What Is a Credit Score and Why Does It Matter in Canada?
Your credit score is more than just a number. It’s a snapshot of your financial health — and in Canada, it plays a huge role in everything from getting a mortgage to signing up for a cell phone plan.
What Is a Credit Score?
A credit score is a three-digit number between 300 and 900 that represents how trustworthy you are as a borrower.
- Higher score = lower risk to lenders.
- Lower score = higher risk, which can mean higher interest rates or denied applications.
In Canada, scores are calculated by Equifax and TransUnion, the two national credit bureaus.
Why Does It Matter?
Your score influences:
- Loan approvals (mortgage, car loan, personal loan)
- Interest rates (higher score = lower cost)
- Credit card approvals & limits
- Rental housing applications
- Even job applications in some industries
What’s a “Good” Score?
- Excellent: 760+
- Very Good: 725–759
- Good: 660–724
- Fair: 560–659
- Poor: below 560
A “good” score is often the cutoff for better credit card offers and competitive loan rates.
How Is It Calculated?
The exact formula is secret, but these are the main factors:
- 35% – Payment history (on-time vs late)
- 30% – Credit utilization (how much of your limit you use)
- 15% – Credit history length
- 10% – New credit inquiries
- 10% – Credit mix (credit cards, loans, mortgage, etc.)
Key Takeaways
- Your credit score = financial reputation.
- Higher scores save you money and open doors.
- Building good credit is a long-term investment in your future.
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