Understanding Canadian Credit Scores: What Immigrants Need to Know

After 15 years as a credit analyst and now helping newcomers navigate the Canadian financial system, I’ve seen the confusion and frustration that comes with starting over. Your excellent credit history from home? It doesn’t exist here. But understanding how Canadian credit scores work is your first step to rebuilding your financial reputation.

The Harsh Reality: Starting from Zero

Why Your Home Country Credit Doesn’t Transfer

I regularly meet accomplished professionals—doctors, engineers, business owners—shocked that their decades of perfect credit history mean nothing in Canada. Here’s why:

Different Systems:

• No international credit reporting standard
• Privacy laws prevent data sharing
• Different scoring models
• Varying financial regulations

The Exception: Some banks (like AMEX) may consider internal global history, but this is rare and limited.

What “No Credit” Really Means

In Canada, no credit is often worse than bad credit:

• Bad credit: Shows you’ve had difficulties but exist in the system
• No credit: Complete unknown, highest risk category
• Impact: Higher deposits, limited access, higher rates

Canadian Credit Score Basics

The Number Range: 300-900

Canadian credit scores range from 300 to 900, different from the U.S. system (300-850):

300-559: Poor

• Difficulty getting approved for credit
• Require co-signers or security deposits
• Highest interest rates if approved
• Limited to secured products

560-659: Fair

• Some credit access available
• Higher interest rates
• May require larger down payments
• Basic credit cards possible

660-724: Good

• Approved for most credit products
• Reasonable interest rates
• Standard down payments
• Qualify for rewards cards

725-759: Very Good

• Preferred rates available
• Higher credit limits
• Premium credit cards
• Easy approval for most products

760-900: Excellent

• Best rates and terms
• Highest credit limits
• Premium products access
• Negotiating power with lenders

Real-World Impact of Each Range

Mortgage Rates by Credit Score (Example):

• 760+: Prime rate (e.g., 5.95%)
• 720-759: Prime + 0.25%
• 680-719: Prime + 0.50%
• 650-679: Prime + 1.00%
• Below 650: May not qualify or need alternative lenders

Car Loan Rates by Credit Score:

• 760+: 0-3% (promotional rates possible)
• 700-759: 4-6%
• 650-699: 7-10%
• 600-649: 11-15%
• Below 600: 16%+ or require co-signer

The Two Credit Bureaus

Equifax vs TransUnion

Canada has two major credit bureaus, and your scores will likely differ:

Equifax Canada

• Older, established in 1919
• Used by most major banks
• Slightly more conservative scoring
• Updates can be slower

TransUnion Canada

• More technology-focused
• Popular with fintech companies
• Often updates faster
• May show different account details

Why You Have Different Scores

It’s normal to have different scores because:

• Not all lenders report to both bureaus
• Update timing varies
• Scoring models differ slightly
• Error rates vary

Example from my files: Client A: Equifax 710, TransUnion 748 Client B: Equifax 695, TransUnion 681

How Canadian Credit Scores Are Calculated

The Five Factors (and Their Real Weight)

1. Payment History (35%)

What it measures:

• On-time payments
• Late payments (30, 60, 90+ days)
• Collections accounts
• Bankruptcies
• Public records

Newcomer insight: Even one late payment can drop your score 60-110 points when you have thin credit history.

2. Credit Utilization (30%)

The formula: (Total balances ÷ Total limits) × 100

Optimal ranges:

• 0-9%: Maximum points
• 10-29%: Good points
• 30-49%: Reduced points
• 50-74%: Significant impact
• 75%+: Severe impact

3. Credit History Length (15%)

What counts:

• Average age of all accounts
• Age of oldest account
• Age of newest account
• Average age by account type

Newcomer challenge: You’re starting at zero, which is why keeping your first accounts open forever is crucial.

4. Credit Mix (10%)

Types that help:

• Credit cards (revolving)
• Installment loans
• Mortgage
• Lines of credit
• Cell phone accounts

Newcomer tip: Don’t rush to add everything; natural diversity over time is better.

5. New Credit/Inquiries (10%)

Impact timeline:

• 0-30 days: Maximum negative impact
• 31-365 days: Declining impact
• 365+ days: Minimal impact
• 2+ years: Not counted

Hard inquiry impact: 5-10 points each, but cumulative effect can be worse.

Credit Score Myths Debunked

Myth 1: “Checking Your Score Lowers It”

Truth: Soft inquiries (you checking) have zero impact. Only hard inquiries (credit applications) affect scores.

Myth 2: “You Need to Carry a Balance”

Truth: Paying interest doesn’t help your score. Pay in full, always.

Myth 3: “Closing Cards Improves Your Score”

Truth: Closing cards can hurt by:

• Reducing available credit
• Increasing utilization
• Lowering average account age

Myth 4: “Income Affects Your Score”

Truth: Income isn’t in credit score calculations, though lenders consider it separately.

Myth 5: “Paying Off Collections Removes Them”

Truth: Paid collections stay on your report for 6 years from first delinquency date.

Special Considerations for Newcomers

The Thin File Problem

A “thin file” means limited credit history. Challenges include:

• Score algorithms have less data
• More volatility in scores
• Single events have larger impacts
• Some lenders auto-decline thin files

Alternative Credit Data

Some Canadian lenders now consider:

• Rent payment history
• Utility payment records
• Bank account management
• International credit reports (translated)
• Employment stability

Building Credit Without History

Strategic first steps:

1. Newcomer credit card: Even with $500 limit
2. Cell phone plan: Postpaid plans report monthly
3. Secured credit card: If needed as backup
4. Authorized user: On someone’s established card
5. Credit builder loan: Forced savings that build history

How to Check Your Credit Score

Free Options

Borrowell

• Free Equifax score
• Updated monthly
• Basic credit monitoring
• Educational resources

Credit Karma

• Free TransUnion score
• Updated weekly
• Credit simulator
• Product recommendations

Your Bank’s App

• Many banks now offer free scores
• Usually updated monthly
• Integrated with your accounts

Paid Options

Equifax Complete ($19.95/month)

• Daily score updates
• All credit reports
• Identity monitoring
• Credit lock feature

TransUnion Premium ($24.95/month)

• Real-time alerts
• Dark web monitoring
• Identity theft insurance
• Score simulator

Annual Free Reports

By law, you can request free reports annually:

• Equifax.ca
• TransUnion.ca
• By mail or phone
• Reports don’t include scores

Understanding Your Credit Report

Key Sections to Review

Personal Information

• Verify all names, addresses
• Check for identity errors
• Ensure SIN accuracy (if reported)

Account Information

• Payment history by account
• Current balances
• Credit limits
• Account status

Inquiries

• Hard inquiries (credit applications)
• Soft inquiries (your checks, pre-approvals)

Public Records

• Bankruptcies
• Consumer proposals
• Legal judgments

Credit Report Codes

Payment History Codes:

• 1: Paid as agreed
• 2: 31-60 days late
• 3: 61-90 days late
• 4: 91-120 days late
• 5: 120+ days late
• 7: Making payments under arrangement
• 8: Repossession
• 9: Written off/Collection

Account Type Codes:

• R: Revolving (credit cards)
• I: Installment (loans)
• O: Open (line of credit)
• M: Mortgage

Timeline Expectations for Newcomers

Months 1-6: Foundation

• First credit products approved
• Initial score appears (usually 650-680)
• High score volatility
• Focus on perfect payments

Months 7-12: Building

• Score typically reaches 700-730
• Eligible for better products
• Less volatility
• Credit limit increases possible

Months 13-24: Establishing

• Score can reach 740-780
• Qualify for premium products
• Multiple credit types possible
• Mortgage pre-approval achievable

Year 3+: Optimizing

• Potential for 800+ scores
• Best rates available
• Full product access
• Negotiating power

Action Steps for Newcomers

Immediate Actions (First Month)

1. Apply for SIN (needed for credit)
2. Open bank account with newcomer program
3. Apply for first credit card
4. Set up postpaid cell phone
5. Register for free credit monitoring

Short-term Goals (Months 2-6)

1. Achieve 2-3 active credit accounts
2. Set up automatic payments
3. Keep utilization under 30%
4. Monitor credit reports monthly
5. Build emergency fund

Medium-term Goals (Months 7-12)

1. Request credit limit increases
2. Add different credit type
3. Maintain perfect payment history
4. Build banking relationships
5. Plan major purchases

Long-term Strategy (Year 2+)

1. Optimize credit mix
2. Leverage excellent credit
3. Negotiate better rates
4. Consider mortgage pre-approval
5. Help family members build credit

The Bottom Line

Understanding Canadian credit scores is the first step to mastering them. As a newcomer, you’re not just building a number—you’re establishing your financial identity in a new country.

Remember:

• Starting from zero is temporary
• Canadian system rewards consistency
• Perfect payments matter most
• Time is your ally
• Every newcomer goes through this

Your credit score is a tool, not a judgment. Use this knowledge to build it strategically, and within 18-24 months, you can achieve scores that unlock the best financial products Canada offers.

The journey from no credit to excellent credit is well-mapped. Follow the path, avoid the pitfalls, and your Canadian credit score will soon reflect the responsible financial citizen you’ve always been.