How Credit Score Works in Canada



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Credit Score

A credit score is a number that reflects the more detailed information found in your credit report. There are two major agencies in charge of compiling the data that makes up a credit score; TransUnion credit score and Equifax.

These agencies keep tabs on your spending habits, loan history, and credit card usage, converting all these into a score. The three-digit number that makes a credit score determines an individual’s creditworthiness. Read on to know the importance of a good credit score and the factors that can take up or bring down your score.

Canadian Credit Score Range

There are many ranges to a credit score. Canada has a score range between the values of 300 – 900. The lower the number value, the less likely, your applications for loans or mortgage will be approved.

On the other hand, the higher your score, the brighter your prospects of securing the best loans and mortgage rates from grade “A” lenders. A good credit rating will give you access to improved insurance coverage, rent a good home, and a better deal for phone and Internet utilities.

You don’t always have to pay a fee to see your score. Borrowell’s credit score is free as well as a few others.

 741 – 900 Credit Score Range (Excellent)

Canadians with an excellent score have little to no late payments. They also pay off their balances on time and in full. The utilization of their credit lines is minimal. Individuals with excellent credit have access to the best financial facilities in Canada.

You’d be hard-pressed to find a financial institution that isn’t eager to do business with a Canadian with an excellent credit score.

Lenders fall over themselves to entice them with the lowest interest rates in the market, maximum loans, and credit limits, as well as premium credit card perks. Canada has an average credit score of 650, and this encompasses 50% of the Canadian population.

690 – 741 Credit Score Range (Good)

If an excellent credit score opens all the doors, then a good credit score ensures you’re in the conversation. Canadians who fall under this range still have access to the best credit products with the lowest rates from grade “A” lenders.

An individual who has a score within this range is fiscally responsible, makes payments within a reasonable time and is hardly late on payments. Their credit card utilization is low considering the amount of credit at their disposal.

660 – 689 Credit Score Range (Average)

Although having an average credit score is not the end of the world, people who fall under this category are likely to pay a higher interest rate for loans and other financial products than the individuals mentioned above.

Canadians who fall under this range are usually late on their payments, and very often too. They may also have defaulted on a few loans as well. Lenders aren’t so keen to do business with these individuals, hence the higher interest rates.

575 – 659 Credit Score Range (Below Average)

Let’s make one thing clear. Poorer credit scores mean higher interest rates – for those who are willing to lend you money. Customers who fall under this category will have a hard time getting approved loans from reputable lenders.

They can’t have access to the financial incentives and rewards offered to those at the top of the list.

300 – 574 Credit Score Range (Poor)

A damaged credit history means a lot of lending options are closed to you. Canadians under this range are likely to have declared bankruptcy or at the very limit of their credit.

They’ve likely defaulted on many loans, multiple times, and this significantly damages their credit score.

It’d be easier for the proverbial camel to pass through the eye of a needle than for a Canadian with a score within this range to secure a mortgage or loan from a grade “A” lender.

Importance of a Good Credit Score

A good credit score makes it easier to achieve your dreams. Most financial institutions need access to your credit score to determine how much credit to give you and whether to extend credit to you at all.

Below are some benefits of a good score:

  • Get a credit card with good rates and rewards
  • Rent any home of your choice as landlords are legally allowed to have access to your credit history
  • Buy a home with the best mortgage products

Most lenders will place a strong emphasis on your credit score whenever you apply for a financial product. Individuals with the best scores hardly default on their loans and credit cards, and this allows them to reap the benefits of a good score.

Conversely, people with the lowest scores default more often.

A good score gives you the best chance to apply for credit products and other loans without passing through stringent application processes.

Although mortgage products and car loans follow an intense vetting procedure, having a good score instills confidence in the lender you’ll be able to pay back.

Thus, the lender is willing to negotiate the best rates for your loans.

Most people do not understand the significance of having a good score. It is a number that can greatly affect your chances of living your best life.

Getting Your Credit Score

Although credit scores can be a big deal, it is a small matter to get yours. Credit scores checks on a few platforms are free. These companies allow you to do a “soft check” which won’t drop your score. You can request your credit report from Equifax or TransUnion.

The credit report is more detailed and free once a year. It can also be worth your while to go through your credit report for mistakes that can dent your score. If you feel there are errors on your credit report, contact the credit bureau to investigate as soon as possible.

Factors That Affect Your Credit Score

A lot of factors can affect your credit score. Because it reflects your past credit transactions, making full payments on your credit is critical. If you can’t do that, then the minimum payment will suffice.

However, there’s a lot more that can affect your score. Some of them are:

  • The number of credit accounts in your possession
  • Owning high balances above 35% on your loans or credit cards
  • Multiple applications for credit
  • Many late or default payments
  • Little to no credit history

Below are a few factors that affect your credit score:

Payment history

Your payment history is the factor that affects your score the most. It is like a report card that scores your spending and payment transactions. It looks at your consumer debt, which ones are paid off, and loans with defaults.

It particularly factors in your repayment history and the time it takes for you to pay off loans.

The longer it takes, the lower your score. Your payment history gives creditors a good insight into your ability to repay your loans. Their decision to approve a credit product on your behalf is heavily influenced by your payment history.

Credit Utilization

Credit utilization is the amount of credit you consume compared to the amount that’s at your disposal. For instance, if you have C$2000 on your card with a balance of C$400, that’s a 20% credit utilization.

It is generally advisable to stay under 30% of your total credit.

Length of Credit History

Lenders are happy with consumers who have a long history of using credit.

On the other end of the spectrum, they see individuals with little to no credit history as a risk to do business with due to defaults on their balances.


The general rule is, the younger you are, the lower your score. A young person is likely to have a short credit history the same way an old person will have a longer credit history. It has nothing to do with your ability to deal with credit or pay off your loans.

Soft Checks and Hard Checks

Whenever you apply for a credit product, the lender is obligated to run a check on you. There are two types of credit checks. They are:

  •  Soft Checks
  • Hard Checks

A soft check means taking a look into your finances and creditworthiness for a non-lending purpose. A soft check does not affect your credit score. Hard checks are mostly carried out by your lender whenever you apply for a financial product or loan.

Unlike the soft check, a hard check can affect your score. Carrying out many hard checks within a limited time can decrease your score by up to 10 points.

Credit Diversity

Just the same way investors diversify their portfolios to spread risk, it is advisable to do the same. Lenders are happy to see you have different types of credit and are even more impressed when you show the financial responsibility to manage each credit well.

Ways To Raise Your Credit Score

If you are not happy with your credit score, outlined below are a few tips to increase your score.

  1. Repay your debt on time and in full where possible.
  2. Reduce your credit utilization by applying only for the credit you need.
  3. Keep a lengthy credit history.
  4. Avoid hard checks on your credit unless it’s necessary.
  5. Report errors and outdated information on your credit report.


Your credit score is one of the most important numbers you’ll ever have and stays with you for the rest of your life. It is in your best interest to keep it within a good range as this can save you hundreds of thousands of dollars in the long run.

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Kareena Maya

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Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.

Kareena Maya is a freelance writer focused on the personal finance and travel spaces. He frequently writes about credit cards, banking, student loans, insurance, travel rewards and more. His work has been featured in publications such as Forbes Advisor, Bankrate, Credit Karma, Finance Buzz, The Ascent and Student Loan Planner.