What Actually Moves a Canadian Credit Score — and What Does Not

Your credit score is a lender’s ranking of how risky you look as a borrower, and it moves for a small number of reasons: whether you pay as agreed, how much of your available revolving credit you use, how long your accounts have been open, how often you apply for new credit, and what sits in the public-record section of your file. Everything else is either noise or a slow side effect of those five things. Canada has two national credit reporting bureaus, Equifax Canada and TransUnion Canada, and a free copy of your credit report is available from each, as the Financial Consumer Agency of Canada explains.

Why your credit score is not one number

There is no single official score. Each bureau keeps its own file on you, and each sells several scoring models to lenders. A number you see in a free app may be produced by a different model, at a different bureau, on a different day, than the one a lender pulls when you apply. The direction of travel is what matters: if your balances fall and your payments stay on time, most models move the same way.

The weights inside those models are proprietary. The bureaus publish the broad categories that matter, but not how much each is worth, and the weighting differs by model, by lender and by the type of credit you are applying for. Anyone who tells you a specific action is worth exactly a set number of points is guessing.

What actually moves a Canadian credit score

Six factors do most of the work. They are not equal in weight, but they are the only levers worth pulling.

The practical implication: payment history and utilisation dominate, and both are things you control directly. The other four mostly run in the background.

What you can change within a couple of payment cycles

1. Bring anything past due up to date. The longer an account sits in arrears, the more serious the notation that gets reported. Catching up before the account moves further down the delinquency ladder limits the damage.
2. Pay down revolving balances before you pay down instalment debt. A car loan or student loan balance is not what pushes utilisation up. Credit cards and lines of credit are, because the model compares the balance to the limit on each account.
3. Ask your existing issuer whether a limit increase involves a soft or hard credit check. A higher limit lowers your utilisation ratio without you repaying anything — but only if you leave the new room unused. Ask first, because some issuers perform a hard check, which shows up as an application.
4. Stop applying for credit for a while. Rate shopping for the same product in a short window is usually treated differently from unrelated applications, but a scatter of applications across different lenders is not.
5. Dispute genuine errors in writing. Wrong balances, accounts that are not yours, duplicate listings and debts discharged in a proposal or bankruptcy are all worth disputing with the bureau directly, with documents.
6. Keep old accounts open if they cost you nothing. A dormant card with no annual fee lengthens your history and adds to your total available credit.

How long negative items stay on your file

Retention is set by rule, not by the lender, which is why no company can speed it up for you.

Two things follow from this. First, accurate negative information cannot be deleted early by anyone, whatever they charge you. Second, the clock often starts later than people assume: for a consumer proposal, the retention period is measured from completion or from filing, not from the date you stopped paying. A proposal that takes years to complete can therefore sit on your file considerably longer than the headline number suggests, which is one reason the choice between a proposal and a bankruptcy is a decision to take with a licensed insolvency trustee rather than a salesperson. Only a licensed insolvency trustee can administer a consumer proposal or a bankruptcy in Canada, and trustees are regulated by the Office of the Superintendent of Bankruptcy Canada.

What does not work

• Paying a credit repair firm to remove accurate items. It cannot be done. A business that takes a fee upfront to delete a genuine late payment is selling you something it has no power to deliver. Disputes only succeed when the information is actually wrong.
• Disputing everything on your file. Bureaus investigate disputes; they do not wipe files clean. Flooding them with challenges to accurate information wastes your time and can slow down the legitimate corrections.
• Closing cards you have paid off. This typically raises your utilisation ratio, shortens your average account age and reduces your available credit. It usually makes the file look worse, not tidier.
• Paying a collection and expecting it to disappear. Paying changes the balance and status, which is worth doing if you can, but the record itself stays for its retention period.
• Being added as an authorised user on someone else’s account. In Canada, whether an authorised user is reported to the bureaus at all varies by issuer and by bureau, so it is not a dependable way to import another person’s good history.
• Opening several new accounts to build a history. It creates inquiries and new accounts with short histories. One account used lightly and paid on time does more than five opened in a month.
• Anything based on a false identity or a new credit profile. So-called file segregation or credit privacy number schemes involve misrepresenting who you are. That is fraud, and the consequences are considerably worse than a low score.

Rebuilding after a consumer proposal or bankruptcy

The rebuilding pattern is unglamorous and takes time. Establish one small account you can definitely service — a secured card, where your deposit reduces the lender’s risk and is the reason you can be approved at all, is the usual starting point. Use it for something you already buy, keep the balance well below the limit, and pay on time every month. Add nothing else until your file has a clean stretch of payments behind it.

At the same time, avoid the two things that undo progress: a new high-cost loan taken for breathing room, and a fresh collection account. Both reset the picture a lender sees.

If you are looking for a loan on poor credit

Lenders price risk. A weaker file means a higher rate, a smaller amount or a requirement for collateral, because the lender is accepting a higher probability of not being repaid. That is the mechanism behind every expensive offer you will see. It is not a penalty and it is not personal.

Two legal ceilings shape the market. The Criminal Code criminal rate of interest is 35% per year under section 347, calculated using a defined method that aggregates interest and certain charges — and a lender cannot lawfully structure around that by renaming interest as a fee. Where a province operates a licensed payday lending regime, federal payday lending regulations cap the cost of borrowing at $14 per $100 advanced, though some provinces set a lower cap and the lower figure applies. Payday loans are generally up to $1,500 for a term of 62 days or less. Annualised, that cost of borrowing is far above any mainstream credit product, which is why payday-style credit is best treated as a short-term bridge and not a way to fund a shortfall that repeats every month. Quebec does not license payday lending, which effectively prohibits the model there.

If you are searching for loans for not so good credit, the useful questions are not about the headline rate. Ask what the total cost of borrowing is, whether there are fees deducted before the money reaches you, whether the payment comes out automatically, and what happens if a payment is missed. Anyone who asks for an upfront fee before a loan is advanced should be ruled out immediately.

If something goes wrong, the Financial Consumer Agency of Canada handles consumer complaints about federally regulated financial institutions, while provinces license and supervise most other lenders and each has a consumer protection office.

Loanwolf.ca is a matching service, not a lender. We do not make loans, set rates or make credit decisions, and no application submitted through a matching service is guaranteed to be approved. The lowest advertised rates in any market are only available to the most qualified applicants, so the most useful thing you can do before you shop is spend a few months improving the two factors you control — on-time payments and low revolving balances — and then compare offers knowing what the numbers actually cost you. For anything significant, including a consumer proposal or bankruptcy, get advice from a regulated professional who can review your full circumstances.