What your credit score means

What does your credit score mean?

Updated May 27, 2019 | Originally published May 5, 2017

You probably have a general idea of what a credit score is, but do you know how it’s calculated and what it really means?

A credit score is a number (usually between 300 and 850) that represents your creditworthiness. Basically, it provides a snapshot of how likely you are to repay your debts on time.

Your credit score can play a big role in your life and influence things like your monthly car payments, your ability to snag that sweet apartment and even the hiring manager’s decision on that new job you applied for. That’s why it’s super important to understand how they work.

Watch as Credit Squirrel breaks it down for us in this helpful video.


If you’re a visual person, you might also find this Credit score breakdown infographic helpful.

>> Check out the infographic <<

What’s a good credit score?

A credit score of 720 or more is considered prime – this means you’re in good shape. Scores under 550 mean you could be turned down for a loan. Scores in the good-not-great range (550 to 720) might get you loan approval, but your interest rates will be higher than if you had a prime credit score. Nobody likes the idea of paying more money for no reason, so it makes sense to adopt credit habits that will boost your overall score.

How is my credit score calculated?

The FICO score is the best known and most widely used credit score model in North America. It’s also known as the Beacon score in Canada.

The vast majority of financial institutions use the FICO model, which is based on consumer credit files from the two national credit bureaus:

  • Equifax Canada
  • TransUnion Canada

Because a consumer’s credit file may contain different information at each of the bureaus, FICO scores can vary, depending on which bureau provides the information to FICO to generate the score.

How is my credit score calculated

Each credit bureau uses a slightly different calculation, but the basic breakdown goes like this:

  • 35% = payment history
    Making payments on time boosts your score.
  • 30% = capacity
    This is one of the areas where the less you use of your total available credit, the better. If you get close to maxing out all your credit cards or lines of credit, it tanks your score, even if you’re making your payments on time.
  • 15% = length of credit
    Good credit habits over a long period of time raise your score.
  • 10% = new credit
    Opening new credit cards (this includes retail credit cards) has a short-term negative effect on your score, so don’t open a whole bunch at once!
  • 10% = mix of credit
    Having a combination of different types of credit (like revolving credit and instalment loans) boosts this part of your score. Credit cards are considered revolving credit, and things like car loans and mortgages are instalment loans.

How do I get my score?

You are entitled to one free credit report per year by mail from Equifax and TransUnion. Spacing out your credit report requests allows you to check on your credit every six months or so. If you can’t wait for a free report by mail, you can always get an instant credit report online from Equifax or TransUnion for approximately $15.

When you receive your credit report, you’ll notice that it does not list your three-digit credit score. Despite this, it’s still a helpful reference because it serves as the basis of your credit score.

If you know how a credit score is calculated, then you know how to look for factors on your credit report that might be influencing your score for better or for worse. It’s also an easy way to look at account openings, account closings and what your repayment history looks like.

You can get access to your actual credit score from either Equifax or TransUnion for an additional fee ($20 to $25).

Some commercials make it seem like credit scores are big, mysterious, randomly assigned numbers. But with a little research, a little patience and some good habits, you can influence your credit score in a positive way and not be caught off guard by a denied loan or an outrageous interest rate.

Need advice?

As always, we recommend that you talk to your financial institution to get more specific advice. You can talk to a financial planner at Vancity about options relating to your specific situation. Not a Vancity member? Join us.


This blog post provides general information only, and does not constitute financial, accounting, tax, legal or other professional advice. We encourage you to obtain personalized advice from qualified professionals regarding your particular circumstances. Please see our Terms of Use. 

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