In April 2022, FICO launched its latest scoring model – the FICO Score 10. Your FICO score is used by credit reporting agencies to calculate your overall credit score, and with the adoption of the new FICO model, your score could be affected (either positively or negatively).
Have you ever wondered what the average credit score in Canada by age is, though?
If so, then you’re in the right place. Below, I’ll show you the latest data, explain how credit reporting works, and give you a few helpful tips to improve your credit score.
Average Credit Score In Canada By Age: Overview
According to Borrowell, the average Canadian credit score is 672, which is considered a fair score. Keep in mind that this score is just an average taken by accounting for all Canadians’ credit score.
A 672 credit score isn’t bad, but it’s not that great either. With a 672 score, you can usually finance a car or apply for a smaller credit card. However, it may be difficult to obtain a mortgage or a small business loan until your credit score is over 700.
Wondering how you stack up to other Canadians? Here’s a quick chart detailing the average credit scores by age in Canada:
| Age Range | Average Credit Score |
| 18 to 25 years old | 690 |
| 26 to 35 years old | 698 |
| 36 to 45 years old | 705 |
| 46 to 55 years old | 718 |
| 56 to 65 years old | 738 |
| 65 or older | 745 |
The data in this table was taken from the latest Canadian consumer credit review by Equifax, which is one of Canada’s two major credit reporting bureaus. According to the report, the majority of Canadians have a lower credit score today than they did in the previous decade.
This could be due to multiple factors, such as:
- Increasing living costs
- Our “finance it” culture (we finance everything from phones to mattresses these days)
- The rising cost of vehicles and vehicle financing
- Increased credit card use (and misuse) among millenials
As a whole, millennials tend to be more optimistic about their financial future than the rest of the population.
One concerning item in this report is that 27% of Canadians between ages 45 and 54 claims that they have difficulty saving money every month. This is one of the key times when Canadians should be saving for retirement to ensure they’re able to retire in comfort.
What Is A Good Credit Score In Canada?
A good credit score is considered to be anything above 660. Once you reach a 725 credit score, then your credit rating is very good.
The better your credit score is, the more financial opportunities you’ll have. With a good credit score, you’ll be more likely to receive:
- Lower interest rates when financing
- Offers for great cashback credit cards
- A good deal on vehicle financing or a mortgage
- Lower security deposit on apartments or new accounts
- Higher loan offers
Conversely, with a lower score, it may be difficult to obtain financing, you may be required to put down higher security deposits, and you won’t be able to get approved for good credit cards.
If you’re just getting started on your credit journey, then you may be trying to see how your credit score stacks up. Is it good? Is it bad? Is it somewhere in between?
Here’s a quick breakdown of your credit rating based on your score:
| Credit Score Range | Credit Rating |
| 300 to 559 | Poor |
| 560 to 659 | Fair |
| 660 to 724 | Good |
| 725 to 759 | Very Good |
| 760 to 900 | Excellent |
What Is Your Credit Score In Canada?
Credit is an incredibly important part of most people’s lives today. With a bad credit score, your ability to receive any type of financing is very limited. For example, if you need a new car, you’ll either need to pay for it all upfront or apply for a high-risk loan (which typically comes with a very high-interest rate).
The problem is that many public schools simply don’t teach students about credit. As a result, many students graduate not knowing how to build their credit or use it to their advantage.
In short, your credit score is a measure of how trustworthy you appear to lenders.
If you have a good credit score, lenders consider you a low-risk applicant and have high confidence in your ability to stay on top of your payments. If you have a bad score, then lenders view you as risky and have little confidence in your ability to make payments on time (or at all).
How Are Credit Scores Calculated: FICO Basics
Your credit score is calculated using complex algorithms derived by FICO. The FICO company was founded in 1956 with the goal of helping retailers determine the trustworthiness of borrowers. Back in the 50s, it was common for major retailers to offer in-store financing and credit lines to their customers.
However, the FICO scoring model as we know it today first emerged in 1989, at the same time that TransUnion and Equifax (the two largest credit reporting bureaus in North America) came about.
Both TransUnion and Equifax adopted FICO’s scoring model to give consumers a unique credit report.
Key Factors That Affect Credit Score
The FICO scoring model is essentially an algorithm that determines financial trustworthiness. This algorithm accounts for key factors, such as:
- Your payment history (accounts for 35% of your score)
- Total debt (accounts for 30% of your score)
- Credit length (accounts for 15% of your score)
- New credit applications (accounts for 10% of your score)
- Credit variety (accounts for 10% of your score)
Your payment history is, by far, the most important factor. If you have a history of making payments on time, then you’re good as far as this is concerned. However, if you have a history of missed payments or late payments, then your credit score will be negatively impacted.
Your total debt is another important factor that’s measured, in part, by your income. The higher your debt-to-income ratio is, the lower your credit score will be. Before lenders offer you more money, they usually want to make sure that you’re not already drowning in debt.
Where To Get Your Credit Report In Canada
Your credit score is based on the information obtained from your credit report. The FICO model scans your report and uses data from the report to generate a score by using its scoring algorithm.
Most adults over the age of 18 have a credit report and score in Canada. Being able to view your credit report is just as important as knowing what your score is.
Often, your credit report may not be entirely correct. Sometimes, lenders send the wrong data (or forget to send information) to the major credit bureaus. This, in turn, can result in your score being lower than it should be. By viewing your report, you’ll be able to identify any erroneous or missing information and dispute it.
After resolving the dispute, your credit score will be updated, which can have a positive impact on your score.
You can get your free credit report from either of the two major credit bureaus in Canada – Equifax and TransUnion. Both Equifax and TransUnion will send you your latest report for free via mail.
They also offer paid subscription services that allow you to monitor your credit 24/7 and instantly view any changes to your credit report. This can be useful for individuals who are trying to build their credit and want access to up-to-date scores and reports.
Some other great resources to get your credit report and monitor your score are:
- Borrowell (you’ll also receive financial coaching through the platform)
- Credit Karma
- Mogo
How Does Credit Reporting Work?
Without credit reporting, there would be no way for the credit bureaus to generate a score. Your credit report is just a file that includes data on all of your credit profiles, including:
- Account history
- Account payments
- Types of accounts
- Your total debt on each account
- … and more
Your credit report is directly linked to your social insurance number (SIN). Most of your accounts (credit cards, loans, bank accounts, etc.) are all verified using your SIN.
The two major credit reporting bureaus in Canada are Equifax and TransUnion. These two companies maintain a database of consumers along with a credit report on each individual in their system.
Whenever you open a new account, the company will notify the credit bureaus of your activity. Whenever you make a payment on time (or miss a payment), your creditor will notify the credit bureaus. Your activity is always being recorded, which is why your score may constantly change.
Occasionally, a creditor may neglect to notify credit bureaus of account changes. Alternatively, some creditors may only report to one bureau, which can result in you having two different credit scores.
In either case, you can file a dispute with your creditor or the credit bureau to update your credit score to reflect any unrecorded changes.
Can You Remove Derogatory Marks From Your Credit Report?
Derogatory marks like missed payments or collections accounts can severely impact your credit score, which can make it difficult to obtain financing or apply for credit in the future. In most cases, derogatory marks stay on your credit report for seven years.
Unpaid and unsettled accounts can remain as derogatory marks on your credit report indefinitely until you arrange to settle or pay off the debt in whole.
This is why it’s so important to make all of your payments on time.
How To Increase Your Credit Score In Canada: 5 Quick Tips
To wrap things up, let’s go over a few quick tips that you can implement to improve your credit score and build a better credit history. Your credit score won’t dramatically improve overnight.
However, if you remain consistent, make your payments on time, and use your credit wisely, you’ll see steady improvements over time.
1. Use A Credit Card (Wisely)
Credit cards are, by no means, bad. In fact, the opposite is true. When used wisely, credit cards not only help you build a credit history, but they can also improve your credit score.
Some tips for using a credit card wisely are:
- Don’t max out your card all at once
- Try not to carry a balance over to the next month
- If you do carry over a balance, make sure you make your payments on time
When you make payments on time and only use a small percentage of your total credit limit, the credit card company reports this to Equifax and TransUnion, which looks good on your report.
It’s often a good idea to open two or three credit cards. Even if you don’t use them (or rarely use them), they’ll contribute to your total credit limit, which can improve your score.
2. Pay All Of Your Bills On Time
Your payment history is the most important factor when it comes to your credit score. Missed payments will stay on your credit report for seven years and can negatively affect your credit score.
Timely payments, on the other hand, remain on your credit indefinitely and have a positive impact on your score.
3. Use A Credit-Building Service
Using a credit-building service like Hello Safe or Spring Financial can help diversify your credit profile, build positive payment history, and improve your score. These services charge a monthly fee for a “loan” (you don’t actually receive the money) that’s paid off over a set period of time.
On your credit, it will appear as if you have a retail line of credit that you’re slowly paying off.
4. Become An Authorized User
If you have a friend or family member with a good credit score and a good credit card, then you can ask them to make you an authorized user of their card. This will increase your total credit limit, making you appear more trustworthy to lenders and improving your score.
The individual doesn’t necessarily need to give you the card to use. They can simply activate it and keep it in a safe place, so there’s no risk to them.
The catch here is that you could be negatively affected if the card you’re added to has a high balance. This will make it appear as if you’re using a high percentage of your available credit.
5. Minimize Hard Credit Pulls
Whenever you apply for a loan, financing, or a credit card, the creditor will check your credit report, resulting in a hard inquiry that stays on your credit report for two years. If you have a high number of hard inquiries, it can derogatorily affect your credit score, as it can make you appear desperate to lenders.
Conclusion
Building a credit history and developing a good credit score is a lot like a game. When you make smart moves, you’re rewarded, and when you make mistakes, you’ll be set back.
The important thing to remember is that it’s a long game that you’ll play for your entire life. As long as you’re responsible, make payments on time, and use your credit wisely, you’ll come out on top.
Interested in seeing your credit score? Keep on reading to see the best places to get your free credit report in Canada next!
