What Is the Average Credit Score in Canada?
Gain clarity on Canadian credit scores. Explore their overall landscape, how they're shaped, and their vital role in your financial journey.
A credit score is a numerical representation of an individual’s creditworthiness. This three-digit number, ranging from 300 to 900 in Canada, offers lenders a quick assessment of the risk associated with extending credit.
The Current Average Credit Score in Canada
The average FICO Score in Canada was 760 as of November 2024. This figure provides insight into the general financial health of Canadian consumers. While other reports may show slightly different averages due to varying methodologies or data collection periods, the FICO score is widely used by Canadian lenders. A score of 760 falls within the “excellent” or “very good” range, indicating responsible credit management. A higher score signifies a lower risk to lenders, which can lead to more favorable borrowing terms.
Understanding Canadian Credit Scores
A credit score indicates how likely a credit bureau believes an individual is to pay their bills on time. Its purpose is to provide lenders with a concise evaluation of a borrower’s credit risk. This helps determine eligibility for financial products and their terms.
Different score ranges signify varying levels of creditworthiness. Scores from 300 to 559 are poor, 560 to 659 are fair, 660 to 724 are good, 725 to 759 are very good, and 760 and above are excellent.
Credit scores are calculated and maintained by two credit bureaus in Canada: Equifax and TransUnion. These companies collect data from lenders and public records to compile an individual’s credit report. The information within these reports is then used to generate the credit score, which may vary slightly between the two bureaus due to different scoring models.
Key Factors Determining Credit Scores
Payment History
Payment history accounts for about 35% of the score. Consistently making payments on time for credit cards, loans, and lines of credit helps maintain a healthy score. Missed or late payments can substantially lower a score. The impact of missed payments considers how late they were, the amount owed, and their frequency.
Credit Utilization
Credit utilization, the amount of credit used compared to the total available credit, makes up around 30% of the score. Lenders prefer a low credit utilization ratio, ideally keeping it under 35% across all credit products. High utilization can signal increased risk, even if payments are made on time.
Length of Credit History
The length of an individual’s credit history influences their score, contributing approximately 15%. A longer history of responsible credit use reflects positively on a score. Older accounts showing consistent on-time payments demonstrate a proven track record of managing debt.
Credit Mix
The types of credit an individual uses, also known as credit mix, accounts for about 10% of the score. A diverse mix of credit, such as revolving credit (credit cards) and installment loans (mortgages or car loans), can indicate financial maturity. Having too many accounts or a lack of variety can negatively impact the score.
New Credit
New credit inquiries and recently opened accounts make up the remaining 10% of a credit score. Each time an individual applies for new credit, a “hard inquiry” is usually placed on their credit report, which can temporarily lower their score. Frequent applications for new credit within a short period may suggest a higher risk to lenders.
How Credit Scores are Used in Canada
Credit scores are widely used by lenders in Canada to make informed decisions regarding loan approvals. This includes major financial products such as mortgages, car loans, and personal loans. A higher credit score can increase the likelihood of approval and often results in more competitive interest rates and favorable loan terms.
Beyond traditional loans, credit scores play a role in credit card applications and determining credit limits. Individuals with higher scores may qualify for premium cards with better rewards or lower interest rates. Landlords often review credit scores as part of rental applications to assess a prospective tenant’s financial reliability.
Insurance companies may consider credit scores when calculating premiums. Employers, where permitted by law, might conduct credit background checks as part of their hiring process, particularly for positions involving financial responsibility. A credit score opens doors to a broader range of financial products and services, reflecting an individual’s financial stability.