How credit scores work in Canada

A credit score is a three-digit number that lenders use to estimate how likely you are to repay what you borrow. In Canada, scores usually range from 300 to 900, and a higher score is better. It isn’t a measure of your worth or your income. It’s a summary of how you’ve handled credit so far, and it changes as your habits change.

This guide explains where your score comes from, what moves it, and how to start building one if you don’t have much of a history yet.

Your credit report and your credit score are different things

Your credit report is the record. According to the Financial Consumer Agency of Canada (FCAC), it can include:

• personal details, such as your name, date of birth and current and past addresses;
• your credit accounts, such as credit cards, loans and lines of credit, and how you’ve paid them;
• debts sent to collections, bankruptcies and certain court decisions;
• inquiries from lenders who have looked at your report, generally over the past three years.

Your credit score is a number calculated from that report by a scoring model. Canada has two main credit bureaus, Equifax and TransUnion, and each keeps its own report on you. Lenders may report to one bureau, the other or both, and different scoring models weigh information differently. So it’s normal to see slightly different scores from different sources.

What shapes your score

Scoring models don’t publish their exact formulas, but FCAC describes the habits and history that matter most:

• Payment history. Paying on time, every time, is the most important part of your score. If you can’t pay the full balance, paying at least the minimum by the due date protects your history.
• How much of your available credit you use. FCAC suggests trying to use less than 30% of your total credit limit. Using $1,000 of a $5,000 limit, for example, is 20%.
• Length of your credit history. Lenders like to see a long, stable history. Keeping older accounts open, even with a zero balance, can help.
• Types of credit. A mix, such as a credit card and an instalment loan, can help, as long as you only borrow what you can repay.
• New applications. Each application for credit usually creates a “hard” inquiry on your report. Several in a short time can lower your score. Checking your own report or score is a “soft” inquiry and doesn’t affect it.
• Serious negative events. Collections, consumer proposals and bankruptcies have a significant impact.

What the numbers mean in practice

There’s no single “passing” score. Each lender sets its own criteria and looks at more than your score, including your income and existing debts. In general, a higher score gives you more choice and can help you qualify for better rates.

If your score is low, or you don’t have one yet, that tells lenders they have less information or more risk to price in. It’s a starting point, not a verdict.

Negative information doesn’t last forever

How long information stays on your report depends on the type of information, the credit bureau and your province. For example, FCAC notes that a first bankruptcy is typically removed six years after the date of discharge, or seven years in some provinces with TransUnion. FCAC’s guide covers the details, and the bureaus can confirm your specific timeline.

Checking your own score is free and safe

You can get your credit report from both Equifax and TransUnion at no cost, and you can get a credit score for free from at least one bureau, depending on where you live. Some banks also show scores in their apps. FCAC explains every option in its guide to getting your credit report and score.

Look through your report at least once a year for accounts you don’t recognize, wrong addresses or payments marked late that were on time. If something is wrong, you can ask the bureau to correct it.

Be cautious with websites that promise free scores: FCAC warns that scammers sometimes pose as credit report providers to collect personal information.

Building a score from scratch

To have a score at all, you need credit accounts that are reported to a bureau. If you’re new to credit, two products are designed for exactly this situation:

• a secured credit card, where a security deposit sets your credit limit, and
• a credit builder loan, where you make regular payments and build toward funds you receive at the end of the term.

We compare them in secured card vs credit builder loan, and you can read how our planned secured credit card is designed.

Key takeaways

• Canadian credit scores usually range from 300 to 900. Higher is better.
• Equifax and TransUnion each keep their own report, so scores can differ.
• On-time payments matter most. Keeping your balances low relative to your limits comes next.
• Checking your own score doesn’t lower it, and you can do it for free.
• Negative information fades over time; consistent habits rebuild your history.