A credit score refers to the evaluation of an individual or a corporation’s credit history and capability to repay financial obligations.
A credit score is essentially a numerical representation, obtained through careful analysis of a person’s credit files, of the creditworthiness of that person.
A credit score is typically attributed by a credit reporting agency, such as Equifax or TransUnion in Canada, which tracks how the general population pays back debt, such as credit cards, lines of credit, bank loans and car loans. The company then applies its research to a statistical analysis of an individual’s likelihood of being able to pay back credit, based on the overall behaviour of the population.
A person’s resulting credit score represents that particular moment in time and can change based on subsequent behaviour. For instance, missed or late payments, or numerous credit accounts nearing their limits, will lower your score, while consistently paying your debts on time will help improve your score.
Credit scores typically range from 400 to 900, with a good score considered to be 600 and higher. A credit score of 750 and above is considered to be excellent.
Lenders, including banks and credit card companies, typically use credit scores to evaluate the potential risk of a consumer. Lenders use credit scores to determine things such as who qualifies for a loan and at what interest rate, while telecom companies, insurance companies, landlords and government agencies also use credit scores to assess risk.
In Canada, consumers can obtain a free copy of their credit report any number of times in a given year, as long as the request is made in writing. Such requests are noted in the credit report, but have no effect on a credit score.
For more tips on personal finance, sign up for the National Bank newsletter .
Any reproduction, in whole or in part, is strictly prohibited without the prior written consent of National Bank of Canada.
The articles and information on this website are protected by the copyright laws in effect in Canada or other countries, as applicable. The copyrights on the articles and information belong to the National Bank of Canada or other persons. Any reproduction, redistribution, electronic communication, including indirectly via a hyperlink, in whole or in part, of these articles and information and any other use thereof that is not explicitly authorized is prohibited without the prior written consent of the copyright owner.
The contents of this website must not be interpreted, considered or used as if it were financial, legal, fiscal, or other advice. National Bank and its partners in contents will not be liable for any damages that you may incur from such use.
This article is provided by National Bank, its subsidiaries and group entities for information purposes only, and creates no legal or contractual obligation for National Bank, its subsidiaries and group entities. The details of this service offering and the conditions herein are subject to change.
The hyperlinks in this article may redirect to external websites not administered by National Bank. The Bank cannot be held liable for the content of external websites or any damages caused by their use.
Views expressed in this article are those of the person being interviewed. They do not necessarily reflect the opinions of National Bank or its subsidiaries. For financial or business advice, please consult your National Bank advisor, financial planner or an industry professional (e.g., accountant, tax specialist or lawyer).