How credit scores work in Canada (and what actually moves yours)

Your credit score is a three-digit number, usually between 300 and 900, that summarizes how you’ve handled credit so far. Lenders, landlords, insurers and even some phone companies use it to decide whether to say yes, and at what price. It shapes the interest rate on your car loan, whether a Toronto or Vancouver landlord picks your application, and whether a mortgage comes from a bank or a lender charging two points more. Here’s what goes into it, what the ranges mean, and what you can actually do about it.

Two bureaus, one set of rules

Canada has two national credit bureaus, Equifax and TransUnion. Each keeps its own file on you and calculates its own score, so the two numbers are rarely identical. They use similar logic, though, and both respond to the same five factors below. Most mortgage lenders, banks and landlords pull Equifax, which is why it’s the file to strengthen first — more on that in Equifax vs. TransUnion.

The five factors, roughly weighted

• Payment history (about 35%). Did you pay on time? This is the single biggest factor. One payment 30 days late can cost dozens of points; a long run of on-time payments quietly rebuilds them. Bureaus track each account with a rating — R1 means paid as agreed, R2 to R5 mean progressively later, R9 means written off or included in bankruptcy.
• Credit utilization (about 30%). How much of your available credit you’re using. Carrying $900 on a $1,000 limit looks risky even if you pay it off every month, because the bureau sees the balance on your statement date, not your payment a week later. The fix is simple and fast — read the 30% rule.
• Length of history (about 15%). How long your accounts have been open, on average and at the oldest. Older accounts help, which is why closing your first card can backfire years later.
• Credit mix (about 10%). A blend of account types — a card (revolving), a loan (instalment), a line of credit — scores a little better than a single type.
• New inquiries (about 10%). Every time you apply for credit and a lender pulls your file, it leaves a hard inquiry. A few are fine; a burst of them in a short period looks like trouble. Checking your own score is a soft inquiry and never counts.

What the ranges mean

Bureaus and lenders draw the lines slightly differently, but the bands most Canadian lenders work with look like this:

• 760–900: excellent. Best rates, easy approvals.
• 725–759: very good. Prime rates almost everywhere.
• 660–724: good. Approved by most prime lenders; promotional auto rates and top mortgage rates start to require the upper end.
• 560–659: fair. Approvals get selective; alternative lenders and higher rates become common. Insured mortgages generally need at least 600.
• Below 560: poor. Most mainstream lenders decline; rebuilding is the priority.

What score you need depends on the goal. See the score you need for a mortgage and for a car loan.

What doesn’t count

This surprises people: rent, phone bills, utilities and insurance almost never appear on a Canadian credit file. You can pay all of them perfectly for years and your score won’t move, because nobody is reporting them — which is why paying rent builds no credit in Canada until a service files it. Your income, savings and net worth don’t appear either — a score measures behaviour with credit, not wealth. That’s the gap a credit-building membership fills: it adds a real, reported payment to your file every month — here’s how that works — and Boost members can have up to two years of past rent added as well.

How long things stay on your file

Positive accounts stay as long as they’re open, plus several years after closing. Negative items age off on a schedule: most late payments and collections after six years; a consumer proposal three years after completion (or six from filing, whichever is first); a first bankruptcy six years after discharge. The clock matters less than most people think, because scoring models weight recent behaviour heavily. Twelve clean months on a reported account moves the score long before an old item disappears.

How to read your own report

Both bureaus provide a free copy of your report. When it arrives, work through it line by line the way a lender does and check four things: that every account is actually yours; that each rating matches reality (a payment marked late that wasn’t is worth disputing); that closed accounts show as closed; and that any proposal or bankruptcy shows the correct completion or discharge date. Errors are common and fixable — file a dispute with the bureau directly, in writing, with proof. If you’re not sure whether your file is thin or damaged, this comparison will tell you.

Three myths that cost people points

• “Carrying a balance builds credit.” No. Paying in full builds the same history and costs nothing in interest. It’s the on-time payment that’s reported, not the balance you carried.
• “Closing cards I don’t use will help.” Usually the opposite: it shortens your history and raises your utilization on the cards that remain.
• “Checking my score hurts it.” Only hard inquiries from applications count. Look at your own file as often as you like.

A 12-month plan that works for almost everyone

1. Pull your free report from Equifax and read every line. Dispute what’s wrong.
2. Set every account to autopay at least the minimum, so payment history is never the problem.
3. Get card balances under 30% of their limits before the statement date — under 10% if you can.
4. Add a reported, on-time payment every month. That’s the part most people are missing, and it’s exactly what AvenaCredit does: no credit check, no loan, one membership payment reported to Equifax Canada. Members gain an average of 71 points after 12 months.
5. Stop applying for anything new for six months. Then check the report again and watch the direction.

None of this is dramatic. Scores move on boring, repeated behaviour, and the good news is that boring is easy to keep up. When you’re ready, compare the three plans.