How Important is Credit Score in Canada?

People’s daily lives are closely associated with a credit score in Canada. Many countries in the world like Canada have sophisticated credit systems in place. Such a credit system will determine whether your bank will approve a loan or whether you will land an apartment or a job that you want. Keeping a great credit score in Canada is crucial to citizens’ daily life. And there are 2 major agencies help people rate credit score in Canada, Equifax, and TransUnion. Those agencies will track your use of credit cards, lines of credit, payment history, and mortgages, and keep all your credit history on record. 

The credit score in Canada ranges from 300 to 900 points. According to Business Insider (2018), most people in Canada need at least a 680 to get a good interest rate on a bank loan. If you ever want to get a loan from the bank to purchase a house or car or rent an apartment, a good credit score can mean the difference between being approved or denied. 

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What factors influence credit scores?

There are 3 major factors that influence your credit score.  The first factor is your payment history.  This is also the most important factor the credit agencies use to determine your credit score. 

The second factor is Credit utilization. This factor is the percentage you actively use of your available credits.

The last factor is the length of your credit history. All lenders prefer to lend funds to a person with a well-established credit history over someone with little or no credit history.

What to avoid?

Please note, certain actions will hurt your credit. The easiest way to damage your credit score is by not paying your credit card bill or your loan. In addition, paying your credit card bill or your mortgage late can also damage your credit score. 

Do not utilize a large percentage of your available credit line. This will let lenders view you as a higher-risk borrower. 

Do not frequently close your credit card account, because closing an old credit card account can hurt your credit score, due to changes in credit utilization. 

What to do?

  1. Always pay your bills on time and in full. This will improve your credit. However, if you can’t pay your bill in full, at least pay the minimum amount due on time, this will maintain your credit score in good standing. 
  2. To help your credit score, it’s best to utilize your line of credit of less than 35%. For example: if your credit line is $3000, normally, you should not exceed $1,050. If you generally exceed 35% of your credit limit, it’s best to increase your credit limit or get a second credit card. 
  3. Keep your credit card account in good standing and keep the account open.

 Why should an international student care about the Credit Score in Canada? 

For international students, the credit score is also important and it can affect your daily life and your future in Canada. For example, renting an apartment or finding a job.  When international students first land in Canada, they do not have any credit. However, if you sign a mobile phone contract or open a utility account you are in the credit system. Therefore, paying your bills on time is critical. 

In addition, if you want to quickly establish your credit profile, getting a credit card will help you if you can maintain your account in good standing. However, if your credit account is suffering, it will hurt your credit even down in the future. Payment history will be on your credit profile for many years.

In summary, financial institutions, employers, and landlords all use credit scores to evaluate applicants. Be sure to maintain your credit score in good standing.


Check out: Can International Students Start a Business in Canada?