How often does my credit score change?

Your credit score can change whenever lenders report new information to the credit bureaus (like payments or new accounts). This means your score is updated frequently, not on a fixed schedule.

If I pay off old debt, will my credit score automatically jump?

While paying off old debt is a great step, it won't erase the history of late payments. However, it positively impacts your credit utilization and demonstrates you're now managing finances responsibly. Your score should improve over time.

How long does negative information stay on my credit report?

Most negative items (like late payments) remain on your report for approximately 6 years. However, bankruptcies can stay for 10 years. Positive information, on the other hand, can stay indefinitely.

Can checking my own credit score hurt it?

No! Checking your own score is considered a "soft inquiry" and does not impact your credit rating. It's a good idea to check your score regularly to stay on top of your credit health.

I've never had a credit card or loan. Do I have a credit score?

It's possible you don't have a score yet. Credit scores are generated based on your credit history. You'll need credit activity reported to the bureaus in order to establish a score.

Canadian Credit Scores Explained: What You Need to Know

Your credit score is your financial passport – it determines what doors of opportunity open for you. It affects everything from your ability to get loans, the interest rates you're offered, and even approval for things like rental housing. Credit scores might seem like they're calculated with some complex, secret formula. But in reality, the process is more straightforward than you might think. Let's look at the key elements that determine your score.

What Exactly is a Credit Score?

A snapshot of how responsibly you've managed borrowed money in the past.
Calculated by credit bureaus (the main ones in Canada are Equifax and TransUnion).
Ranges from 300 to 900, with higher being better.

Think of your credit score like a grade for your borrowing behaviour. The higher your score, the more lenders will see you as a responsible borrower. It's calculated based on information in your credit reports, which are detailed summaries of how you've handled credit in the past.

What Goes into Your Credit Score?

Several factors contribute to your score, with the most important being:

Payment history: Do you pay your bills on time? The most important factor!
Credit utilization: How much of your available credit are you using? Lower is better – try to stay below 30% of your limits. Here's the breakdown: Let's say your credit limit is $5,000. This means the total amount of credit you can access on that card is $5,000. Ideally, you should keep your balance well below that limit. Aim to use no more than 30% of your available credit. So, in this example, try to keep your balance under $1,500. Using less than 30% shows lenders you're not living paycheque to paycheque and relying heavily on credit.
Length of credit history: A longer history shows stability and increases your score.
Types of credit: A healthy mix of credit types (credit cards, instalment loans) is beneficial.
New credit applications: Too many in a short period can hurt your score.

How do I Find Out My Credit Score?

Free credit reports: Equifax and TransUnion are legally required to give you a free copy each year. These reports don't always include your score.
Your bank or credit card company may offer free scores.
Paid services: You can purchase your score directly from the credit bureaus.
The CRA website will have the most up to date links and information on how to get your credit score.

Good vs. Bad Credit Scores in Canada

Here's a general idea of where scores fall:

Poor: 300-559
Fair: 560-659
Good: 660-724
Very Good: 725-759
Excellent: 760-900

Why a Good Credit Score Matters

Access to credit: You'll have an easier time qualifying for loans and credit cards.
Better interest rates: Save big money over the life of a loan.
Insurance premiums: Lower rates with good credit in some provinces.
Approval for apartments: Some landlords check credit.
Employment: Yes, some employers may check your score.

How to Improve Your Credit Score

It takes time, but here's the gist:

Pay your bills on time. Even one late payment stings.
Reduce debt balances. The less you owe relative to credit limits, the better.
Keep old credit accounts open (length of history matters).
Only apply for credit you truly need.
Dispute any errors on your credit report.

While this list seems simple, it has a significant impact. Making these behaviours habitual is the key to building a strong credit history. Remember, it's not about quick fixes; it's about responsible financial management over time.

Understanding your credit score is an essential part of managing your finances. A strong credit score opens doors to lower interest rates, better loan terms, and even impacts things like insurance rates. While building good credit isn't an overnight process, it's achievable with simple, consistent habits like paying bills on time and managing debt strategically. Take control of your credit, and you'll take control of your financial future.