How Credit Scores Work in Canada 2025

Updated March 2025 · 8 min read

Your credit score is a three-digit number that tells lenders how likely you are to repay borrowed money. In Canada, scores range from 300 to 900. The higher your score, the better — and understanding how it works can save you thousands of dollars in interest over your lifetime.

What Is a Credit Score?

A credit score is a numerical summary of your credit history. It's calculated from the information in your credit report — a detailed record of every loan, credit card, and line of credit you've ever had in Canada.

Lenders use your score to decide whether to approve your application for a credit card, car loan, or mortgage, and at what interest rate. A higher score means you're seen as lower risk, which means better rates and easier approvals.

Credit Score Ranges in Canada

Canada uses a 300–900 scale. Here's what each range generally means:

• 800–900 — Excellent. You'll qualify for almost anything at the best rates.
• 720–799 — Very Good. You'll qualify for most products at competitive rates.
• 650–719 — Good. Most lenders will approve you; rates may be slightly higher.
• 600–649 — Fair. Some lenders will approve you; expect higher interest rates.
• 300–599 — Poor. Limited options; may need a secured card or co-signer to rebuild.

The average Canadian credit score is around 660–670. Anything above 720 puts you in strong standing.

Who Calculates Credit Scores in Canada?

Canada has two credit bureaus: Equifax Canada and TransUnion Canada. Both collect information about your borrowing behaviour and generate a credit score. Your score may differ slightly between the two because not all lenders report to both bureaus.

When a lender checks your credit, they typically pull from one or both bureaus. Equifax and TransUnion both use slightly different scoring models, but the factors that affect your score are largely the same at both.

What Factors Affect Your Credit Score?

Five main factors determine your credit score in Canada. Here they are in order of importance:

1. Payment History (35%)

This is the most important factor. Do you pay your bills on time? Even one payment that's 30 days late can drop your score significantly. Consistent on-time payments build your score steadily over time. Missing payments, going to collections, or declaring bankruptcy all cause major damage.

2. Credit Utilization (30%)

This is how much of your available credit you're using. If your credit card limit is $5,000 and you carry a $4,000 balance, your utilization is 80% — which hurts your score. Most experts recommend keeping utilization below 30%, and ideally below 10%. If your limit is $5,000, try to keep your balance below $1,500.

3. Length of Credit History (15%)

The longer you've had credit, the better. A 10-year-old credit card in good standing adds more to your score than a brand-new one. This is why financial advisors often say: don't close your oldest credit card, even if you don't use it much.

4. Credit Mix (10%)

Having different types of credit — a credit card, a car loan, a line of credit — shows you can manage various obligations. You don't need to take on debt just to improve your mix, but having at least two types of credit products does help over time.

5. New Credit Inquiries (10%)

Every time a lender checks your credit (a "hard inquiry"), it can temporarily lower your score by a few points. If you apply for five credit cards in a month, lenders see that as a red flag. Shopping around for the best mortgage rate is an exception — multiple mortgage inquiries within a 14-day window are typically treated as one inquiry.

What Does NOT Affect Your Credit Score

Many people worry about things that actually don't affect their score:

• Your income or net worth
• Your age
• Your marital status
• Where you live
• Checking your own credit score (a "soft inquiry")
• Your bank account balances
• Your employment history
• Utility bills (unless you default and they go to collections)

How to Check Your Credit Score in Canada for Free

You're entitled to a free credit report from both Equifax and TransUnion once per year. You can also check your score for free through:

• Borrowell — Free Equifax score, updated weekly
• Credit Karma — Free TransUnion score, updated weekly
• Many Canadian banks — TD, BMO, CIBC, Scotiabank, and others now show your score free in their apps

Checking your own score never hurts it. You can check it every day if you want — it's a soft inquiry, not a hard one.

How Long Does Negative Information Stay on Your Credit Report?

In Canada, negative information doesn't stay on your report forever:

• Late payments: 6–7 years from the date of the late payment
• Collections accounts: 6–7 years from the date the account went to collections
• Consumer proposal: 3 years after you complete the proposal
• Bankruptcy (first time): 6–7 years after discharge
• Hard inquiries: 3 years (though the impact on your score is minimal after 12 months)

Timelines can vary slightly between provinces and between Equifax and TransUnion.

Building Credit From Scratch in Canada

If you have no credit history — because you're young, new to Canada, or have always paid cash — lenders have no data to assess you. This can be as frustrating as having bad credit. Ways to start building:

• Secured credit card: You deposit money as collateral (e.g., $200–$500), and that becomes your limit. Use it, pay it off, and your on-time payments get reported to the bureau. KOHO and several major banks offer these.
• Become an authorized user: A family member adds you to their credit card. Their payment history can help your score.
• Credit-builder loan: Some credit unions offer small loans specifically designed to help you establish credit.
• Student credit card: If you're a student, most major banks offer credit cards with low limits designed for people with no credit history.

Why Your Credit Score Matters in Canada

Your credit score affects more than just credit cards and loans:

• Mortgage rates: The difference between a 650 and 750 score can mean thousands in interest over a 25-year mortgage
• Rental applications: Many landlords in Toronto, Vancouver, and other cities check credit before renting to you
• Car insurance: Some provinces allow insurers to factor in your credit score
• Cell phone plans: Carriers check credit for postpaid contracts
• Utility deposits: If your score is low, a utility company might require a deposit before connecting service

A strong credit score is one of the most valuable financial assets you can build in Canada. It doesn't happen overnight, but consistent on-time payments over 12–24 months can move you from fair to good — and from good to very good in another year or two.