How credit cards affect your credit score in Canada

A credit card is the most common way Canadians build a credit history, and the most common way they dent it. The mechanics are simpler than they look. Here is what the two credit bureaus, Equifax and TransUnion, actually record, and what moves the number.

The basics

• Scores in Canada run from 300 to 900. Higher is better.
• Your lenders report to Equifax and TransUnion, usually monthly. The two files can differ slightly.
• Checking your own score is a soft inquiry and has no effect. You can get your report free from both bureaus.

What a card does to your score

Paying on time (the biggest factor)

Payment history matters most. Pay at least the minimum by the due date every month, even if you are disputing a charge. One late payment can stay on your file for years.

How much of your limit you use

The Financial Consumer Agency of Canada recommends using less than 30% of your available credit. That applies even if you pay in full, because the balance is often reported before your payment lands. A $10,000 limit with a $4,000 statement balance looks like 40% utilization, whatever you do on the due date. Paying part of it early, before the statement date, fixes that.

Applying for cards

Every application is a hard inquiry. Equifax shows it for 3 years. A few in quick succession can look like you are in trouble, which is why the FCAC advises spacing applications out. Mortgage and car loan rate-shopping within about two weeks is treated as one inquiry; credit cards don't get that treatment.

Closing old cards

Closing a card lowers your total available credit, which raises your utilization on whatever is left. A closed account stays on your Equifax file for 6 years after the last activity, so the history doesn't vanish immediately, but the limit does. If a card is free and you aren't tempted to misuse it, keeping it open is often the gentler option.

How long things stay on your file

Who can look at your file

In most provinces a business needs your consent to check your credit. In Nova Scotia, Prince Edward Island and Saskatchewan it only has to tell you it is doing so.