How credit works in Canada

There are two bureaus, and they don't talk to each other

Canada has two national credit reporting agencies: Equifax Canada and TransUnion Canada. They are competitors, not branches of one system. Each keeps its own file on you, and each is only as complete as the lenders who choose to report to it.

This has a practical consequence people discover at the worst moment. A lender may report to one bureau and not the other. An error corrected at Equifax stays wrong at TransUnion until you correct it there too. And the two scores are usually different — sometimes by fifty points or more — because they're calculated from different data using different models.

So when someone tells you their score, the useful follow-up question is: from which bureau, and when? A number with no source attached doesn't mean much.

What's actually in your file

Four things, broadly.

Identifying information. Your name, date of birth, current and former addresses, and employment history as lenders have reported it. This section is descriptive only — it doesn't affect your score. It's also where a surprising number of errors live, usually from name variations or old addresses.

Credit accounts. Every credit card, loan, line of credit, and financed purchase a reporting lender has extended you. For each one: when it opened, the limit or original amount, the current balance, and a month-by-month payment history. This is the heart of the file and the bulk of what drives your score.

Inquiries. A record of who has looked at your file and when. There are two kinds, and the difference matters — more on that below.

Public records and collections. Accounts that have been sent to collection agencies, and court judgments registered against you.

The five factors, in order of weight

Canadian scores generally run from 300 to 900. The exact formula is proprietary and differs between bureaus, so treat any specific percentage you see online with suspicion — most of those numbers are lifted from American FICO documentation. The order, though, is stable and is what actually matters for deciding where to put your effort.

1. Payment history. The single largest factor by a wide margin. Have you paid on time, and if not, how late and how recently? One payment thirty days late does real damage. Ninety days late does considerably more. This is the factor worth protecting above all others.

2. Utilization. How much of your available credit you're using. If you have a $5,000 limit and a $4,500 balance, you're at 90%, and that's read as strain regardless of whether you pay it off monthly. Below 30% is the usual guidance; below 10% is better. This is the fastest-moving factor — it can change within a single billing cycle, which makes it the most useful lever if you need movement quickly.

3. Length of history. How long your accounts have been open, weighted toward your oldest. This one you can't rush. You can only avoid damaging it, which is the main argument against closing your oldest card.

4. New credit and inquiries. Several applications in a short window suggest you're looking for credit urgently, which reads as risk.

5. Credit mix. Whether you've handled different types — revolving, like a card, versus instalment, like a car loan. The smallest factor, and not worth taking on a loan you don't need in order to improve.

Hard and soft inquiries

A hard inquiry happens when you apply for credit and a lender pulls your file to decide. These are visible to other lenders and affect your score slightly.

A soft inquiry happens when you check your own file, when an existing lender reviews your account, or when you're pre-screened for an offer. These are visible only to you and have no effect on your score whatsoever.

Checking your own credit is always a soft inquiry. You can do it daily for a year and it will not cost you a single point. The belief that it hurts keeps a lot of people from ever looking at their own file, which is exactly backwards — the people who check are the ones who catch errors early.

Four things people believe that aren't true

"Carrying a balance builds credit." It doesn't. What builds credit is using an account and paying it as agreed. Interest paid to a lender is a cost to you and a benefit to them; it does nothing for your score. Paying in full every month builds history just as effectively and costs nothing.

"Closing old cards helps." Usually the opposite. Closing an account removes its available credit, which pushes your utilization up, and if it was one of your oldest accounts you also shorten your history. There are good reasons to close a card — an annual fee you're not getting value from, or a temptation you'd rather remove — but improving your score isn't one of them.

"Checking my score hurts it." Covered above. It doesn't.

"Someone can remove accurate negative information for a fee." No, they can't. Nobody can, at any price. Errors can be corrected — that's module two — but accurate information stays for its full retention period. Anyone offering otherwise is selling something that doesn't exist, and that promise is the clearest signal you should walk away.