As a newcomer to Canada, you might want to understand the importance of a good credit score in your financial journey.
What is a credit score? It is a total score on a scale of 300 – 900 rating how you manage credit. It is based on your credit history, which is summarized in your credit report. Canadian lenders may use it to assess the potential risk of lending to you.
Here in Canada, financial institutions and some businesses typically review credit scores to assess your eligibility for credit, loans, or other financial services. These are a few common examples of where your credit score may be reviewed:
- When making property rental applications to ensure you qualify as a tenant based on landlords’ requirements
- When applying for credit cards
- When getting approved for a mortgage to finance a home
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How is my credit score calculated?
So what makes up your credit score? Your score is based on information from your credit report. Points may be added for responsible credit use and deducted for missed payments or poor financial management. Scoring models may consider factors like your payment history, amounts owed, and the frequency of your missed payments.[1]
While the exact formulas for calculating credit scores aren’t shared, they are influenced by several factors, such as:
- Length of your credit history
- Your payment history and missed payments
- Any outstanding debts and credit card balances
- How close you are to your credit limits
- Recent credit applications and the types of credit you use
- Any accounts sent to collections or records of bankruptcy[1]
Your credit score changes over time as your credit report is updated.[2] Keep in mind that your credit score from your country of origin or any other country where you may have lived will generally not be used in Canada.
How your credit history is checked
When you apply for credit in Canada, financial institutions may:
- Look at your past transactions with them
- Review the details you provide in your application
- Request a credit report from a credit agency
Credit agencies in Canada may collect information about your credit use from lenders. With this, they create a credit report that summarizes your financial history.
It’s a good idea to check your credit report regularly to ensure the information is accurate and up-to-date. This may help you stay on top of your credit history and address any errors you may perceive.
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What number is considered a good credit score?
In Canada, credit scores typically range from 300 to 900. Below is a handy reference to evaluate your rating.
A score:
- Between 660 and 724 is considered good
- Between 725 and 759 is seen as very good
- 760 or higher is generally viewed as excellent[1]
Again, lenders may use your credit score to evaluate your ability to manage credit. A higher score may make it easier for you to access loans, credit, or even rental properties and certain jobs. Keep in mind that your score changes over time based on your credit use and payment history.
Tips for building a good credit score
If you’re new to Canada, here are some simple ways to start building your credit:
- Apply for a credit card
Using a credit card responsibly is a great way to build credit. When you do make purchases, always try to pay your bill on time. Starting early may help you establish a credit history. If you haven’t applied yet, it’s nice to know TD offers a credit card for newcomers as part of its TD New to Canada Banking Package. - Get a phone or Internet plan
Timely phone and Internet bill payments help contribute to a good credit score. It may be a good idea to check with your provider to see if they report payments to credit agencies. - Make loan payments on time
Whether it’s a car lease, student loan, or mortgage, making these payments on time may also contribute to a positive credit history and good score. - Stick to a budget
Budgeting helps to remind you to pay your bills on time, which may help you build and maintain good credit. Remember, if you need assistance with budgeting, TD offers tools like the TD App or online banking through EasyWeb to help you manage your money from anywhere.
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Why Choose TD?
150 years helping Canadians:
TD has a proud history of delivering financial solutions to Canadians for more than 150 years. TD also brings a century of experience helping newcomers navigate the unique challenges of the Canadian banking system.
With over a thousand branches, a reputation for excellence in financial services, and the ability to also serve you in more than 80 different languages, TD has become one of the largest and most trusted banks in Canada, now serving 16 million Canadians.
TD offers online support and resources of interest to newcomers on topics such as banking basics, moving to Canada, credit score essentials, and more. TD is open longer hours for your convenience and has thousands of ATMs across Canada to help you take care of your everyday banking needs quickly and easily.
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Learn more about TD New to Canada Banking Package today. Book an appointment to talk with a TD Personal Banking Associate about the TD New to Canada Banking Package. You can book online right away, or visit the TD website to learn more.
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[1] Financial Consumer Agency of Canada, Credit Report and Score Basics, Canada.ca, Ottawa, Government of Canada, 2024, n.p., (accessed 12 December 2024)
[2] Financial Consumer Agency of Canada, Credit Report and Score Basics, Canada.ca, Ottawa, Government of Canada, 2024, n.p., (accessed 12 December 2024)
[3] TD Bank, ‘What’s A Good Credit Score?’, www.td.com, Canada, TD Bank, 2024, What is a good credit score? | TD Canada Trust (Accessed 11 Dec. 2024)