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What factors affect your credit score rating?

What is a credit score?

A credit score is a three-digit number generated based on your credit report that provides a snapshot of your creditworthiness.  It is used by lenders to determine the risks associated with granting credit to you. Generally, in Canada, credit scores range from 300 to 900. The higher your credit score, the higher your creditworthiness.

Credit Score Chart, Grant Thornton Limited

Factors impacting your credit score

Payment history 

Making payments on each debt you owe—including late and incomplete—has an impact on your credit score. There are nuances on which factors have more significance: 

  • Your debt payment history has an impact on your credit score. 
  • Your score is negatively affected if you’re late with payments or you’re not making payments as agreed.
  • Recent late payments affect your credit score more than older late payments.

Outstanding debts

What you owe in outstanding debts compared to what you have affects your credit score. Find out what factors can have a more negative impact than others:

  • Your credit score can be affected by the level of debt you carry and by the portion of available credit you use.
  • High levels of debt compared to your income will negatively affect your credit score.
  • Being close to your credit limits on available credit will negatively affect your credit score.
  • Having low balances compared to available credit on two debts is better than having a high balance on one.

How to improve your credit score

Your credit score can be improved by consistently practising healthy debt payment habits. Habits that can have a positive impact on your credit score include:

  • Making debt payments on time and no less than the minimum required payment.
  • Keeping credit score inquiries to a minimum—only when they are absolutely necessary.
  • Having enough available credit on a debt that it’s not considered close to the limit.
  • Ensure that if you have to borrow, you are borrowing money wisely.

What’s the difference between a credit score and a credit report?

Your credit score is the resulting number from the credit report generated by a credit bureau. The credit report details all the elements that impact your credit score. Both are used by lenders to determine your eligibility for new credit based on your creditworthiness. You can obtain a copy of your credit report to review where you stand.

Credit reports

A credit report is a detailed report of information gathered by credit bureaus on an individual’s credit history (e.g., bill-paying habits and type of credit previously used). Credit reports are used by creditors, like banks and lending companies, to evaluate your creditworthiness—your suitability for the granting of credit.

How to access your credit report

There are two major Credit Bureaus in Canada: Equifax Canada and TransUnion Canada. You can easily access your credit report for free from both credit bureaus online. You can also access your credit report online for free via Credit Karma and Borrowell.

Although there are many ways to order your credit report, the easiest and safest method is by mail or by the internet. When applying for a credit report online, make sure you are using a secure and reputable site to protect your personal information.

Credit report structure

A credit report is divided into several sections including:

  • Personal information (name, address, SIN, etc.)
  • Credit inquiries (employers, landlords and credit agencies who check your report)
  • Credit history (number and types of credit account past and present, balances, etc.)
  • Public records

It is important that you review each section carefully to ensure there are no mistakes. We recommend receiving a credit report from all or more than one credit bureau, to ensure there are no mistakes on your report.

Credit report terminology

  • Installment credit (I). A loan for a set amount to be paid back with specific payment amounts over a specific period of time. Indicated by an “I” on your report. Car leases are included here.
  • Revolving credit (R). A credit card where you charge and pay regularly and on time to establish a credit history. Indicated by an “R” on your report.
  • Open credit (O). A line of credit allows you to use up to a set amount of money without having to request a loan from the bank. Indicated by an “O” on your report.

Rating indicators

Rating Indicators are number values assigned that reflect your payment history for individual creditors. A good credit rating to strive for would be I1 or R1 or O1.


0 – Too new to rate; approved but not used.

1 – Paid within 30 days of the due date or paid as agreed.

2 – Paid within 31-60 days from the due date or not more than two payments past due.

3 – Paid within 61-90 days from the due date or not more than three payments past due.

4 – Paid within 91-120 days from the due date or not more than four payments past due.

5 – Account is at least 120 overdue, but is not yet rated “9”.

6 – Code not used.

7 – Making regular payments through a special arrangement to settle your debts. Proposals are recorded here.

8 – Repossession (the voluntary or involuntary return of merchandise).

9 – Bad debt; placed for collection; or moved without giving a new address. Bankruptcies are recorded here.


The importance of reviewing your credit report

Mistakes on credit reports are common and could hinder your chances of receiving credit in the future. It’s important to carefully review all areas of your report and address any errors with the credit bureaus. Dispute forms are available on their websites (Equifax & TransUnion).

Remember: You are responsible for your credit report and should check it regularly. The rule of thumb is to check it on a yearly basis.

Retention period of data on a credit report

Information from various credit scores remains on your credit report for different lengths of time.

  • Credit Inquiries. Three (3) years from the date of the inquiry. The system will keep a minimum of five (5) inquiries.
  • Voluntary deposit, orderly payment of debts or credit counselling. Three (3) years from the date of full payment.
  • Registered consumer proposal. Three (3) years from the date it is fully performed, or six (6) years from the date it was filed, whichever comes first.
  • Credit history. A credit transaction will automatically purge seven (7) years from the date of last activity.
  • Bankruptcy. Six (6) or seven (7) years* from the date of discharge, depending on the province in which you filed. If more than one bankruptcy is declared, the system will keep each bankruptcy for fourteen (14) years from the date of each discharge.

*6 years in AB, BC, MB, NS, NU, NWT, SK, and YT; 7 years in NB, NL, ON, QB, and PEI.

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