A credit score is a numerical reflection of your creditworthiness, calculated based on information in your credit report, which includes:

• Payment history
• Outstanding debt
• Length of credit history
• Types of credit accounts
• Frequency of credit applications

In both Canada and the United States, most lenders use the FICO scoring system, which ranges from 300 to 900. A higher score increases your chances of being approved for loans and receiving better financial terms.

• High Score (750+) – Improves eligibility for mortgages with lower interest rates and smaller down payments, potentially saving thousands of dollars over time.
• Low Score (below 600) – Makes mortgage approval more difficult. Lenders may demand larger down payments and higher interest rates, resulting in higher monthly payments and overall borrowing costs.

Key Factors That Influence Your Credit Score

1. Loan Defaults

Failing to repay a loan seriously harms your credit score and can remain on your report for up to seven years. It signals high financial risk to lenders and reduces your future borrowing options.

2. Late or Missed Payments

Your payment history is the most important factor in your credit score. Even one missed or delayed payment can have a noticeable negative impact—the longer the delay, the worse the effect.

3. Credit Utilization

This represents the ratio of your current balances to your total available credit. High utilization indicates possible financial stress. It’s best to keep this ratio below 30% to maintain a healthy score.

4. Credit Applications

Every time you apply for credit, a hard inquiry appears on your report. Multiple inquiries within a short time can lower your score and suggest financial instability.

5. Credit Accounts

Closing long-term accounts shortens your credit history and can lower your score. Lenders prefer borrowers who maintain long-standing, well-managed credit accounts.

How to Maintain a Healthy Credit Score

• Pay all bills on time, every time.
• Keep balances below 30% of your credit limit.
• Avoid unnecessary credit applications.
• Apply only for credit products that fit your financial profile.
• Review your credit report regularly and dispute any inaccuracies.
• Build a long-term credit history—if you’re new to credit, consider starting with a secured credit card.

Steps to Rebuild or Improve Your Credit Score

1. Review Your Credit Report

Request a free copy from Equifax or TransUnion. Check for errors or outdated information and dispute anything that may be unfairly reducing your score.

2. Reduce Outstanding Debt

High debt levels limit your borrowing power and increase risk. Paying down balances lowers your credit utilization ratio and strengthens your credit profile.

3. Create and Follow a Budget

Plan monthly expenses carefully to ensure timely bill payments. Use a budgeting app or spreadsheet to stay organized and consistent.

4. Seek Professional Support

If debt becomes difficult to manage, contact a credit counselor or financial advisor. They can help develop a personalized plan to reduce debt, rebuild your score, and regain financial stability.

✅ Bottom Line

A strong credit score not only increases your chances of loan approval but also secures better interest rates, lower borrowing costs, and greater financial freedom in the long run.