Your Credit Score

We rely on signals every day to make decisions. A wedding ring tells us someone is married. A green traffic light tells us it’s safe to go. These little cues help us navigate life more easily.

Now think about a high school graduate trying to decide their next step. They can either jump into the workforce and start earning money right away or go to college and earn a degree. That degree acts as a signal to employers — it says, “I’ve got knowledge and discipline.”

Just like that degree signals competency, your credit score sends a powerful signal about your financial reliability. Yet, many people ignore this crucial number that plays such a big role in their lives.

Let’s break down what your credit score is, why it matters, and how you can improve it — all in simple terms.

What Is a Credit Score?

Your credit score is a number that shows how likely you are to pay back money you borrow — like a loan or a credit card balance. Lenders use it to decide whether they can trust you, how much money to lend you, and what interest rate to charge.

In Canada, credit scores usually range from 300 to 900. The higher your score, the better your chances of getting approved for loans with good terms. Your score might vary slightly depending on the type of loan you’re applying for (a car loan vs. a mortgage, for example), but a solid base credit score helps across the board.

Why Is It Important?

Think of your credit score as a trust rating. A low score can cost you more money — plain and simple. It can mean:

• Higher interest rates on loans and credit cards

• Bigger monthly payments

• Trouble getting approved for a mortgage or a car loan

• Difficulty signing up for basic services like a cell phone or internet plan

A high score, on the other hand, can open doors. You get better deals, save money on interest, and have an easier time getting approved when you need credit.

How Is My Credit Score Calculated?

Your credit score is based on your credit report, which is a record of your credit activity. It includes:

• Trade lines – Info about your credit accounts: how much you owe, your payment history, etc.

• Credit inquiries – A list of companies that have checked your credit (especially when you apply for new credit).

• Public records – Things like bankruptcies, collection accounts, or court judgments.

Credit agencies (like Equifax and TransUnion in Canada) use all of this information to calculate your score. While they don’t reveal the exact formula, here’s a rough breakdown of the factors that matter most:

1. Payment History (35%) – Do you pay your bills on time?

2. Credit Utilization (30%) – How much of your available credit are you using?

3. Length of Credit History (15%) – How long have your accounts been open?

4. Credit Mix (10%) – Do you have a variety of credit types (e.g., credit cards, car loans)?

5. Credit Inquiries (10%) – How often are you applying for new credit?

How Long Does Information Stay on My Credit Report?

Most information stays on your credit report for several years. In Canada:

• Positive information (like on-time payments) can stay for up to 20 years.

• Late payments or collections usually stay for 6 years.

• Bankruptcies stay for 6 to 7 years, depending on the province.

How to Improve (and Protect) Your Credit Score

Here’s how you can start taking control of your credit score today:

1. Check Your Credit Report

In Canada, you can get a free copy of your credit report once a year from Equifax or TransUnion. Review it for mistakes or unfamiliar accounts — they could be signs of identity theft. Dispute any errors right away.

2. Pay Bills on Time

Your payment history is the biggest factor in your score. Always pay your credit card bills, loan payments, and utility bills on time. Even one missed payment can hurt.

3. Pay More Than the Minimum

If you only make the minimum payment, you start paying interest on the balance, and it signals to lenders that you might be overextended. Aim to pay your full balance every month.

4. Watch Your Credit Usage

Try to use less than 30% of your available credit. So, if you have a $10,000 limit, try not to carry a balance over $3,000.

5. Keep Old Accounts Open

The longer your credit history, the better. Keep older accounts open — even if you don’t use them often — to show a longer track record of responsible borrowing.

6. Be Careful with New Applications

Every time you apply for credit, a “hard inquiry” is made, which can temporarily lower your score. Only apply for new credit when you really need it — especially with big purchases like a car or house.

7. Have a Mix of Credit Types

Over time, having a mix of credit (credit cards, a car loan, maybe a line of credit) can help your score. But don’t rush to open new accounts just for the sake of it.

Final Thoughts: Why It All Matters

Your credit score is one of the strongest signals you send out about your financial reliability. It affects your ability to borrow, the interest you pay, and even your access to services.

By building good habits — like checking your credit report, paying bills on time, and managing how much you borrow — you’ll not only improve your score, but also improve your financial health and quality of life.

So start today. A strong credit score means more freedom, more options, and less stress. And that’s a signal worth sending.

“If you don’t take care of your credit, then your credit won’t take good care of you”

– Credit Score Adage