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article-credit-score-tips-1In life, there’s one number that can open or close a lot of doors, and you may not even know what it is. Answer? It’s your credit score.

While it’s one of the most important numbers in anyone’s financial life, many Canadians are unaware of where they stand. In fact, according to a 2015 BMO report, 56 per cent of Canadians have never checked their credit score. Yikes! What’s even scarier is that one fifth of respondents believe the mere act of checking your credit score can decrease your score (Hint: it’s just a myth!).

Knowing your credit score is incredibly important, because it may impact how lenders determine what they’ll charge you to borrow money for a car, home or other big purchase.

In other words, your credit score represents how “creditworthy” you are and how likely you are to pay your bills on time. Your credit score can have a huge impact on your financial life and affect everything from your interest rates (think home or car loan) to if you get approved for a rewards credit card or an apartment.

In this guide, learn about six things you should know about credit scores, as well as how to improve your score.

What is a credit score?

A credit score is a numeric representation of your creditworthiness, while a credit report details your credit history (see an example here). In Canada, credit scores range from 300 to 900 points (with 900 being top marks). One of the most popular types of credit scores is the FICO credit score, though other brands such as Beacon and Empirica can produce credit scores, as well.

If you have a low credit score or no credit score, it may be difficult to get approved for a mortgage, a credit card, etc. This is because your credit score is a snapshot of how financially responsible you are when it comes to paying back your debt, as well as paying bills on time.

You may be wondering then, “what is a good credit score?” Credit scores are typically broken down into different categories: poor, fair, good, very good and excellent.

See how Canadians compare in the chart below:


Source: Financial Consumer Agency of Canada

So if you’re curious about what is a good credit score, a solid benchmark is 700 or above. The higher the credit score, the better.

Who can check your credit score and credit report?

You may be surprised by just how often your credit is checked and used by others to determine if you are creditworthy. According to the Financial Consumer Agency of Canada, lenders, landlords and employers can use your credit report, with your consent. However, in some cases, your credit report may be used if you are applying for insurance, or even a job (yes, really!).

How do I establish credit history?

Establishing credit can be tricky. You need to get approved for a loan or credit card to establish credit, but how can you get approved if your credit score is low or non-existent?

One way you can start is by getting a secured credit card. Credit cards typically have limits, but with a secured card, the limit is set by how much money you put down as a deposit. The key for secured and unsecured credit cards or any other type of loan or financial payment ― such as rent, utilities and student loans ― is to pay on time.

Paying on time, 100 per cent of the time, illustrates that you are financially responsible and can pay back what you borrowed.

How is my credit score calculated?

The main factors that contribute to your credit score calculation include:

  • Types of credit (for example: credit cards, student loans, mortgages, etc.).
  • Number of inquiries (how often are you applying for a loan? Too much in too little time can set off alarms for lenders, pegging you as a risk).
  • How long you’ve had your accounts — your length of credit history can affect your credit score.
  • Credit utilization — how much credit you have available can affect your credit score. Keeping a low balance in relation to your credit limit is a good idea.
  • Payment history — do you pay your bills on time? Whether you make on-time payments or not can be a huge red flag to lenders and if you miss a payment, it could hurt your credit score. 

Who administers my credit score and credit report?

You may wonder who actually administers your credit report and credit score? Where do you even get it?

How to obtain your credit report

In Canada, there are two credit bureaus: Equifax®* and TransUnion®†. These credit bureaus can administer your free credit report, which is a comprehensive report that illustrates how much you owe, when you opened accounts, and contains personal information such as name, date of birth, social insurance number and more.

How to check your credit score

If you’d like to know how to check your credit score, you can get it from the same bureaus as your credit report.

Why you should check your credit score and credit report

Before you apply for a mortgage, credit card or any other type of loan, you’ll want to check your credit report to make sure everything is correct.

Checking your own credit score and credit report, does not affect your credit. That’s only a myth. Checking your own credit report is considered a “soft hit”. A “hard hit” does affect your credit. These inquiries could be from credit card applications, rental applications, and more.

How to improve your credit score

So by now, it’s probably clear that your credit is pretty important. But you may be curious how to improve your credit score.

  • Make sure you make your payments on-time, every time. Your payment history is a big factor in determining your credit score, so making on-time payments can give you a huge leg up. Consider signing up for automatic payments to ensure you never miss a due date.
  • Use credit responsibly. You probably know you should pay off your credit card balances in full, but it’s also key to keep your balance fairly low, relative to your credit limit. If you are maxing out your credit cards each month — and paying them off in full — you may still be considered a risk to your lender.
  • Don’t cancel all of your credit cards. A common credit myth is that cancelling your credit card can boost your credit score, but this isn’t necessarily true. Cancelling a card could affect your length of history, which could potentially hurt your credit score.
  • Check up on your credit. Keep tabs on your credit report and credit score and be sure to follow-up about any potential errors. You can get in touch with the credit bureaus to correct your information, if there are any errors.

By using these tips, you can find out how to check your credit score and how to get a credit report, as well as how to improve your score. You may not think it means much, but your financial life will thank you.

®*Registered trademark or EQUIFAX SERVICES, LTD.
®†Registered trademark of TRANSUNION, LLC

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