Credit Score Basics for Canadians
Understanding your credit score is the first step to financial empowerment. Here's everything Canadians need to know about how credit scores work.
What Is a Credit Score?
Your credit score is a three-digit number between 300 and 900 that represents your creditworthiness. It's calculated using information from your credit report and helps lenders quickly assess the risk of lending to you.
Canadian Credit Score Ranges
How Credit Scores Are Calculated
Canadian credit scores are calculated using five main factors, each weighted differently:
Payment History
35%Do you pay your bills on time? Late payments, collections, and defaults significantly impact this factor.
Credit Utilization
30%How much of your available credit are you using? Lower utilization is better for your score.
Credit History Length
15%How long have you been using credit? Longer credit history generally helps your score.
Credit Mix
10%Do you have different types of credit? Credit cards, auto loans, and mortgages show variety.
New Credit Inquiries
10%How often are you applying for new credit? Too many applications in a short time can lower your score.
How to Check Your Credit Score
In Canada, you have several options for checking your credit score:
Free Options:
- • Credit Karma (free monthly updates)
- • Borrowell (free weekly updates)
- • Many banks offer free scores to customers
- • Annual free credit reports from Equifax and TransUnion
Paid Options:
- • Equifax Canada ($20+ for detailed reports)
- • TransUnion Canada ($20+ for detailed reports)
- • Include credit monitoring and identity protection
Important: Checking your own credit score does not hurt your credit. This is called a "soft inquiry" and doesn't affect your score.
Understanding Your Credit Report
Your credit report contains detailed information that's used to calculate your score:
Personal Information
Name, address, date of birth, employment history, and phone numbers
Credit Accounts
All your credit cards, loans, and mortgages with payment history, balances, and limits
Public Records
Bankruptcies, consumer proposals, court judgments, and tax liens
Credit Inquiries
Recent applications for credit, divided into "hard" and "soft" inquiries
Common Credit Score Myths
Myth: Checking your credit hurts your score
Truth: Checking your own credit is a soft inquiry and doesn't affect your score.
Myth: Closing credit cards helps your score
Truth: Closing cards can hurt your score by reducing available credit and shortening credit history.
Myth: You need perfect credit for auto financing
Truth: Many lenders specialize in bad credit auto financing and consider factors beyond just credit scores.
Your Next Steps
Put Your Knowledge to Work
Understanding credit scores is just the beginning. Whether you have excellent credit or are rebuilding from challenges, there are auto financing options available in Ontario.