Your Credit Score: What It Means and How to Improve It

You’ve probably heard that having a good credit score matters. But what actually goes into that number — and what can you do if yours isn’t where you’d like it to be?

The good news is that your credit score isn’t fixed. The way you use and repay credit over time can help you build or improve it.

First, what is a credit score?

Your credit score is a number that helps lenders understand how you’ve managed credit in the past. In Canada, credit scores generally range from 300 to 900, with a higher number indicating a stronger credit history.

Your score can be one factor lenders consider when you apply for a mortgage, loan, line of credit or credit card. It can also affect the interest rate or terms you're offered.

What affects your credit score?

There isn't one single thing that determines your score. Your credit history includes things like whether you make payments on time, how much of your available credit you're using, how long you've had credit accounts and how often you apply for new credit.

One common misconception is that you need to carry a balance on your credit card to build credit. You don't. Using your card and paying what you owe on time can help build a positive credit history without paying unnecessary interest.

How can you improve your credit score?

Start with the basics. Pay your bills on time, and whenever possible, pay your credit card balance in full each month.

Try not to regularly use most or all of the credit available to you. For example, a card that's consistently close to its limit may affect your score even if you're making the required payments.

Be thoughtful about applying for new credit, too. Applying for several new credit products within a short period can have an impact on your score.

And give it time. There isn't a quick fix for your credit score. A pattern of responsible borrowing and on-time payments is what matters.

Check your credit report

It's a good idea to review your credit report periodically. Look for accounts you don't recognize, incorrect balances or other errors. In Canada, you can access your credit report through Equifax or TransUnion.

Checking your own credit report doesn't hurt your credit score.

Your score isn't the whole story

A credit score is useful, but it's only one part of your overall financial picture. Income, debt, savings and the type of credit you're applying for can all matter too.

If you're planning a big purchase, thinking about borrowing or simply want to get your finances in better shape, talk to us. We can help you understand your options and make a plan that works for you.