Credit Score vs. Credit Rating

Credit Score vs. Credit Rating

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated May 5, 2021

The terms credit score and credit rating are used almost interchangeably. Is there a difference? Well, it depends. Usually, in casual conversation there is not, but strictly speaking, your credit score ranges from 300 to 900 while a credit rating ranges from 1 to 9 and is specific to every item in your credit history.

Your Credit Score

Do you plan on buying your own house or condo one day? Are you thinking of buying a car in the near future? Poor credit will make this much more difficult.

Your credit score says a lot about how financially responsible you are. It’s a reference point lenders use to determine how risky a borrower you might be. Credit scores are calculated by two Canadian credit bureaus: Equifax and TransUnion, and as mentioned above, credit scores range from 300 to 900. Typically lenders set a minimum credit threshold for their clients; and of course, this number is not universal, it changes from lender to lender.

Canadian Credit Score Ranges

The Factors That Affect Your Credit Score

Your credit score is calculated using multiple pieces of data, taken from your credit report and grouped into 5 categories. The percentage taken from each section reflects the importance of that specific factor.

The 5 factors that make up your credit score include:

1. Payment History (35%)

Realistically, someone who has a consistent history of making payments on time is perceived as less of a risk. They’re considered more trustworthy than someone who frequently makes late payments, short payments, or misses their payments completely. That being said, this credit score factor takes into consideration both late and on-time payments.

Other important factors include: how late the payments were made (30, 60, or 90 days), whether partial or full payments were made, and the total number of past-due payments. Also included are accounts that have been sold to collection agencies, charge-offs, debt settlements, bankruptcies, foreclosures, wage garnishments, and liens.

2. Outstanding Debt (30%)

This is the amount owed on all credit and loan accounts. It includes how much of your total available credit you’ve already used and the amount of debt you owe in total.  

3. Length of Credit history (15%)

This refers to how long you’ve been using credit for, meaning the ages of your credit accounts are analyzed. A longer history is favourable, as someone with a lengthier history of on-time/full payments shows experience and responsibility when it comes to handling their credit. Conversely, it is difficult to judge someone’s creditworthiness if they have very little credit history.

4. New Credit (10%)  

This includes the number of recently opened credit accounts you have, how many new accounts you’ve applied for lately, and when the last time you opened a new account was. The core assumption here is that if you’ve had multiple credit checks recently, it could signal financial difficulty. Of course, having recently opened various new credit accounts also reflects negatively on your credit score because it implies more payments for an individual to manage.

5. Credit Mix (10%)

This refers to the different types of credit used, such as credit cards, mortgages, store accounts and installment loans, and how many accounts you currently have. It is crucial to apply for credit in moderation, as your credit score drops slightly whenever a credit check is performed.

Don’t Forget!

When you’re applying for credit, creditors look at more than just your credit score and credit report. They also want to know how long you’ve been employed for, what your income is, and other relevant indicators before they come to a decision.

Your Credit Rating

Each individual account that appears on your credit report has its own credit rating. Every credit rating is an evaluation of your ability to repay that account. The Canadian credit bureaus give ratings to every item in your credit history individually. These ratings can range from 1 to 9 and are given one of three letters, which represent the type of credit being used: I, O and R.

1 represents all payments that are made on time, while 9 indicates that bills were never paid or that the account has gone bankrupt.


stands for “installment”, meaning that your loan is being repaid in fixed installments over a certain period of time, such as a mortgage or car loan.


stands for “open”, meaning you have opened credit, such as a line of credit or student loans.


stands for “revolving”, meaning your credit payments are contingent on your account balance. This is the most common type of credit account among borrowers. A good example is a credit card.

Read this to learn about revolving debt and how to manage it.

These are the different R-ratings one can have, in accordance with the North American Standard Account ratings:


Too little credit history or, credit unused.


Account paid within 30 days of due date or one or less payments late.


Account paid more than 30 days past the due date, not more than 60 days late, or two or less payments late.


Account paid more than 60 days past the due date, not more than 90 days late, or three or less payments late.


Account paid more than 90 days past the due date, not more than 120 days late, or four or less payments late.


Account paid 120 days late or more, but had not yet received an R9.




Account holder is making agreed- upon payments through a debt relief program.




Account in collections or bankruptcy. Account holder moved and did not provide a new address.

Where To Find Your Credit Report And Credit Score 

There are two ways of pulling your credit report; one is free, and the other has a small fee.

The Free Method

If you want to pull your credit score for free then you will have to contact Equifax Canada or TransUnion Canada. They will then send you your report by mail. The advantage, of course, is that it’s free, but the disadvantage is that it may take some time for you to receive your report. You will be able to see your credit report, but not your credit score. Furthermore, the credit bureaus only allow you to request one free copy of your report per year.

Getting Your Report Online

If you want to get your credit report online and instantaneously then there will be a fee (usually around 25$). The advantage here is that there is an option to see your credit score, and you can see it instantly.

Third-Party Providers

You can also choose a third-party provider, for example, Borrowell. Companies like this have partnered with a credit bureau to provide their clients with access to an online portal where they can check their credit score and credit report for free or for a small monthly fee.

How Does The Credit Reporting System Work? 

As we mentioned earlier, the credit bureaus, TransUnion and Equifax are the two major sources for providing credit reports in Canada. Your credit score is based on your credit report, which you (and your lender) may access upon request. The reporting companies issue credit reports to lenders, insurers, and other organizations in order for them to evaluate your creditworthiness.

Here’s an example of how the system works:

  • Applying for a Credit Card: When you apply for a new credit card, the lender/creditor requests a copy of your credit report from one or both of the main credit bureaus. Note that you must provide consent before a creditor can pull your credit report or credit score.
  • The Lender’s Assessment: The lender may use your credit report, your credit score, and any other information you provide (such as income or debt information) to decide whether to approve your request and which interest rates to offer. If you have a low score and bad payment history, you may not get approved. However, if you have a high score and a great credit history, your chances of getting approved increase significantly. If you have no credit history and you’re applying for your first credit card, this process will be much harder because creditors have nothing to evaluate your repayment ability with.
  • The Lender’s Decision: If you are granted a credit card, the creditor reports that account to the credit bureaus, then consistently updates it every 30 days or so. The updated information includes your balance and payment activity.
  • Your Credit Profile Updated: The credit bureaus revise and update your credit report as they receive new information from creditors/lenders (e.g. if you paid or not, was it full or partial, are they chasing you to pay). The next time you apply for a credit card or other credit product, the process repeats itself.
How Does Bad Credit Affect Daily Life?

Credit Myths And Misconceptions – True Or False?

There are countless myths and misconceptions found online about credit that you can’t always trust. Relying on this incorrect information and letting it guide your decision process can be very dangerous for you and your credit.

Some of the most common errors include, but aren’t limited to:

  1. Your credit score drops if you check your own credit report. False. it’s recommended that you review your credit report annually. This type of credit check is considered a “soft” inquiry and will not negatively affect your credit score.
  2. It’s good for your credit to close your old accounts. False. A longer history is advantageous and seen as less risky. Closing old accounts will make your credit history look shorter, which is not attractive to lenders.
  3. Paying off a negative record removes the record from your credit report. False. Negative records, such as late payments, will stay on your credit report for up to 7 years. Once an account is paid, it isn’t deleted from your credit report. Instead, it is simply listed as “paid.” 
  4. Cosigning means you’re responsible for the account. True. Opening a joint account or co-signing loans implies you will be held legally responsible for said account. All activities and transactions on the joint account are shown on the credit reports for both people involved.

The Health Of Your Credit Is Important 

Regardless of where you are in your life and your financial goals, a healthy credit score should always be a priority for you. Whether you’re starting from scratch or looking to rebuild your credit score, Loans Canada can help. We offer a variety of credit improvement products and services, as well as debt relief options if you’re concerned about how your debt is affecting your financial health.

Rating of 5/5 based on 9 votes.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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