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This wall will give visitors information about building and maintaining a healthy credit score. Credit scores are important to everyone because they have a big impact on whether or not you can get a loan, rent a home, finance a car or purchase a home.

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This video explains in detail the actions you can take to improve your credit score quickly.  The first recommendation is to become an authorized user on a credit card where the primary account holder has a very high credit score.  If you can’t find someone to add you to their credit card account than get a secured credit card.  Secured credit card is where you put a cash deposit upfront and then you can use the credit card up to that amount.  The video goes on to list other options, such as to set up automatic bill payments to make sure you don’t pay any bills late, use balance transfer credit cards to take advantage of promotional low interest rates and to keep the amount of credit you use below 30% of the total credit available.

This video was unique because it explained the 2 week rule.  The 2 week rule is something to follow if you are looking for a new loan and checking with different banks then you should make all the inquiries within a 2 week period so it shows you are “rate shopping” otherwise it will look like you are having financial trouble.

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INCREASE Credit Score FAST Canada 2023 (800+ Guaranteed)

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This video is specific about mortgages and explains what the different options are for getting a mortgage depending on your credit score.  There are 3 types of mortgages covered: traditional, alternative or private lending.  If you want a mortgage with a traditional lender, such as a bank, you will need a credit score above 620.  Otherwise you will need to go to an alternative lender where you need to have a credit score of 480.  The last option is a private lender who doesn’t look at your credit score but considers your credit history to show you can pay back the loan on time.    
I liked this video because it was very specific about what options there are available for getting a mortgage even if you don’t have a high credit score. 

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Looking to get a mortgage with bad credit in Canada? Watch this! #badcredit #canada #mortgage #mortgagebroker #creditscore #debt #privatelending #traditionallending #mortgages #mortgagetips What does my credit score need to be to get a mortgage?

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@jcmortgages.ca
Looking to get a mortgage with bad credit in Canada? Watch this! #badcredit #canada #mortgage #mortgagebroker #creditscore #debt #privatelending #traditionallending #mortgages #mortgagetips What does my credit score need to be to get a mortgage?
♬ vlog, chill out, calm daily life(1370843) - SUNNY HOOD STUDIO

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This video talks about the challenges of being a newcomer to Canada when you have no credit history and how your credit score affects more than just getting a big loan like a mortgage or car but also getting a phone plan and renting a home.  Your credit history from your home country will not transfer to Canada so you need to start from scratch no matter if you had good credit or not.  They recommend to get a Canadian credit card as soon as you can to start building your credit history and increasing your credit score.  They explain your credit utilization ratio and to keep it under 30%.  This video is unique because they explain your credit score and credit history will take 3-6 months to establish for newcomers.  Also, Scotiabank has a program for newcomers and offer special credit cards that provide benefits for newcomers and helps them start building their credit history.      

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How to Build a Good Credit Score in Canada for Newcomers

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The video includes interviews of real people around Toronto and the host asks them about their credit score.  It’s interesting to see what other regular people know about their credit score and it seemed like most people understood how to keep a good credit score and that your credit score is important.  There is also an interview with a financial expert who explained some do’s and don’ts for students and new graduates.  He gave good advice to not make any big purchases that aren’t planned.  If you are making a big purchase it should be something you’ve thought about and planned how to pay for.  This video also explains the difference between your credit card statement date and due date.  
I found it interesting to hear one person say that you should make sure to use your loans only for yourself.  I think that’s good advice because young people might not understand how much your credit score can affect your future plans and they might agree to use their credit to help friends.  Also, I learnt you can check your credit score as often as you want and it won’t have a negative affect on your score.  

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Here are some tips to help increase your credit score!

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This website provides Financial Literacy Education, Credit Counselling and services to consolidate your separate debts into a single monthly payment.  Credit counselling is a service where you can get advice for what is in your best interest. They give you advice on how to improve your credit score, pay off your debts with the lowest interest rate and educates you for how to make good financial decisions.  
This website is interesting because it’s about working with a credit counselling service that is nonprofit and helps you improve your overall credit health and helps you avoid declaring bankruptcy.  I also think this website is good because they offer their services even if people can’t afford to pay for their services.  

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We live in an age where at the touch of our smartphones or computers, we can instantly connect with those we know, and yet more people are lonelier than ever. Virtually surrounded, and yet alone. When a person's self-worth errantly seems to be connected to the number...

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We live in an age where at the touch of our smartphones or computers, we can instantly connect with those we know, and yet more people are lonelier than ever. Virtually surrounded, and yet alone. When a person's self-worth errantly seems to be connected to the number...

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Transunion is one of the credit reporting companies in Canada where you can access your credit report and check your credit score.  They explain how your credit score helps creditors decide whether they should give you a loan.  They also explain the difference between your credit report and your credit score.  It’s important to take your credit score seriously and avoid mistakes that can harm your credit score and affect your ability to get a car, mortgage or other type of loan.

This website explains important steps to improve your credit score such as making sure you always pay your bills on time, don’t open too many credit card accounts, don’t use too much of your available credit and keep track of your credit report to correct any errors.

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This website provides an overview of the importance of having a good credit score, the 2 major credit bureaus in Canada, how to check your credit report and how to check your credit score.  
Young person who can relate to the challenges students and young people face.  Explains how the credit rating system works in a way that’s easy to understand.  Clarifies not only what things affect your credit score but how the different factors are weighted.  I think this website is useful because they provide specific advice that it’s worth it to pay for subscription for Equifax and TransUnion just to get your current credit score and then cancel before it renews.  

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This post may contain affiliate links. Please read my disclaimer for more info.

Want to learn how to improve your credit score in Canada? Good! Because you 100% can do it yourself and it's not hard (though it may not be easy). Here's a helpful and free Credit Best Practices Guide you can download to help you improve your credit score today!

Why You May Think Credit Scores Aren't Important

When I first started my personal finance journey over 7 years ago, one piece of advice I found a lot of "money gurus" shared was that it wasn't important to know your credit score. Instead, what was more important was to check your credit report. To be fair, that's not bad advice per se. Your credit report is important to check at least once annually (I'll dive into that a bit more shortly). Still, I found it odd that they were essentially saying "Don't worry about that, it's not important" when in actual fact knowing your credit scores and understanding how they work is important!

How I discovered this was through my financial counseling training. Most Accredited Financial Counselling Canada® designees go through the program to specifically become credit counselors for non-profits. I'm probably one of the few designees who simply wished to get my credentials to become an independent fee-only financial counselor. In any case, although the program goes through all aspects of financial planning, credit and debt are heavily focused on. To give you a taste, one of the books we were required to read was Credit for Canadians: Fix Your Own Credit Report, Protect Yourself from Identity Theft by Mike Morley (super exciting reading, let me tell you!).

So, going back to why these "money gurus" shared in their books or TV shows that credit scores aren't important. I don't really know why they shared this misguided advice, I can only speculate. One theory is that they don't trust the credit bureaus. They may feel it's all a big racket in which these bureaus getting paid by consumers to find out their credit scores, and also getting paid by creditors (financial institutions and credit/loan companies) as all creditors have to be a member of at least one credit bureau. Or maybe they believe the credit bureaus are in cahoots with lenders in a big scheme to get more consumers to borrow, pushing more consumers into debt which obviously isn't good.

I'm not here to defend the credit bureaus. All I want to do is explain how the system works. And the system works by you getting scored by these credit bureaus based on past credit behaviour, which will determine if you will be approved for credit, how much credit you'll be approved for, and what kind of interest rate you'll be offered.

These Are the Credit Bureaus in Canada

In Canada, there are two credit bureaus: Equifax Canada and TransUnion Canada.

You may have thought there was a third, but that's only in the United States. In the U.S., there are three credit bureaus: Equifax, TransUnion, and Experian.

What a "FICO Score" Means

Both Equifax Canada and TransUnion Canada use a credit scoring system called a FICO score. In case you're curious, that acronym comes from Fair Isaacs Company which developed the scoring system. This scoring system helps to predict the likelihood of a consumer paying their bills or debts on time.

It scores consumers by giving them a number between 300 and 900. As you may already know, the higher the number the better! If you have a low number, it's basically telling lenders that they don't have much confidence in you paying your bills or debts on time.

Here's Equifax's credit score range by Canadian population percentage that's pretty interesting.

And here's TransUnion's credit score range.

You may be wondering, what do they base these scores on? It's an important thing to answer since it could help you identify why your credit scores aren't as high as you assumed they'd be. As outlined in Credit for Canadians, "Credit scoring involves assigning a value, usually points, to different factors that will be used to predict the likelihood of you paying your loan back as agreed." And the loan can mean any type of credit, such as a line of credit, credit card, mortgage, car loan, etc.

So, how do these bureaus assign points? They don't reveal all the details, however, we do know that some factors are more heavily weighted.

Here's a quick breakdown:

35% - Late payments, bankruptcies, collections and judgments

30% - Current debts

15% - Age of accounts

10% - Type of credit (credit cards, mortgage, bank loan)

10% - Applications for new credit or credit inquiries

As you can see, paying your debts on time and how much current debt you have accounts for 65%! That means those are the two most important things you need to be mindful of when thinking of how to improve your credit scores. In other words, always pay your bills and debts on time, and make a plan to pay off all your debts as soon as possible.

Why Credit Scores Are Important

Unless you never plan on getting a credit card, getting a mortgage or car loan, or using any type of credit in your life, credit scores are important. You need to know how creditworthy or responsible you look to lenders because they ultimately decide whether or not to approve you for credit, how much credit you'll be approved for, and what interest rate you'll get.

A common example is getting a mortgage. Almost all homeowners require a mortgage to afford a home. When applying for a mortgage, you want to make sure you'll be approved for the amount you need to buy a home and get a low-interest rate. If you have high credit scores, it is very likely you'll be approved for the amount you need and get a low-interest rate. If you don't have high credit scores, you may only be approved for a fraction of what you were hoping for and be given a high-interest rate.

Why You May Have Different Credit Scores at Each Bureau

This is a common question I get: "Why is my score 650 at Equifax and 700 at TransUnion?" The simple answer is that they are different bureaus and thus are given different information from lenders. You see, lenders in Canada only have to be a member at one of the bureaus, not both.

For example, Lending Company A may only report information about you to Equifax, and Lending Company B may only report information about you to TransUnion. Equifax and TransUnion do not share information, which is why you need to check your scores at both bureaus. I know, it's annoying but that's just how the current system is set up.

Your credit report is where all the credit information about you lives. The credit score is just a number to help lenders determine whether you are creditworthy or not, but the details about you are in the credit report. That's why you need to check your credit reports from both bureaus at least once per year to see what's on your report and verify that all the information being reported about you is accurate.

If there is inaccurate information on either of your reports, it could inadvertently lower your credit scores. So make sure all the information is correct. But if you see a mistake or something that isn't up-to-date, first contact the lender to dispute it and get them to fix the reporting error to the bureau. If that doesn't work, contact the bureau directly.

You can request your free credit reports from both bureaus via these links:

How to Check Your Credit Scores

Now, to find out what your current credit scores are, there are a few ways you can do it. You can do it on the free way or the paid way.

Some people speculate that the free credit scores aren't as accurate as going directly to the bureaus, but at a conference, I went to last year a rep from TransUnion said that shouldn't be the case. These partner companies get the scoring data directly from the bureaus, so the scoring numbers should be identical.

That being said, I've heard many people say they've tested them all out and they don't match. I'm not sure why, maybe these companies are lagging behind in getting their scoring numbers. In any case, I usually tell my clients to test out the free ones if they like, but in my opinion, it's easiest to just pay for a one-month subscription for both Equifax and TransUnion, then cancel those subscriptions before they renew (and yes, this is what I do personally as well). This way you get your most accurate score within minutes plus it includes your credit report and suggestions on how to improve your scores too.

Free Credit Scores

Paid Credit Scores ($19.95/month)

Tips on How to Improve Your Credit Score

Once you find out your credit scores, you may want to take immediate action to improve them. Make sure to download the free Credit Best Practices guide for a checklist on how to start improving your scores today!
Got any questions about how to improve your credit score in Canada? Share them in the comments, I'm happy to answer!
Disclosure: Nothing on my website or affiliated channels should be considered advice or an endorsement, and some content may include affiliate links in which I may earn a commission at no extra cost to you. Please read my disclaimer to learn more.

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How to Improve Your Credit Score in Canada - Jessica Moorhouse

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Want to improve your credit score in Canada? Here is everything you need to know about improving your credit worthiness as a Canadian.

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This website has detailed information on how your credit card affects your credit score.  There are many things about having a credit card and how you use it that can have an impact on your credit score.  Some of the factors are not obvious.  For example, if you want to close a credit card, it is better to close your newest card because it is better to keep your older accounts open.

The noteworthy information I found on this website is the list of recommendations to ensure you don’t negatively impact your credit score when you need to close a credit card account.  They clearly detail the steps you should follow to make the right decision.

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If your wallet is overflowing with credit cards, you may feel the urge to declutter your collection and close out unused credit accounts. Or perhaps you see cancelling a credit card as a move to curb overspending. Whatever your reasons, you may want to think twice about ending the credit card relationship, as cancelling a credit card could impact your credit score.

Keep on reading to learn how closing a credit card affects your credit score so you can approach the situation with financial savviness.

The short answer is yes, cancelling your credit card may have a negative impact on your credit score. 1, 4 However, there are factors to consider like how much it will be affected and is there a good way of going about closing a credit card?

Pulling the plug on a credit card can affect two important factors used to calculate your credit profile:

your credit history

and credit utilization ratio.

Combined, these two factors can make up almost half (45%) of your credit score.

In general, credit scoring models reward you for long-standing credit accounts and only use a small percentage (less than 30%) of your credit limit. ¹ So if you cancel a credit card (especially one you've had for a while), it could reduce the average age of your accounts and affect the amount of available credit you are using - triggering your credit rating to drop.

There's no definitive, one-size-fits-all figure. Ultimately, the impact of cancelling a credit card largely depends on your credit situation and the credit scoring model that's used. ² For instance, if you have a good credit score, closing a credit card might not have a huge or long-lasting impact on your rating. ³

But here's the good news: Even if your credit score drops after closing a credit card, it will typically recover within a few months if you continue to make your payments on time and use credit responsibly. ⁴

To understand what happens after you close a credit card, you need to understand what affects your credit score. Some of the primary factors that play into calculating your credit rating include: ⁵

Your payment history (do you pay your bills/debts on time?)

Your credit utilization ratio (or used vs. your available credit)

The length of your credit history

Public records

Number of inquiries into your credit file

If you close a credit card, it can change the way your credit score is calculated in two major ways. Specifically, cancelling a credit card can shorten the length of your credit history and increase your credit utilization ratio (meaning you use a bigger chunk of your available credit limit), which can impact your credit rating. Here's a breakdown of why and how that works.

Cancelling a credit card can impact the length of your credit history, which is the part of your credit report that shows how long your credit accounts - credit cards, student loans, mortgage, car loans and the like - have been in existence. ⁶

When calculating your credit rating, credit scoring models look at how long your oldest accounts and most recent accounts have been open. Specifically, credit history is based on the average age of your credit accounts. So, the longer you hold credit accounts open, the higher your average age will be.

Since credit history generally makes up 15% of your total credit score calculation, ⁷ closing a credit card account can lead to a change in your score - and in some cases for the worse. With one less account on your file, it can shrink the average age of your credit accounts, causing your rating to drop. ⁸

Lenders typically like to see that you can responsibly handle credit accounts for the long haul. If you have no or very little credit history, you may struggle to get approved for a credit card, loan or mortgage. That's why using a credit card responsibly can be a great tool to help build up your credit history.

Your credit utilization ratio (or used credit vs. available credit)

Let's say you charge $4,000 between three credit cards and have a total credit limit of $20,000. In that case, your utilization ratio across all your cards is 20% ($4,000 divided by $20,000 = 20%.)

But let's say you cancel one of your three credit cards. There are now fewer credit accounts and less available credit, thereby boosting your credit card utilization ratio. If you charge $4,000 between two credit cards and have a total credit limit of $10,000, your credit utilization ratio would now be 40% ($4,000 divided by $10,000 = 40%, which is above the desired 30%). That one cancelled card makes a difference! *

*This example is for illustrative purposes only.

Also, consider the credit limit on the card before you cancel it. If you look at the example above, a credit card with a $10,000 credit limit will have a bigger impact on your credit utilization ratio. Whereas one with a $500 credit limit will make less of a difference. If you're decluttering credit cards from your wallet, you may want to choose the one with the lowest credit limit.

If you're using the credit card responsibly and it has no annual fee, you may want to just tuck it back into your wallet and leave it open. Since it's not costing you anything, it can benefit you to keep the account open. You can use it as a tool to build a longer credit history and minimize your credit utilization ratio. However, just bear in mind that the issuer might close the account if you don't use it for a long time, which can ultimately impact your credit score. ¹⁷

A total credit utilization ratio of less than 30% is preferred by creditors. ¹² Before you close a credit card account, be sure to crunch the numbers and make sure it won't push you above that 30% threshold. If you're serious about building your credit, consider taking a look at other factors that affect your credit score.

But if you're paying a fee for a credit card you don't use or you're unhappy with, cancelling the card might make sense and can be done in a way to initially minimize the impact on your score. If you're looking to curb overspending, it might also make sense for you to cut down on the number of credit cards in your wallet.

Plus, your credit score will typically rebound after closing a credit card. Just keep using your credit responsibly and your credit score will likely eventually recover.

What to consider when deciding to close or keep a credit card

Before you get busy closing credit cards, consider the following potential advantages and disadvantages of closing a credit card account. Whether you decide to close your card or not, ensure you evaluate your options and are informed about the pros and cons.

Things to consider when closing a credit card

* Helps build or maintain a good credit score. If you're using the credit card responsibly and it has no annual fee, you may want to leave the account open and use the card to build or maintain a good credit score.

* Unused credit cards may be declared inactive. If you have a credit card with a zero total balance that you don't use over a certain time, the credit card issuer may declare it inactive and close the account. Also, if the credit card expires, make sure to destroy the old one and reactivate the new card when it comes in the mail. ¹⁶

If you've decided to say goodbye to a credit card, below are some tips for safely closing the account. Before you begin, however, remember to choose widely which credit card to cancel. Cancelling a credit card that you've recently opened will have less of a negative impact on your credit score than closing an older account. ¹⁵ So if you must cancel a card, you may want to first go with the account that was opened most recently. But a general guideline is to keep a new credit card open for a few months before cancelling it.

After you cancel the card, get written confirmation of the cancellation. If you ever have to dispute your credit history entries, having this proof will come in handy.

Check your credit reports to ensure that the information has been reported correctly to the credit reporting agency.

You can get your free credit score check online via the Credit View service available through your Scotiabank mobile app. This Credit View feature is powered by TransUnion, so you're getting your credit score directly from one of Canada's leading credit bureaus.

After cancelling your credit card, do everything you can to stay in good standing: make payments regularly and on time to all your other credit accounts.

Your credit score will gradually recover if you continue to use credit responsibly.¹³

However, it may take some time, so you may want to avoid taking on any new debt, like a mortgage or car loan, until your score rebounds.14

Cancelling a credit card may seem like no big deal, but it could have an impact on your overall credit score. So, whether you choose to close an old card, or keep it in your wallet longer, if you've done your research and are aware of the pros and cons of either of those choices, you're in a good place.

This article is provided for information purposes only. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. References to any third-party product or service, opinion or statement, or the use of any trade, firm or corporation name does not constitute endorsement, recommendation, or approval by The Bank of Nova Scotia of any of the products, services or opinions of the third party. All third-party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.

Sources:
1 https://www.experian.com/blogs/ask-experian/is-it-better-to-cancel-unused-credit-cards-or-keep-them/
² https://www.equifax.com/personal/education/credit-cards/how-closing-credit-cards-impact-credit-scores/#:~:text=Closing%20a%20credit%20card%20could,be%20closed%20by%20the%20lender

³ https://www.experian.com/blogs/ask-experian/deciding-when-to-close-credit-cards-with-zero-balance/

⁴ https://www.experian.com/blogs/ask-experian/will-closing-a-credit-card-hurt-your-credit/

⁵ https://www.consumer.equifax.ca/personal/education/credit-score/how-are-credit-scores-calculated/

⁶ https://www.equifax.com/personal/education/credit-cards/how-closing-credit-cards-impact-credit-scores/#:~:text=Closing%20a%20credit%20card%20could,be%20closed%20by%20the%20lender

⁷ https://www.consumer.equifax.ca/personal/education/credit-score/how-are-credit-scores-calculated/

⁸ https://loanscanada.ca/credit/canceling-a-credit-card-is-it-bad-for-your-credit-score/

⁹ https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/credit-report-score-basics.html#toc5

¹⁰ https://www.equifax.com/personal/education/credit-cards/how-closing-credit-cards-impact-credit-scores/#:~:text=Closing%20a%20credit%20card%20could,be%20closed%20by%20the%20lender

¹¹ https://www.consumer.equifax.ca/personal/education/credit-score/how-are-credit-scores-calculated/

¹² https://www.scotiabank.com/ca/en/personal/advice-plus/features/posts.what-affects-your-credit-score.html#affect-credit-score

¹³ https://www.experian.com/blogs/ask-experian/will-closing-a-credit-card-hurt-your-credit/

¹⁴ https://www.experian.com/blogs/ask-experian/will-closing-a-credit-card-hurt-your-credit/

¹⁵ https://www.experian.com/blogs/ask-experian/is-it-better-to-cancel-unused-credit-cards-or-keep-them/#:~:text=An%20unused%20card%20with%20a,than%20closing%20an%20older%20account

¹⁶ https://www.equifax.com/personal/education/credit-cards/how-closing-credit-cards-impact-credit-scores/

¹⁷ https://www.experian.com/blogs/ask-experian/what-happens-if-i-dont-use-credit-card

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Here's how closing your credit card affects your credit score

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Learn about the pros and cons of closing your credit cards and how that may affect your credit score.

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This image gives a very clear explanation of how your credit score is rated and what is says about you to lenders.  It also confirms the information I learnt in the video about mortgages that a credit score above 620 should be good enough to get a traditional mortgage.   

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This graphic is a great illustration to represent CREDIT UTILIZATION RATIO.  This term came up in all of my research and is a very important concept to understand to keep a health credit score.  Most experts recommend keeping your credit utilization ratio to under 30%.  

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After researching the topic of credit scores, I learnt a lot of new information about how to improve your credit score and how to avoid mistakes that will have a negative impact. One of the most surprising things I learnt was it's better to keep higher credit card limits and not use all of it. Rather than keep a low credit limit and use most of it.

I think this topic is interesting and important for me to understand because I don't want to make mistakes as a student that will impact me in the future. I hope to be able to purchase a car and rent or buy a home in the future and now I understand that little things, such as paying my phone bill late, can have a big affect on my credit score.

The most important information I would want my friends and family to understand is that you should check your credit score and credit history regularly so that you can take actions to improve it. That way when you're ready to make a big purchase or need to borrow money you will know what to expect. Not only does your credit score affect whether or not you can qualify for a loan, but also what interest rates the lenders will offer you.