Understanding Credit Scores in Canada

Your credit score is an important measure of your creditworthiness. In Canada, credit scores range from 300 to 900, with a higher score indicating better credit. But how is your credit score calculated, and what factors can affect it?

First, it’s important to know that there are two main credit bureaus in Canada: Equifax and TransUnion. Each bureau calculates your credit score slightly differently, but both use similar factors to determine your score. These factors include:

• Payment history: Your payment history makes up the largest percentage of your credit score (35%). This means that making payments on time is crucial to maintaining a good credit score.
• Credit utilization: Your credit utilization refers to the amount of credit you’re using compared to your total available credit. High credit utilization (above 30%) can lower your credit score.
• Length of credit history: The longer your credit history, the better your credit score will be. This is because it shows that you have a track record of managing credit responsibly.
• Types of credit: Having a mix of credit types (such as a credit card, car loan, and mortgage) can also improve your credit score.

Other factors that can affect your credit score include recent credit inquiries, bankruptcies, and collections.

So, how can you improve your credit score? Here are some tips:

• Pay your bills on time, every time. Late payments can have a significant negative impact on your credit score.
• Keep your credit utilization low. Try to use no more than 30% of your available credit at any given time.
• Don’t close old credit accounts. Keeping older accounts open can help boost the length of your credit history.
• Monitor your credit report regularly. Check for errors or fraudulent activity that could be dragging down your score.
• Be patient. Improving your credit score takes time, so don’t get discouraged if you don’t see immediate results.