Your credit score is a three-digit number that lenders use to help decide how likely it is that you will repay borrowed money. In Canada, credit scores are shown as part of your credit report, which is a summary of your borrowing history maintained by credit bureaus such as Equifax Canada and TransUnion Canada.
The Government of Canada’s Financial Consumer Agency of Canada (FCAC) explains that credit scores are based on information in your credit report, and that certain types of information can influence your credit score over time.
Here’s some examples of what may affect your credit score in Canada:
1. Payment History
Your payment history shows whether you make credit and loan payments on time.
Paying on time demonstrates responsible borrowing behaviour.
Late payments, missed payments, or accounts sent to collection agencies appear on your credit report and can lower your credit score.
This is generally seen as one of the factors most closely associated with how risk is assessed.
2. Use of Available Credit
Credit bureaus take into account the amount of credit you are using relative to the total credit available to you.
Carrying a high balance relative to your credit limit may be interpreted as greater risk.
Lower credit utilization (i.e., using only a small portion of your available credit) may be seen as more responsible.
The government guidance explains that your credit score is based on how well you manage your credit, including the amounts you owe.
3. Length of Credit History
How long your credit accounts have been open matters.
Older accounts with a positive payment history can contribute positively over time.
New accounts have shorter histories and give less information about long-term behaviour.
Canada’s official guidance notes that longer credit histories generally give lenders more information about your borrowing behaviour.
4. Number of Credit Applications
When you apply for credit, lenders check your credit report.
These checks can appear on your credit report as credit inquiries.
A high number of recent applications may signal higher risk to lenders.
The government notes that limiting unnecessary applications can help manage how your credit report is viewed.
5. Types of Credit Used
Credit reports reflect a range of credit products, such as:
Credit cards
Loans
Lines of credit
Using different types of credit responsibly over time can provide evidence to lenders about your borrowing experience.
Canada’s official education on improving credit score notes that a mix of credit types can be part of overall credit history.
Important to Know
The exact formulas used by credit bureaus to calculate your credit score are proprietary and not publicly disclosed, and Canadian authorities do not publish exact weightings or scores tied to specific actions.
This means:
You cannot know precisely how much one factor moves your score.
Different credit bureaus and lenders may use their own models based on the information in your credit report.
Why These Factors Matter
Your credit score affects:
Whether lenders will offer you credit
What interest rate you might pay
How easy it may be to get a loan, credit card, or other financial products
Something to note: Checking your own credit report for personal use does not impact your score.
Credit scores change over time as information on your credit report changes, which is why understanding how credit reporting works is important.
DISCLAIMER: This article is for informational purposes only and is not intended as legal or financial advice
