Understanding Your Credit Score

A credit score is a three-digit number (typically 300–900 in Canada) that represents your creditworthiness — essentially, how likely you are to repay borrowed money. The higher the number, the better.

Many Canadian consumer scores use a 300–900 scale, but the score you see may differ from the one a lender uses. Credit bureaus and lenders use different formulas, and each lender sets its own criteria. A score is one part of an application, not a guarantee of approval or a particular interest rate.

Equifax Canada and TransUnion Canada are the country’s two main credit bureaus. They maintain separate reports, so information and scores can differ. Lenders commonly use reports and scores when reviewing credit applications; other organizations may request a report where permitted by law.

There is no universal formula or published set of percentages for Canadian credit scores. Common factors include your payment history, balances and credit limits, how long you have used credit, the kinds of accounts you have, and recent applications. The exact mix and weight depend on the bureau, scoring model, and lender.

If you're just starting out — whether you're a newcomer to Canada or a young adult — you may have no credit history at all. Here's how to build it safely:

1. 1If you qualify and can manage the cost, consider one starter product such as a secured credit card. Compare fees, read the terms, and ask whether the provider reports to Equifax, TransUnion, or both.
2. 2Use the account for a small purchase you already planned, then pay at least the minimum on time. Paying the statement balance avoids interest; carrying debt is not required to build credit.
3. 3An authorized-user account or a credit-building product may help in some cases, but reporting and scoring treatment vary. Confirm how the product works before paying a fee or relying on someone else’s account.
4. 4Some phone, internet, or utility accounts may appear on a credit report, but reporting practices vary. An unpaid bill sent to collections can also appear.
5. 5Give your file time to develop. Avoid applying for products you do not need just to create a credit mix.

There is no set timeline or score target. A bureau needs enough reported history to calculate a score, and lenders may have different approval criteria. Consistent payments and manageable borrowing are a sound foundation.

If you have negative marks on your credit report, rebuilding takes time — but it's absolutely possible. Here's the priority order:

1. 1Make future payments on time where possible. If you cannot pay in full, pay at least the minimum and contact the lender to discuss options.
2. 2Get your free credit reports from Equifax and TransUnion, check them for unfamiliar accounts or errors, and follow the bureau’s dispute process. Checking your own report does not lower your score.
3. 3Reduce balances where you can. Less than 30% of available credit is a practical target suggested by FCAC, not a threshold that guarantees a score increase.
4. 4Before closing an older account, weigh fees, security, and the possible effect on available credit or account history. The result depends on your file and scoring model.
5. 5Negative information is kept for different periods depending on the item, bureau, and province. Check FCAC’s current retention guide for the relevant account type rather than relying on one rule for every mark.

Review your credit reports periodically so you can catch errors, unfamiliar accounts, or signs of fraud. You can get a free report from both Equifax and TransUnion. Checking your own report or score does not affect your credit score.

1. Prepare for Future Borrowing

A credit report can help you understand what a lender may see before you apply. Lenders can use different scores and consider other information, so a score from a monitoring service cannot promise approval or a specific rate.

2. Protect Your Identity

Reviewing your report may help you spot accounts or inquiries you do not recognize. Reporting can take time, so a clean report does not rule out identity theft.

Signs of identity theft on your credit report include: accounts you don't recognize, hard inquiries from lenders you never contacted, addresses you've never lived at, and sudden unexplained drops in your score.

You can access your credit report online for free from both Equifax and TransUnion. Equifax currently offers a free online score across Canada; TransUnion includes a free score with its Consumer Disclosure for residents of Ontario and Quebec. Some financial institutions and other services also provide scores, but features, update frequency, and terms vary.

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