A sudden credit score drop is unsettling — especially if you have not missed a payment and have not applied for anything new. But the cause is almost always traceable. Canadian credit scores are calculated by Equifax and TransUnion using a set of well-defined factors, and once you know what they are, the drop usually makes sense.
Here is a breakdown of every common reason your credit score may have fallen, ranked roughly by impact.
The most likely reasons your credit score dropped
1. You have a missed or late payment on file
Payment history is the most heavily weighted factor in your credit score — accounting for roughly 35% of your Equifax Beacon and TransUnion CreditVision scores. A single payment reported 30 or more days late can drop your score by 50–100 points depending on your current standing.
Payments as few as one day past due can be reported by some lenders, though most will only report at 30 days. If you had automatic payments that failed due to insufficient funds or a changed bank account, you may have a late payment you are unaware of.
What to do: Pull your free credit report at canada.ca/en/financial-consumer-agency or through Equifax and TransUnion directly. Look for any account marked “past due” or with a rating worse than R1 or I1.
2. Your credit utilization spiked
Credit utilization — the percentage of your available revolving credit you are using — is the second most impactful factor. Scores are sensitive to utilization above 30%, and a spike above 60% can cause a significant drop even if you have never missed a payment.
Common scenarios:
- You made a large purchase and have not paid it down yet
- A credit limit was reduced by your issuer (less room = higher utilization percentage)
- You cancelled a credit card (reduces total available credit)
Target: Keep utilization below 30% across all cards, and ideally below 10% for the highest scores. If you make a large purchase, consider making a mid-cycle payment before the statement closes to keep the reported balance low.
3. A hard inquiry was added to your file
Each time you apply for credit — a credit card, mortgage, car loan, line of credit, or even a cell phone plan in some provinces — the lender pulls a hard inquiry. Hard inquiries stay on your file for up to 3 years and affect your score for the first 12 months.
A single hard inquiry typically drops a score by 5–10 points. Multiple inquiries in a short window can compound the effect. The exception is rate-shopping for mortgages or auto loans — multiple inquiries of the same type within a 14-day window are typically treated as a single inquiry by Canadian scoring models.
What to do: Only apply for credit when you need it. Use pre-qualification tools (which use soft inquiries) before formally applying.
4. An account was closed
Whether you closed a credit card voluntarily or a lender closed it due to inactivity, account closures can hurt your score in two ways:
- Shortens average credit age — Older accounts raise your average account age, a factor in scoring models. Closing your oldest card can meaningfully reduce this average.
- Reduces total available credit — This increases your utilization ratio on remaining cards.
What to do: If you want to close a card, consider keeping your oldest card open, even with no balance. If the annual fee is the issue, ask the issuer to downgrade you to a no-fee version of the same card.
5. A collection account or judgment was reported
If a debt was sold to a collection agency and they filed it with Equifax or TransUnion, it will appear as a collection account — one of the most damaging items possible. A collection account can drop a score by 100+ points and stays on your file for 6–7 years depending on the province.
Even old debts you dispute or have paid can be re-reported when a new collection agency purchases the debt. In some cases, re-reporting a paid collection is not permitted, and you can file a dispute.
What to do: Check for unfamiliar collection accounts on your report. If the debt is paid or does not belong to you, file a dispute with Equifax or TransUnion.
6. A high-balance account updated
Credit card statements close on a monthly cycle. The balance on your statement date is the balance reported to the credit bureaus, not the balance after you pay. If you use your card heavily and pay it off in full every month, your reported utilization may still be high because the statement balance was captured before your payment.
What to do: Make a payment mid-cycle (before your statement closes) to reduce the balance that gets reported.
7. A derogatory mark was added
Other negative marks that can lower your score include:
- NSF (non-sufficient funds) notices — Some lenders report these
- Consumer proposals or bankruptcy — Severe and long-lasting
- Charge-offs — When a lender writes off a debt as uncollectable
- Court judgments — Public record items that appear on your bureau
8. Your credit mix changed
Canadian scoring models reward having a variety of credit types — credit cards (revolving), auto loans (installment), a mortgage, and so on. Closing an installment loan removes that diversity from your profile, which can cause a minor dip.
This is one of the least impactful factors and is usually not worth keeping an account open solely to maintain the mix.
How to check your credit report in Canada for free
You can access your full credit report (not just your score) for free through:
- Canada.ca — Government-mandated free annual report from both bureaus
- Borrowell — Free weekly Equifax score and report
- Credit Karma Canada — Free TransUnion score and report
Your credit score from these services may differ from the score a specific lender sees, since lenders can use different scoring models and may weight factors differently.
How to recover from a credit score drop
The steps depend on the cause:
| Cause | Recovery Steps | Timeline |
|---|---|---|
| Hard inquiry | Wait — no action needed | 12 months for full recovery |
| High utilization | Pay down balances | 1–2 billing cycles |
| Missed payment | Catch up immediately, keep all future payments on time | 2+ years |
| Collection account | Dispute if wrong; negotiate pay-for-delete if in collections | 6–7 years (can improve sooner with new positive history) |
| Closed account | Open a new card or keep remaining cards active | 6–12 months |
| Consumer proposal | Rebuild with secured card, maintain clean history | 3–6 years after completion |
What does not affect your credit score in Canada
Common myths about things that lower your score:
- Checking your own score — Soft inquiry, no impact
- Income level — Not in the score calculation
- Employment status — Not in the score calculation
- Debit card use — Debit is not reported
- Bank account balance — Not in the score calculation
- Rent payments — Not automatically reported (though some services like Landlord Credit Bureau can add them)
Related resources
- How to Read Your Credit Report — Understand every item on your Equifax or TransUnion report
- Best Credit Cards for Building Credit — Cards that help re-establish positive history
- Debt Payoff Calculator — Plan to reduce balances and improve utilization
- How to Negotiate Debt in Canada — Options if collection accounts are the cause