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What’s the point of a Credit Score anyways?

Updated: Jun 26

Author: Olivia Reitsma

Date: March 5, 2023

Credit Scores, you might have heard about them and gotten confused about the numbers or even thought, what's the importance if I’m paying back my credit card? Well, a lot of life milestones can depend on a few digits, aka your credit score.

First up, what exactly is a credit score?

A credit score is a three digit number that ranges between 300 and 900. 300 being the starting point meaning an inexperienced credit holder (potential credit risk) and 900 being an experienced credit holder and seen as trustworthy from the banks.

Why should I care about my credit score?

Credit scores can help you in achieving your milestones such as buying your own property, getting a new car. When you have a high credit score, the banks see you as a smart decision maker when it comes to money. This means they are willing to lend you more money for a potentially lower interest rate.

For example, say you have two friends, Jacob and Dustin. And say that whenever Jacob asked if he could borrow 10$, he would pay you back in the next few days. But whenever Dustin asked if he could borrow 10$, it would always take a few months to pay you back. Now imagine they both asked to borrow 2000$, who would you prefer to lend the money to?

I would vote Jacob, and this is exactly how banks see your credit score and how you handle your money.

How are credit scores calculated?

There are a few major components that make up your credit score; which include payment history (35%), credit utilization (30%), the length of credit (15%), public records (10%) and inquiries (10%).

If you’ve ever forgotten to pay off the full amount on a credit card (it happens to the best of us), that can have a negative impact on your credit score. Or perhaps you’ve gone car shopping and Toyota, Nissan and Ford all asked to check your credit report and you said yes, that can also have an effect too.

If you want some solutions on how to improve your credit score, click here.

Our suggestion

Using less of your credit available, paying your bills in full and on time and patience are key for building credit. Building credit takes time so go slow and easy. For more ways to increase your credit score check out our article here, “ 5 Ways to Improve your Credit Score”.

In Conclusion

It is never too late to start building credit and it can even be advantageous for your future self. It is a crucial step in achieving your future goals. If you’re looking for some of the options for students, international students or newcomers to Canada try checking out our article here.



Check Your Credit Score


E. (2018). How Are Credit Scores Calculated? Equifax.

Financial Consumer Agency of Canada. (2020, May 13). Credit report and score basics.

Irby, L. (2022, March 22). How a Credit Score Influences Your Interest Rate. The Balance.

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