What is a Credit?

Credit is an agreement that lets you borrow money or access goods and services now, with the promise to pay later—usually with interest. It’s a key part of Canada’s financial system and affects everything from getting a mortgage to renting an apartment.

A good credit history helps you:

  • Qualify for loans and mortgages
  • Rent an apartment
  • Access lower interest rates
  • Pass certain employment checks

Types of Credit

  • Revolving Credit: Credit cards and lines of credit that allow repeated borrowing up to a set limit.
  • Installment Credit: Loans like mortgages or car loans, paid back in fixed installments.

Credit Report & Credit Score

  • Credit Report: A record of your borrowing history, including accounts, payment patterns, and any collections or bankruptcies.
  • Credit Score: A three-digit number (300–900) that shows how well you manage credit.

Factors that affect your score:

  • Payment history
  • Credit utilization
  • Length of credit history
  • Types of credit
  • Recent inquiries

In Canada there are two main credit bureaus that track your score: They collect and share your credit information with lenders, landlords, and sometimes employers.

  • Equifax
  • TransUnion
Credit Score Ranges
Score Range Rating Impact on You
800 – 900 Excellent You are the “ideal” borrower. You qualify for the absolute lowest interest rates and best perks.
720 – 799 Very Good You will easily qualify for most loans and get highly competitive rates.
660 – 719 Good This is the “safe” zone. You’ll be approved by most banks, though you might not get the “promotional” bottom-tier rates.
650 – 659 Fair You are a “borderline” borrower. You may need a co-signer or have to use “B-Lenders” with higher rates.
300 – 599 Poor Approval is difficult. You may need to look at secured credit cards or private lenders.
What Makes a Score Good?

1. Payment History (35%)
Your payment history carries the most weight. Always pay at least the minimum amount on time, every time.
⚠️ Tip: Even one payment that’s 30 days late can drop your score by 50+ points.

2. Credit Utilization (30%)
This measures how much of your available credit you’re using.
✅ Best Practice: Keep your balance below 30% of your total limit to show responsible usage.

3. Length of Credit History (15%)
The longer your accounts have been open, the better.
📌 Why it matters: Older accounts demonstrate stability and trustworthiness.

4. Public Records (10%)
Avoid negative marks like bankruptcies, consumer proposals, or accounts in collections.
✔️ Clean record = stronger score.

5. Credit Inquiries (10%)
Applying for too many new loans at once signals “credit hunger.”
💡 Pro tip: Space out applications to keep your score healthy.

Having a “Good” score is more important than ever because of the Interest Rate Stress Test:

If your score is 720+, lenders are often more flexible with your debt-to-income ratios (GDSR/TDSR).
If your score drops into the 600s, lenders become much more rigid, and you may find your maximum borrowing power reduced simply because the bank perceives a higher risk.