A credit score is a 3-digit number calculated from your credit report that shows how likely you are to pay back money you borrow. Lenders use it to judge how risky it would be to lend to you. In Canada, scores usually run from 300 to 900, and higher is better. What each band means is on credit score ranges.
Canada has 2 main credit bureaus, Equifax and TransUnion, and they keep track of your credit history and produce both your report and your score. Looking up your own report or score has no effect on your score; which checks do count is on how hard inquiries affect your score.
Where does your score come from?
Your score is built from your credit report, so it starts with what lenders tell the bureaus. Lenders send the bureaus information about your credit accounts, and a bureau opens your report the first time you borrow money or apply for credit. The bureaus refresh your report at least once a month.
Because of that, your score moves over time as lenders update your history. It rises when you pay bills on time and use credit responsibly, and drops when you miss payments or carry too much debt. More on improving or building your credit score.
The bureaus record only credit activity in Canada, so a history built in another country doesn’t carry over; newcomers start from the steps on the improve page.
FCAC’s list of who may ask to see your report goes beyond lenders: it includes insurance companies, governments, employers and landlords.
What goes into a credit score?
The bureaus and lenders use different formulas to work out a score and don’t share the exact details, but certain common factors affect your score whichever formula is used. Equifax Canada describes five main factors and gives a general breakdown of how much the models it describes weigh each one:
- Payment history, about 35%. Models look at how late your payments were, how much was owed, and how recently and how often you missed a payment. The Financial Consumer Agency of Canada (FCAC) calls your payment history the most important part of your score, and TransUnion calls it typically the most important aspect.
- Credit used compared with credit available, about 30%. How much of the total available credit on your cards and other revolving lines of credit you are using.
- Length of credit history, about 15%. Usually both how long your oldest account and your most recent account have been open.
- Credit mix, about 10%. The kinds of credit accounts you have, such as mortgages, loans and credit cards.
- Inquiries, about 10%. Only inquiries from actively seeking credit, such as applying for a loan or a credit card, may affect a score.
Equifax presents these percentages as a general breakdown across many scoring models, not as the formula a particular lender uses.
TransUnion says personal details such as your age, marital status, salary, occupation and employer are not factors in its score.
FCAC gives an example of how balances can look to a lender: if you have a $5,000 card limit and you regularly owe $4,500, lenders may see you as riskier than someone who owes $1,000 each month.
Why there is more than one score, and why yours differ
Nobody has just one credit score, because lenders use several scoring methods. Each bureau has several scoring algorithms, and lenders usually ask for only one of them when they make a decision. Lenders also use many different scores: some come from the two bureaus, and some are custom-built and used by one specific lender. The scores Equifax gives consumers with its products use its own model, the Equifax Risk Score.
So it’s normal for your Equifax and TransUnion scores to differ. Both bureaus give the same two reasons: different scoring models, and a file that may not hold the same information at each bureau. Equifax adds that this happens because not every creditor reports to both. Most creditors report to both bureaus, but you may have an account with a creditor that reports to only one of them, or to neither.
The score you look up can also differ from the one a lender sees, because a lender may give some information more weight when it calculates your score.
Which bureau do lenders check?
Each lender decides which credit score it asks for. Equifax says lenders usually ask for just one of a bureau’s scoring algorithms when they make a decision. Each lender has its own policies, and Equifax says you should feel comfortable asking a lender about them.
Since your file can differ between the two bureaus, it can be worth checking both reports; how is on checking your credit score for free.
Your score is also only one of the things a lender looks at. A mortgage lender, for example, will want to know your income and other details as well as your score before it decides, and many lenders also look at the rest of your relationship with them, which may include other financial services. What card issuers look at is on credit card approval.
Related pages
- Credit score ranges in Canada
- How to improve or build your credit score
- How hard inquiries affect your credit score
- How to check your credit score for free
More guides are on the credit card basics page.