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Financial Guide
Your credit score determines how much you can borrow, what interest rate you pay, and whether lenders will approve your mortgage at all.
Jason Byun
Broker
In Canada and the U.S., most lenders use the FICO credit score system, ranging from 300 to 900. The higher your score, the more likely you are to be approved — and on far better terms.
With a score of 750+, you can access low interest rates and small down payments. Below 600, you may be denied a mortgage or face significantly higher costs.
Defaulting on a loan has the most severe negative impact on your credit score. It means you have failed to repay the loan as agreed, and it can stay on your credit report for up to seven years.
Payment history is the most significant factor determining your credit score. Late and missed payments significantly reduce your score. Even one late payment can have a considerable impact.
Credit utilization is the ratio of outstanding credit card balances to credit limits. Keeping your utilization ratio below 30% is ideal for maintaining a good credit score.
When you apply for credit, the lender performs a hard inquiry on your credit report. Too many hard inquiries in a short period can lower your credit score.
Closing credit accounts can negatively impact your credit score, especially if you have a long credit history. It reduces the average age of your accounts, which can lower your score.
Request a free copy from Equifax or TransUnion. Review it carefully for errors or inaccuracies and dispute anything that negatively impacts your score.
The less debt you have, the better your credit utilization ratio will be. Paying off debt on time directly builds your credit score.
Make on-time payments your #1 monthly priority. Use a budgeting app or a simple spreadsheet to keep your finances in check.
If you're struggling, a credit counsellor or financial advisor can help you develop a plan to improve your score and manage debts.