Credit Score 101: How Your Credit Score Works in Canada

A credit score is a three-digit number that represents your creditworthiness. It helps lenders decide whether to approve you for loans, mortgages, credit cards, and other financial products. In Canada, credit scores typically range from 300 to 900, with higher scores indicating lower credit risk.

Why Does Your Credit Score Matter?

• Loan & Mortgage Approvals – Higher scores increase approval chances.
• Interest Rates – A better score can get you lower interest rates.
• Credit Card Eligibility – Premium credit cards often require a strong credit score.
• Apartment Rentals & Jobs – Some landlords and employers check credit history.

How is Your Credit Score Calculated in Canada?

Canada has two major credit bureaus: Equifax and TransUnion. They use five key factors to calculate your score:

• Payment History (35%) – Paying bills on time is the biggest factor.
• Credit Utilization (30%) – Keep utilization below 30% of your total credit limit.
• Credit History Length (15%) – The longer you've had credit, the better your score.
• Credit Mix (10%) – A diverse mix (credit cards, loans, lines of credit) can help.
• New Credit Inquiries (10%) – Applying for multiple credit cards in a short period can lower your score.

Credit Score Ranges in Canada

(Source: Equifax Canada and TransUnion Canada)

How to Improve Your Credit Score

• Always pay bills on time – Set up automatic payments to avoid late fees.
• Lower your credit utilization – Keep usage under 30% of your available limit.
• Keep old credit accounts open – Closing accounts can shorten your credit history.
• Limit new credit applications – Too many hard inquiries can lower your score.
• Check your credit report regularly – Get free reports from Equifax & TransUnion to dispute errors.

How Do Credit Cards Impact Your Credit Score?

Credit cards can either boost or hurt your credit score, depending on how you use them:

✔️ Positive Effects:

• Making on-time payments improves your credit history.
• Keeping low utilization (below 30%) shows responsible borrowing.
• Having an older credit card account helps build a long credit history.

❌ Negative Effects:

• Missing payments can significantly lower your credit score.
• Maxing out your credit limit hurts utilization and looks risky to lenders.
• Applying for too many credit cards at once can cause multiple hard inquiries.

Best Credit Cards to Help Build Your Credit Score

If you’re looking to build or improve your credit, consider these cards:

• CIBC Aeroplan Visa Platinum – Annual fee: $0 (first year, then $89). Earns 1 Aeroplan point per $1 on gas, groceries, and Air Canada purchases. Includes Preferred Aeroplan Pricing for lower Aeroplan redemption costs.
• American Express Cobalt Card – Monthly fee: $12.99. Earns 5x points on food, groceries, and dining, 2x on transit and gas, and 1x on everything else. Membership Rewards points can be transferred to Aeroplan or redeemed for statement credits.
• BMO Cashback Mastercard – No annual fee. 3% cashback on groceries (first $500 per month), 1% on recurring bill payments, and 0.5% on everything else.
• RBC Visa Classic Low Rate – Designed for low-interest financing rather than rewards. 12.99% interest rate, great for those working on their credit.

(Always check the latest eligibility and benefits on the official bank websites.)

Final Thoughts

Your credit score is one of the most important financial tools in your life. Understanding how it's calculated and how to improve it will help you get better credit cards, loans, and financial opportunities.

🚀 Next Steps:

Check your credit score at Equifax or TransUnion, or use free alternatives like Borrowell and Credit Karma for access to the same reports.