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What Your Credit Score Actually Means

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Your credit score can be a significant factor when you are seeking a loan, mortgage, or even rental accommodation. Your credit score is essentially a rating of your creditworthiness. It is important to know how different types of debt can impact your credit score so you can responsibly manage it.

A credit score is not static, it goes up and down based on how you use credit. But life can be unpredictable, making it easy to get into financial trouble—which can result in your credit score taking a hit. Credit counselling may be beneficial to help you get back on top of your finances.

What Is a Credit Score?

Credit scores and credit reports are 2 different ways to examine your credit history.

Simply put, a credit score gives you (or someone checking your credit) an overview of your credit history. A credit score ranges between 300 and 900. A lower number indicates a poor credit history.

What Is a Credit Report?

Credit reports are much more detailed and provide your personal information like:

  • Name 
  • Birthday 
  • Current and past addresses
  • Current and past phone numbers
  • Social insurance number
  • Passport number
  • Current and past employers
  • Current and past job titles

Your credit report also includes finance-related details. Things like personal loans, vehicle loans, mortgages, or credit cards are typically included on the credit report along with payment history.

What Does Your Credit Score Mean?

Your credit score is a sophisticated equation which computes a number that can be used to assess whether or not you get a loan, new credit card, mortgage, or even the rental unit you want.

Various people and institutions can view your credit report and credit score, including banks, the government, landlords, potential employers, retailers, and your cell phone provider. Your credit information helps these groups determine if they want to hire you, lend you money, or consider you as a tenant. These individuals will need your written permission to assess your score or report.

What Is a “Good” Credit Score?

A good credit score ranges between 680–900. Having a good credit score can make it easier to get loans, qualify for a mortgage, and obtain approvals for a new car or phone.

High credit scores help groups like banks and car companies get a sense of who you are and how you spend your money.

A healthy or good credit score looks like:

  • Excellent (780 and up)
  • Very Good (720–779) 
  • Good (680–719) 
  • Average (620–679)

What Is a “Poor” Credit Score?

Poor credit scores happen when you do not make payments according to the lender’s credit terms or you incur too much debt by keeping all your lines of credit and credit cards at their limit.

Missing payments, not paying your minimum credit bill, non-sufficient fund payments, large outstanding debts, being close to your credit limits, and being sent to collections can all negatively impact your credit score.

If your credit score is too low, lenders might see you as a high risk and may not grant you credit. And if a lender does provide the loan, they may increase the lending interest rate based on your credit score or you may have to rely on expensive second or third tier lenders for credit.

Poor credit scores are labelled:

  • Poor (580–619) 
  • Very Poor (Scores 500–579) 
  • Terrible (less than 500)

How to Keep Track of Your Credit Score

Knowing how different variables, such as type of debt, age of credit, or credit inquiries, can all affect your credit is a major benefit when it comes to keeping track of your credit score. You can also keep track of your credit score with the 2 reporting agencies in Canada: TransUnion and Equifax. It is a good idea to discuss your questions with a professional if you need help with understanding the details of your credit score or credit report.

What Affects Your Credit Score?

There are several things to consider that can affect your credit score.

Payment History

Payment history can have a significant impact on your credit score. Your payment history is simply how often you make payments on your debts and whether they are on time.

Debt Utilization

Debt utilization is how much debt you carry and is responsible for a large portion of your credit score. If you have a lot of debt or have been holding close to your maximum credit amount, you will have a lower credit score. Most experts agree you should aim for under 30% of your credit utilization.

Credit Length or Age

Credit length, or age, is how long you have been carrying your debts. A longer credit age can actually improve your credit score. Successfully managing your credit for a long time can improve your credit score.

New Inquiries

New inquiries are probably one of the more confusing aspects of your credit score. New inquiries on your credit report could have a small negative impact on your score, but this is only temporary (two years).

You may not notice any changes unless you apply for a lot of new credit in a short period of time. For example, people trying to get car loan approval by going from car dealer to dealer could inadvertently run into this problem.


Having a lot of different creditors, and handling them responsibly, can have a positive impact on your credit score. The key is how you handle the debt load—keeping debt utilization low and making the payments on time.

Is a Credit Card Required for a Good Credit Score?

Any form of debt, including lines of credit, car loans, or cell phone payments, can influence your credit score. So, you do not necessarily have to get a credit card to have a good credit score.  Mortgages, student loans and government debt are not necessarily reflected in your credit score or credit report.

The licensed insolvency trustees at A.C. Waring & Associates can provide you with reliable strategies for managing and paying off your debts to improve your credit score, even if you’re struggling to keep up with your minimum payments. Contact our office today for a consultation to discuss your financial situation.

Written by Arthur Waring

Arthur earned his Bachelor of Arts from the University of Western Ontario before earning a Bachelor of Commerce from the University of Windsor. During university, he also participated in a French immersion program in Trois Pistol, Quebec, and has been employed for several national firms over the years.

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