Understanding Your Credit Score

A credit score is a three-digit number (typically 300–900 in Canada) that represents your creditworthiness — essentially, how likely you are to repay borrowed money. The higher the number, the better.

In Canada, credit scores are calculated by two national credit bureaus — Equifax Canada and TransUnion Canada. Lenders, landlords, and even some employers check your score before making decisions about you.

Your credit score is calculated from five key factors. Understanding each one is the key to improving your score strategically.

If you're just starting out — whether you're a newcomer to Canada or a young adult — you may have no credit history at all. Here's how to build it safely:

1. 1Open a secured credit card — you deposit $200–$500 as collateral, and that becomes your credit limit. Canadian options include the Home Trust Secured Visa and Capital One Canada Secured Mastercard. Use it for small purchases and pay it off in full each month.
2. 2Become an authorized user on a parent's or trusted family member's account. Their positive history gets added to your credit file.
3. 3Try a credit-building program like Refresh Financial, KOHO, or a credit union credit builder program. You make monthly payments that get reported to the credit bureaus.
4. 4Pay your bills on time — cellphone plans, utility bills, and even CRA (Canada Revenue Agency) payments can impact your credit if they go to collections.
5. 5Keep your first accounts open and in good standing — a long history helps.

Most people with no credit can get to a 700+ score within 12–18 months by following these steps consistently.

If you have negative marks on your credit report, rebuilding takes time — but it's absolutely possible. Here's the priority order:

1. 1Stop the bleeding — pay all current bills on time going forward. One missed payment hurts less than a pattern of late payments.
2. 2Dispute errors — request your free credit reports directly from Equifax Canada and TransUnion Canada and dispute any inaccuracies. Errors are more common than you'd think.
3. 3Pay down credit card balances — getting your utilization under 30% (and ideally under 10%) is the fastest way to raise your score.
4. 4Don't close old accounts — even if you don't use them, open accounts with good history help your average account age.
5. 5Be patient — a late payment typically falls off after 6 years in most provinces (7 in some); bankruptcy after 6–7 years for a first-time discharge. Time plus good behaviour = recovery.

In Canada, you can request a free copy of your credit report from both Equifax Canada and TransUnion Canada — by mail at any time, or online through their websites. You're entitled to this under Canadian privacy law.

Several free services let you monitor your score continuously: Borrowell (provides your Equifax score for free), Credit Karma Canada (provides your TransUnion score for free), and many Canadian banks now show your credit score through their online banking or mobile app.