Your credit score can have a significant impact on your financial well-being – and according to the Financial Consumer Agency of Canada (FCAC), your score can affect:

Your loan options
Your insurance premiums
Your job opportunities

But despite its importance in your financial life, you might be surprised to learn that almost one-third of respondents in a Chartered Professional Accountants of Canada survey have admitted that they don’t know their credit score.

To help you understand the importance of a good credit score on your financial life, this guide explains what a credit score is, outlines some of the factors that can be used to determine your score and offers several best practices to help you maintain the health of your score.

What is a credit score?

The FCAC defines your credit score as a number on a credit report from one of Canada’s two credit bureaus – Equifax and TransUnion – that shows “how well you manage credit and how risky it would be for a lender to lend you money.”

According to Equifax, credit scores generally range between 300 and 900 and fall under the following categories:

Factors that could impact your credit score

While the two credit bureaus don’t share the exact formula for determining your credit score, the FCAC says these factors can affect your score.

Hover over the factors below to read more.

Credit history
Your credit history is the length of time you’ve had an active account.
Payment history
Your payment history is a record of whether you have been meeting your payment obligations.
Credit mix
Your credit mix is how many types of credit you currently have. This includes credit cards, mortgages and other loans.
Credit utilization ratio
Your credit utilization ratio is the percentage of available credit you are using.
Credit checks
A credit check is an inquiry about your credit score made to the credit bureaus, usually when you apply for more credit.
Bankruptcy or insolvency
Public records of bankruptcy or court decisions against your related to your credit can impact your score.
Keeping your credit score healthy

Here are several effective habits that can help you maintain the health of your credit score.

Regularly review your credit reports.

It’s a good idea to regularly monitor your credit reports to flag any signs of errors or fraud that could be affecting your score. You can request free copies of your credit report from each of the credit bureaus once a year, and you can also sign up for their credit monitoring services for a fee.

Try to minimize the number of inquiries you make on your credit score.

When you apply for a new loan or credit card, lenders usually initiate a credit check with the credit bureaus. Making several inquiries can have a negative impact on your credit score, so it’s a good idea to limit the number of applications during a given period.

Always pay your bills on time.

Your payment history has a big impact on your credit score, so making sure that you meet your payment obligations and are never late with your payments is an important habit to support a good score.

Improve your credit mix.

Think about strategically diversifying your credit lines by applying for different types of credit – but remember to space out your applications to avoid making multiple inquiries on your credit file at the same time.

Pay close attention to how much of your credit limit you are using.

The percentage of available credit you are using can have a big impact on your credit score, so try to keep this ratio as low as possible – with both Equifax and TransUnion saying it’s a good idea to keep it below 30%.

Take steps to improve a bruised credit score.

Sometimes, personal circumstances beyond your control can impact your credit score. It’s important to start taking steps to rebuild your score – such as applying for a secured credit card – as soon as you are able to.

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The information, materials and opinions contained in this guide are provided for information only. This guide does not constitute legal, financial or other professional advice and you should not rely on it as an alternative to specific advice on your particular circumstance.

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