurance premiums, and sometimes even your job prospects. Understanding how it works is basic financial literacy that pays off for years.
Canada’s Credit Bureaus
Two main agencies collect and report credit data in Canada: Equifax and TransUnion. Most lenders check one or both. Your score may differ slightly between them because each has slightly different data.
You’re entitled to one free credit report from each bureau per year at no cost. Get yours at equifax.ca and transunion.ca. For ongoing score monitoring, free services like Borrowell (Equifax) and Credit Karma (TransUnion) give you regular updates.
What Affects Your Score
- Payment history (35%): The most important factor. Every payment made on time helps; every missed or late payment hurts. A single 30-day late payment can drop your score 60-100 points.
- Credit utilization (30%): How much of your available credit you’re using. Keep it below 30% — ideally below 10% — on each card and in total. A $10,000 limit card with a $3,000 balance is at 30% utilization.
- Length of credit history (15%): Older accounts help. Don’t close your oldest credit card, even if you rarely use it.
- Credit mix (10%): Having different types of credit (credit card, car loan, line of credit, mortgage) modestly helps your score.
- New credit inquiries (10%): Each hard inquiry (when you apply for new credit) temporarily drops your score by 5-10 points. Multiple applications in a short period signals risk.
Score Ranges in Canada
- 760-900: Excellent — best rates on mortgages and loans
- 725-759: Very good — qualify for most products at competitive rates
- 660-724: Good — most lenders approve, rate may be slightly higher
- 560-659: Fair — limited options; higher rates; some lenders decline
- 300-559: Poor — alternative lenders only; very high rates
How to Improve Your Score
- Never miss a payment: Set up auto-pay for at least the minimum on every account. Missing payments is the fastest way to damage a score.
- Pay down balances: Reduce credit card balances below 30% of each card’s limit. This can raise your score meaningfully within 1-2 billing cycles.
- Don’t close old accounts: The age of your oldest account matters. Keep it open and use it occasionally.
- Limit new applications: Apply for new credit only when you need it, not to collect points or take advantage of promotional offers.
- Dispute errors: Review your credit report for errors — accounts that aren’t yours, incorrect late payments, fraudulent inquiries. Dispute them directly with the credit bureau. Errors affect more reports than most people realize.
