credit score, personal finance

What affects your credit score?

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As Canadians navigate their way through the COVID-19 pandemic, it’s understandable so many are concerned about their finances. They worry about paying bills and how that can have a negative impact on your credit score. Here’s what you need to know about how to check your credit score, how to ensure it stays healthy and what factors affect your credit score. We cover all the basics and top strategies for managing it.

Factors that affect your credit score

There is a range of factors that can impact your credit score:

  • Your payment history: The key factor that affects your score is the regular, timely payment of bills. For a potential lender, this is a strong predictor you’ll meet future financial obligations. If you’re looking to take out a car loan and your credit history shows you are tardy in paying bills, it could hurt your chances of scoring a new set of wheels.
  • Credit utilization: Credit utilization refers to how much of your available credit you use. Making full use of all the credit you have available indicates to financial institutions that you have too much debt. In fact, Borrowell says this one factor determines 30% of your credit score and recommends keeping your credit utilization below 30%. For instance, on a credit card with a $5,000 limit, that translates to a balance of just $1,500.
  • Length of credit history: Having a long credit history — whether that’s for a car loan, cell phone bill, or credit card — will help beef up your credit score. To get in the good books, your history should be a positive one, showing regular, on-time payments. Here’s a tip to keep in mind: even if you no longer use a certain credit card, don’t cancel it. Keep it active, since just having it will help boost your credit score in the long run.
  • New credit: Applying for a form of new credit – whether that’s a credit card or car loan – can make your credit score dip. Credit churners take note: it can especially impact your number if you apply for credit from different lenders within a short period of time and have a relatively short credit history.
  • Types of credit in use: The type of credit can affect your credit score. While you’d expect a mortgage to be considered a greater risk than a credit card (especially since we’re talking about serious amounts of money), that’s not necessarily the case. A credit card is deemed riskier by financial institutions since it’s possible to run up your limit without the guarantee of paying it back in a timely manner, unlike a mortgage payment, which is automatically deducted from your bank account each month. A mix of different types of credit, such as a student loan, car payment, as well as credit card may actually improve your credit score. It demonstrates your ability to handle different types of credit.
  • Other factors: Another factor that can weaken your credit score is a “hard inquiry.” This means a creditor has requested to review your credit report as part of its due diligence when you apply for a loan or credit card. The inquiry is noted on your record so you’ll need to be mindful of the type of credit you apply for and how often. While checking your own credit score (recommended and won’t damage your score), a hard inquiry might impact your score. Keeping current with your own score means you can be confident of the numbers if you do apply for a loan or additional credit cards.

How to improve your credit score

Worried about your credit score? Take a deep breath. Rest assured there are things you can do to help improve your score. Here are a few expert tips to get you started:

  • Limit the number of credit applications you make: While it’s tempting to have a lot of plastic in your wallet, ask: how many credit cards should you have? While there’s no hard number, be picky about what kind of credit card will fit your lifestyle so you can reap the rewards. If you’re a frequent traveller, consider one of the best travel rewards credit cards in Canada. Or if cash is king, one of the best cash back credit cards might be more appropriate. It’s whatever works for you.
  • Stay within your credit card limits: If you’re online shopping, it’s easy to throw multiple items into your cart on multiple sites. A credit card with a lower limit will help keep temptation at bay.
  • Build up your credit history: If your score is low and you don’t have a track record, applying for a credit card with a low limit will help to build a credit history. Used responsibly, it shows you can handle credit. If you’re worried about getting approved, there are credit cards for bad credit that offer guaranteed approval.
  • Pay off your debt: Yes, this isn’t easy, but it’s doable if you follow some simple strategies for paying down your credit card debt. Getting your debt to zero and reducing your credit utilization will help improve your score. If the interest rate on your current credit card is crippling you, consider getting a low-interest credit card or a 0% balance transfer credit card so you can tackle the debt. Make regular payments and get that debt paid off pronto, and you’ll see your credit score rise in time.
  • Consolidate your debt: If you’ve got credit card debt, why pay 19% interest (or more!) when you could pay as little as 4%? Another smart strategy is to get a debt consolidation loan, which involves combining all your high-interest credit card debt into a single but more manageable loan with a lower interest rate. There are plenty of options to get the best personal loan interest rates, but Loans Canada is a reputable place to start. It works as a search platform to find the best personal loan to suit your needs and offers loans between $500 to $50,000 and interest rates ranging from 1.99%–46.96%.
  • Get an app: Canadian FinTech leader Marble Financial can help you boost your number. It offers a free tool called MyMarble — a free financial dashboard that gives you an overview of your finances and can help you work toward building your credit score. MyMarble connects your financial accounts and analyzes trends to make personalized recommendations about debt and budgeting. You’ll also be able to monitor your credit score monthly to see how your actions impact it in real time. MyMarble gives you access to Maestro, an online learning tool that offers over 25 modules on budgeting, debt, and credit. Other credit-building apps issue you loans from deposited funds and make repayments on those loans. They report those repayments to credit bureaus, which raises your credit score

COVID-19 and credit scores

If you’re having difficulty making your mortgage payments or credit card payments, Equifax recommends contacting your lender or credit card issuer and speaking to them directly. Many financial institutions are offering special programs to help Canadians during COVID-19, such as deferring or reducing credit card payments. A lender-approved mortgage payment deferral shouldn’t impact your credit score, but stay on top of your credit score and check it regularly.


  • What is a good credit score in Canada?


    In Canada, credit scores range from 300 to 900. The closer you are to 900, the better your credit score. A good credit score is one between 690 - 740, while anything less than 575 puts you in the poor range. Read more about how Canadian credit scoring works.

  • How can I check my credit score for free?


    It is possible to order a credit report from Equifax Canada and TransUnion Canada for free. To do this, you’ll need to order by mail or telephone and the report will be mailed out to you. If you need to obtain a report quickly online, credit bureaus will charge a fee. However, you don’t need to go through a credit bureau to check your credit score. Borrowell offers a free credit score check and a monthly Equifax credit report. Alternatively, many other banks allow you to check your score free of charge via their online banking websites. It will give you a snapshot of your current credit health.

  • Does credit score matter?


    Yes! You would be surprised how many areas of your life require good credit. While dreams of buying your first home may feel as fanciful as a rainbow unicorn, you'll need a credit check to rent an apartment, buy your first car, or even land the job of your dreams. Some Canadian employers require candidates to pass a credit check first before they are hired. And when it comes to applying for a personal loan - the better your credit score, the lower the interest rate available to you.

  • Will missing a credit card payment affect my score?


    Remember, consistent payment history is the most important factor in determining your score. It’s crucial to make payments within 30 days to keep your score healthy. Any payment over 30 days, but less than 60 days late, will be considered late by your financial institution and could negatively impact your score. Late payments in excess of 60 days will have an even worse impact on your credit score. If you’re unable to schedule an automatic payment with your lender, set yourself a recurring calendar reminder to prevent tardiness.

The bottom line

Your credit score matters. A good score allows you to get a mortgage, credit cards, car loans and more. A bad one makes getting credit of any kind very challenging since companies will see you as a poor risk. Ensuring you have a healthy credit score is also a key factor in getting the lowest interest rates. Make every effort to be a good credit customer. That means regular, on-time payments and limiting how much credit you use at any given time. Protect a good credit score diligently. Once gone, it’s difficult to get back.

Amanda Lee Freelance Contributor

Amanda Lee has been a freelance lifestyle writer for 10 years. She is the former Managing Editor of, which is owned by the Toronto Star. Her bylines have appeared in major Canadian publications, including the Toronto Star, WestJet Magazine and Today's Parent. Amanda is enrolled in an MFA in Creative Nonfiction at King's College and working on her first book.


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