Credit Score vs. Credit Rating

Credit Score vs. Credit Rating

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated January 7, 2022

The terms credit score and credit rating are used almost interchangeably, but is there a difference? Well, it depends. Usually, in casual conversation, there is not. Strictly speaking, credit scores range from 300 to 900 while a credit rating ranges from 1 to 9 and is specific to individual accounts or tradelines that appear on a credit report. 

Your Credit Scores

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 can make this process more difficult.

Your credit scores indicate the likelihood that you will pay your bills on time. 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.

Factors Used To Calculate Your Credit Scores

Your credit scores are calculated using multiple pieces of data taken from your credit report. It’s important to understand that both credit bureaus, as well as third-party score providers, all have their own credit score models. This means you have a variety of different scores and it’s impossible to say exactly what is used to calculate them.

That being said, we do know that five main factors are considered:

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 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 are delinquent and how many there are compared to the total number of accounts you have.

2. Outstanding Debt (~30%)

Another factor taken into consideration during the calculation of your credit scores is how much credit you use compared to your available limit when it comes to credit cards and other forms of revolving credit. 

3. Length Of Credit History (~15%)

This refers to how long you’re credit accounts have been open. Meaning the ages of your credit accounts are analyzed during the calculation of your credit scores. A longer history is favourable, as someone with a lengthier history of on-time 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. Public Records (~10%)

Public records include bankruptcies, collection issues, liens, lawsuits and other derogatory public records. Having these public records on your credit report may have severe negative effects on your credit scores. 

5. Inquires (~10%)

Every time a creditor or lender accesses your credit file because they want to extend credit to you, this request is noted on your credit report. This is called a credit inquiry and this particular type of inquiry is often referred to as a “hard pull” or “hard check”. This is because an inquiry performed by a creditor can impact the calculation of your credit scores. All hard credit inquiries require the consent of the consumer.

Don’t Forget!

When you’re applying for new credit, creditors look at more than just your credit report. They also want to know how long you’ve been employed, what your income is, and other relevant indicators before they come to a decision. Your credit scores are a good indicator of whether or not you will pay your bills on time, but they do not represent your entire financial life.

Your Credit Rating

Each individual account that appears on your credit report has its own credit rating. Every credit rating is an evaluation of how you managed the payments for 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, R, or M.

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

IStands for “installment”, meaning that your loan is being repaid in fixed installments over a certain period of time, such as a personal loan or car loan.
OStands for “open”, meaning you have opened credit, such as a credit card bill that you pay at the end of the month.
RStands 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.
MStand for “mortgage”, while not all mortgages show up on credit reports, if they do, they may be represented by an M. Mortgage may also be represented by an I for installment.

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

R0Too little credit history or, credit unused.
R1Account paid within 30 days of due date or one or fewer payments late.
R2Account paid more than 30 days past the due date, not more than 60 days late, or two or fewer payments late.
R3Account paid more than 60 days past the due date, not more than 90 days late, or three or fewer payments late.
R4Account paid more than 90 days past the due date, not more than 120 days late, or four or fewer payments late.
R5Account paid 120 days late or more but had not yet received an R9.
R6Not assigned a value.
R7Account holder is making agreed-upon payments through a debt relief program.
R8Repossession
R9Account in collections or bankruptcy. Account holder moved and did not provide a new address.

Where To Find Your Credit Report And Credit Scores 

Depending on the method you choose you can get your credit report and credit scores for free or for a fee. 

Free Credit Report And Credit Scores From The Canadian Credit Bureaus

  • Equifax – In Canada, Equifax provides Canadians access to their credit report and credit scores for free. You simply need to create an account online to access it. 
  • Transunion – Transunion, provides Canadians with their credit report and scores for free when they subscribe to their Credit Monitoring service for a fee. However, Transunion does provide your Consumer Disclosure for free every month. This includes all your credit report information according to the consumer reporting legislation. Residents in Quebec can also access their credit score for free with Transunion due to the Quebec Credit Assessment Agents Act  (“CAAA” or “Act”). Quebec residents can obtain a copy for free by requesting a copy of their consumer disclosure by mail or in person. 

Moreover, in Canada, Canadians are entitled to their credit reports for free from both credit bureaus.  To do so, you will need to send a form requesting your free credit report from Equifax Canada or TransUnion Canada. They will then send you your report by mail. 

Banks And Credit Unions

Certain banks and credit unions have been providing their clients with access to their credit scores through their banking account. However, it’s important to remember that these credit scores may not be the same as the ones you see at the credit bureaus. Moreover, the credit scores shown may not be the same ones lenders use to make their lending decisions. 

Third-Party Providers

There are many companies in Canada that have partnered with one of the credit bureaus 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. 

CostCredit ScoreCredit AlertsLink
FreeYesYesVisit Site
Free*
(with credit monitoring)
YesYesVisit Site
FreeYesNoVisit Site
FreeYesNo-

How Does The Credit Reporting System Work? 

As we mentioned earlier, the credit bureaus, TransUnion and Equifax are the two sources for providing credit reports in Canada. Your credit scores are based on your credit report, which you may access upon request. The reporting companies also 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 credit card provider 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 check your credit.

The Lender’s Assessment

The lender may use your credit file 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 good credit history, your chances of getting approved increase. 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 the probability of you making your payments on time.

The Lender’s Decision

If you are granted a credit card, the creditor reports that account to the credit bureaus (either one or both), 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 reports as they receive new information from creditors and lenders (e.g. are you behind on payments and by how much?). The next time you apply for a credit card or other credit product, the process repeats itself.

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:

Your credit scores drop 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.

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.

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.” 

Cosigning means you’re responsible for the account.

True. Opening a joint account or co-signing a loan 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.

Credit FAQs

What is my credit score?

To find out what your credit is in Canada, you can access it via one of the two credit bureaus, through your bank if they offer the options, or from a free third-party provider like Mogo or Borrowell. 

Why is my Equifax credit score different from Transunion? 

Each credit bureau has its own credit scoring model which can affect the calculation of your credit scores. Moreover, not every creditor or lender reports to both credit bureaus, some only report to one while others may not report to either. This affects the information each credit bureau has on you, which in turn also affects how your credit scores are calculated.  

Where can I get my credit report for free?

Both credit bureaus, Equifax and TransUnion are required to provide one free credit report per year to any consumer who requests it. 

Why don’t I have a credit score?

You likely don’t have a credit score because there isn’t enough information in your credit report to calculate one. You likely have a very short credit history and need to continue to use credit in order to build a longer credit history. 

What are tradelines? 

Every account shown on your credit report is called a tradeline. For example, if you have three credit cards and one personal loan, each is its own tradeline. 

The Health Of Your Credit Is Important 

For the average Canadian consumer, checking your credit and understanding what affects your credit scores is an important part of a healthy financial life. If you’re going to request a free copy of your credit report from one or both of the credit bureaus, understand the rating system will only make the process more educational. 


Rating of 5/5 based on 12 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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