Everything you Need to Know About Credit
HomeHappy • February 8, 2021
Your Credit Score is more Important Than Ever
Your credit score
is an evaluation of your risk level as a borrower. In Canada, it’s a number between 300-900 that’s calculated based on the data in your credit report. Designed to give lenders insight into your capacity to manage your finances and repay a loan, your credit score determines what rates, terms, and products lenders will offer.
If you’re interested in a mortgage loan, having good credit is vital to getting a great deal.
Your score is generated by 2 main organizations: Equifax
and TransUnion, and both credit bureaus allow you free access to your data. Since your credit score can impact your ability to make big purchases, don’t get taken by surprise. The more you know about your financial standing before making a big decision like buying a house, the more prepared you’ll be.
See where you stand, ensure correct information, that there are no errors, or strange activity by ordering your credit report and score. While there are more details available, essentially you need to prove your identity with two pieces of ID and basic background information. Your detailed report will arrive by mail in two to three weeks. You can also pay for instant online access for around $24.
Follow these links for instructions on accessing your free credit report from TransUnion and Equifax.
Credit Report and Credit Score -- Are They The Same?
Your credit report contains both personal identifying information like name and address, and contains all your financial information. It details your credit history, including repayment, types of credit, and may also include public records that might affect your creditworthiness -- like bankruptcy, judgements, and liens. Lenders use it to verify who you are, see your activity, and learn about your repayment history.
Your credit score is a number calculated using the information found in your report. It determines your risk level as a borrower. The higher the number, the better the odds are that you’ll repay your debt.
Credit Score Range
In Canada, our credit range varies from 300 to 900. Your credit score is a lot like a really basic game -- you get points when you use your credit responsibly, and lose points when you struggle to manage it. Like most games, the higher your score, the better.
For example, someone with very good (725-759) or excellent (760-900) credit has a high probability of being accepted for a mortgage because it’s unlikely they will default on payments.
People with higher scores have proven they’re reliable and trustworthy borrowers and generally get better credit terms. That translates to lower payments, lower interest rates, and they pay less interest over the lifetime of their account. They’ve also built enough credibility to borrow larger amounts.
People with a credit score below 650 may struggle to get new credit, so it’s best to strive for 680 or more to remain in good standing. Good habits create better outcomes, and make it easier to stay financially fit.
If you're far from this number, don’t fret -- everyone’s financial and credit situation is different, and lenders have different criteria to assess potential borrowers. No matter your situation, we can help.
Besides, a bad score isn’t permanent. Your credit score is flexible and always changing. It’s like a game, remember? So change your strategy.
Follow our tips below to set yourself up for a mortgage that suits you.
Be Consistent, and Improve Your Credit Score
Here are 7 easy ways to get you back on track, and build great credit.
- Create a realistic budget that works for you, and incorporates your debt. Include some fun money so you are more likely to stick to your plan.
- Pay your bills on time. If this is a struggle, set payment reminders or schedule automatic payments so the money automatically goes where it needs to. Late payments lower your score, and timely payment is huge when determining your credit score.
- If possible, pay off your credit card by the monthly due date. If you can’t pay in full, always pay the minimum amount shown on your statement.
- Never exceed your credit card limits. Use your card responsibly, and keep your balance well below the limit by spreading your spending. The higher your balance, the more impact it has on your credit score.
- Don’t apply for too much credit at once. The more applications you make, the more a lender checks your credit report. Hard inquiries stack and damage your score. Plus, the credit bureaus can see multiple applications as a sign of financial trouble.
- Don’t close unused credit cards. While cancelling a card seems like a great way to prevent yourself from debt you can’t afford, a healthy credit score requires a long history of responsible usage. When you cancel a card, you wipe the history. Besides, a low interest card with a zero balance and only periodic usage can really help build credit.
- Regularly check your credit report for any errors, and see how you’re doing.
There’s no shortcuts in the game of life, and it can take 3-6 months for the changes you make to reflect in your score. It takes time, patience, and consistency to rebuild credit.
Start now, and let your future self reap the benefits. You’ll thank yourself later.
What is Good Credit?
Well, it means your credit score is 650+, you can borrow and pay back on time, you’re trusted with large sums of money, and you have financial freedom to make bigger purchases.
Why it Matters
Having a high score provides you with better opportunities and more choices.
Good credit is a major deciding factor on whether you’re approved for a new credit product, and sets the terms and rates. A great score saves you money. Period.
Not only through making better financial choices for yourself, but because you do so, lenders want your business and are typically willing to give you a better deal too.
A good credit score shows lenders you’re reliable and trustworthy. It proves to lenders that you’re a great candidate for a loan or line of credit.
Ultimately, it means you're creditworthy.
How is Your Credit Score Calculated?
There are 5 financial factors pulled from your credit history that determine your score. Each element plays a significant role, though they are weighted differently which changes how they influence your score. Let’s deep dive into the specifics.
Payment History (35%)
Your payment history is 35% of your credit score -- the largest contributing factor. Lenders want to know they will get the money back that you borrowed. When you pay your bills, whether or not you’re on time matters. Your creditors report how much you owe, your monthly payment, and when you pay. A negative credit past will do some damage, and if you have a positive, clean history, it’s likely you have a great credit score to reflect that. The longer you have credit reporting to the credit bureau without late payments, the higher your score climbs.
Debt Owed (30%)
Your credit utilization, and how reliant you are on non-cash funds plays a major role in calculating your credit score. Your current financial obligations determine if you can manage more debt. People with a lot of debt have lower scores. Owing debt also means racking up interest charges, so paying off debt both increases your score, and saves you money.
Pro tip: A great credit score involves keeping the balance on your cards below 30% of the limit. It’s better to spend your spending over several cards, than have one card nearly maxed.
Credit Account History (15%)
How long you’ve been a borrower matters because it can provide a more accurate view of how you operate. It means you’ve had time to establish your reliability and trustworthiness. Someone who’s used credit over a long period of time is seen as a less risky prospect than someone just starting out. That’s why it’s never too early to start building your credit, and it’s a good idea to keep old accounts open. Even with a zero balance, and minimal usage, an old account is great for your overall credit health.
New Credit (15%)
Whenever you apply for a new loan or credit product, a lender does a hard inquiry into your credit report which drops your credit score for several months. Unfortunately, this effect stacks. If you apply to too many new credit cards or loans all at once, your score could significantly drop. Multiple credit applications can signal financial trouble, and red flag you as a risky borrower.
Types of Credit (10%)
Your credit mix plays a small role, and looks at how many cards, loans, or lines of credit you have. Diversity matters, and having a different mix of credit can help build your score. Certain credit types are more beneficial for you. For example, a credit card from a major, traditional financial institution is way better than a store credit card.
Your Choices Matter, Spend Smart.
Bad spending habits, and swiping without a care can have you quickly drowning in debt. Every transaction counts, no matter how small the purchase seems. Little things can sneak up on us, and they stack fast.
Sometimes we forget a credit card isn’t free money. Then we make irresponsible choices because it’s easy not to consider the consequences. Especially in the moment.
When you signed the dotted line and accepted your credit, you agreed to pay your lender back, and on time. That’s why missing payments damages your credit score -- you aren’t keeping your word.
Be smart with credit. Maybe you don’t see it right now, but every choice you make affects you. It hits harder than expected if you haven’t been paying attention.
Order your credit report to see where you stand. Ensure there are no errors.
If you’re ignoring your debt or not monitoring spending, it’s time to make changes. Make a debt repayment plan. Pay off as much as you can. If necessary, talk to us about consolidating. Credit Counselling and debt management programs can make buying your own home near impossible, so it’s better to talk to someone who has your long term interests at heart.
Make a realistic budget and know what you can spend. Set yourself up for success, with a plan that suits your needs. Give yourself the freedom of security and financial peace of mind.
Protect What You’ve Built
If you’re worried about the health of your credit beyond our tips to improve and manage it, you may want to consider a credit monitoring service. Both Equifax and TransUnion offer that option so you can stay on top of your credit and spot any fraudulent accounts and charges.
Talk to us
about any concerns you have, or if you have any questions. We’re always happy to offer customized solutions and advice that suit your unique needs.
Share:
Recent Posts
Being a home owner is excellent, having a huge mortgage isn’t. So, if you have a mortgage that you’re looking to get rid of as quickly as possible, here are four things you should consider doing. Accelerate your payments Making the change from monthly payments to accelerated bi-weekly payments is one of the easiest ways you can make a difference to the bottom line of your mortgage. Most people don’t even notice the difference or increased payment. A traditional mortgage with monthly payments splits the amount owing annually into 12 equal payments. Accelerated biweekly is simply taking a regular monthly payment and dividing it in two, but instead of making 24 payments, you make 26. The extra two payments accelerate the paying down of your mortgage. Increase your regular mortgage payments Chances are, depending on the terms of your existing mortgage, you can increase your regular mortgage payment by 10-25%. Alternatively, some lenders even offer the ability to double-up your mortgage payments. These are great options as any additional payments will be applied directly to the principal amount owing on your mortgage instead of a prepayment of interest. Make a lump-sum payment Depending on your lender and your mortgage product, you should be able to put down anywhere from 10-25% of the original mortgage balance in a bulk payment. Some lenders are particular about when you can make these payments; however, you should be eligible if you haven’t taken advantage of a lump sum payment yet this year. Making a lump-sum payment is a great option if you’ve come into some money and you’d like to apply it to your mortgage. As this will lower your principal amount owing on the mortgage, it will reduce the amount of interest charged over the life of the mortgage. Review your options regularly As your mortgage payments debit from your bank account directly, it’s easy to put your mortgage on auto-pilot and not think twice about it until your term is up for renewal. Unfortunately, this removes you from the driver's seat and doesn’t allow you to make informed decisions about your mortgage or keep up to date with market conditions. So let’s talk about an annual mortgage review. Working through an annual mortgage review with an independent mortgage professional is beneficial as there may be opportunities to refinance your mortgage and lower your overall cost of borrowing. By reviewing your mortgage at least once a year, you can be sure that you’ve always got the best mortgage for you! There is no cost involved here, just a quick assessment and peace of mind. If you’ve got questions about your existing mortgage or want to compare your mortgage to options available today, please connect anytime. It would be a pleasure to work with you.
Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario June 4, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. Since the April Monetary Policy Report, the US administration has continued to increase and decrease various tariffs. China and the United States have stepped back from extremely high tariffs and bilateral trade negotiations have begun with a number of countries. However, the outcomes of these negotiations are highly uncertain, tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high. While the global economy has shown resilience in recent months, this partly reflects a temporary surge in activity to get ahead of tariffs. In the United States, domestic demand remained relatively strong but higher imports pulled down first-quarter GDP. US inflation has ticked down but remains above 2%, with the price effects of tariffs still to come. In Europe, economic growth has been supported by exports, while defence spending is set to increase. China’s economy has slowed as the effects of past fiscal support fade. More recently, high tariffs have begun to curtail Chinese exports to the US. Since the financial market turmoil in April, risk assets have largely recovered and volatility has diminished, although markets remain sensitive to US policy announcements. Oil prices have fluctuated but remain close to their levels at the time of the April MPR. In Canada, economic growth in the first quarter came in at 2.2%, slightly stronger than the Bank had forecast, while the composition of GDP growth was largely as expected. The pull-forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat. Strong spending on machinery and equipment held up growth in business investment by more than expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence. Housing activity was down, driven by a sharp contraction in resales. Government spending also declined. The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9%. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued. CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6 percentage points. Excluding taxes, inflation rose 2.3% in April, slightly stronger than the Bank had expected. The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up. Recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs. The Bank will be watching all these indicators closely to gauge how inflationary pressures are evolving. With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts. We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled. Information note The next scheduled date for announcing the overnight rate target is July 30, 2025. The Bank will publish its next MPR at the same time.
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.
