A credit score in Canada is a three-digit number, usually between 300 and 900, that summarizes your credit report. The Financial Consumer Agency of Canada (FCAC) describes it as “a 3-digit number that comes from your credit report. It shows how likely you are to repay money you borrow.” This page explains who calculates it, the factors that move it and what each factor rewards. It is the starting point of our credit score guides.
Who calculates your score
Canada’s two credit bureaus, Equifax and TransUnion, each keep a credit report on you, built from what lenders send them, and each calculates its own score from it. Lenders may also use other scoring models, including FICO’s. So you don’t have one credit score: you have a score from each bureau and possibly others a lender calculates, which is why Equifax vs TransUnion scores rarely match. The difference between the report and the score is explained in credit score vs credit report.
The exact formulas are private. FCAC: “Credit bureaus and lenders use different formulas to calculate your score, but they don’t share the exact details.” What FCAC and the bureaus do say is which factors count.
The factors that move a score
FCAC lists the common factors in two groups. Your credit history: “how long you’ve had credit how long each account has been on your credit report the types of credit you use if your debts were sent to a collection agency if you’ve ever filed for insolvency or bankruptcy.” And your credit habits: “if you carry a balance on your credit cards if you miss payments how much debt you owe if you’re close to or over your credit limit how often you apply for new credit.” In plain terms, your score “goes up when you pay bills on time and use credit responsibly goes down when you miss payments or have too much debt.”
FICO publishes a breakdown for its own scores: “This data is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).” That’s FICO’s model, described on its U.S. consumer site; Equifax and TransUnion don’t publish weights for their Canadian scores, but the same five areas are what move them.
1. Payment history
Whether you pay on time is the factor FCAC calls “the most important part of your credit score.” Every on-time payment adds to your record; a payment reported late, an account sent to collections or a bankruptcy or consumer proposal weighs against it for years. Equifax notes that late payments on accounts other than credit cards, “such as cell phones, may be reported to the credit bureaus.” How a late payment is reported is covered in what happens if you miss a credit card payment, and how long each negative item stays is in how long bankruptcy and proposals stay on your report.
2. How much of your credit you use
This is your credit utilization: your card and line-of-credit balances compared with their limits. FCAC’s example: with a $5,000 limit, “You regularly owe $4,500. Lenders may see you as higher risk than someone who owes $1,000 each month.” It counts even if you pay in full, because the balance reported is usually the one on your statement. FCAC’s tip is to keep it under 30% of your total limit. Credit utilization covers the calculation, per-card vs total, and the statement-date timing.
3. The length of your credit history
How long your accounts have been open, and the average age across them. FCAC: “Lenders want to see a long and stable credit history.” Opening several new accounts lowers the average, and closing an old one can shorten your history once it drops off the report; does closing a credit card hurt your credit score explains when that matters.
4. The types of credit you have
A file with both revolving credit (credit cards, lines of credit) and instalment credit (car loans, mortgages, other loans) tends to score better than one with a single type. FCAC: “You may have a lower credit score if you only have 1 type of credit product.” This factor is usually a small one, and taking on a loan just to add a type of credit costs interest; a credit-builder loan is one low-cost way people add an instalment account.
5. New credit and inquiries
Applying for credit usually adds a hard inquiry, and several applications close together can count against you more than one does. Checking your own score doesn’t count. Soft vs hard credit checks and how long a hard inquiry stays cover the detail.
What doesn’t count
Your income, savings and bank balances aren’t on your credit report, so they don’t feed the score, though lenders may ask about them on an application. Your report can show personal details such as your date of birth and employers, but they aren’t among the scoring factors FCAC lists. Carrying a balance doesn’t help a score either: paying in full each month builds the same payment history without interest. Debit card spending isn’t credit and isn’t reported.
Where to go next
- What your number means: credit score ranges sets out what Equifax calls good, very good and excellent, and the average credit score in Canada covers the published averages.
- See your score: checking your credit score for free lists the free routes from both bureaus.
- Raise it: how to improve your credit score ranks the actions by how quickly they work; what hurts your credit score covers the other side.
- Start from zero: how to build credit from scratch.
- Fix an error: how to dispute a credit report error, after reading your credit report section by section.