Canada’s credit score fiasco

There’s way more to credit checks than meets the eye.



Online only.


Someone sent me a Tweet the other day to say that Down Easters are smarter. Apparently they’ve stopped the credit score from being used by insurance companies to set home insurance premiums. The rest of Canada should take note. My Tweet peep is right: Down Easters are smarter.

We’ve become very complacent about what credit scores can be used for in Canada. Our American cousins have become slaves to the credit score and it looks like we want to follow in their footsteps. (We know where that got them, right?)

Smart Money reports that the average FICO score is roughly in line with last year’s score and the average in 2007. Hmmm. You mean after almost nine million homes have gone into foreclosure and more than six million folks have filed for bankruptcy, FICO scores stand steady as a rock.

Think about it a minute, if the point of the credit score is to get credit into people’s hands, massive drops would mean way less credit could be doled out, right?

While you’ve been told over and over that the credit score is used as tool to check your credit worthiness, that’s way over-simplified. If that were strictly so, then people who paid their balances off in full wouldn’t have lower scores than the folks who only make minimum payments. Nope, credit scores are used to judge and reward those with more credit—profitability, plain and simple. And if we allow the credit score to become as powerful in Canada as it has in the U.S., we shouldn’t be surprised when we end up in the same place they did.

Credit scores are becoming the new resume in Canada. So if you got laid off from a job, had too much debt, missed a few payments and applied for a new job to get yourself back to rights, you might be out of luck. Regardless of your work experience, your personality, your work ethic, you may be declined for a position on the strength of your credit score. Sounds like a dumb thing to import from our southern cousins to me. Yet we persist.

Not only might a low credit score prevent you from buying a home, it might prevent you from renting too. It could stop you getting car insurance. Or it could set your premiums beyond your reach.

Keep in mind, too, that our record low interest rates have little meaning for anyone who doesn’t have an almost perfect credit score. While the blah blah blah focuses on how cheap it is to borrow money, if your score is under 720 you’re not going to see the cheap rate. According to another Smart Money article, “Credit card issuers charge at least 15% interest rates on average for borrowers with credit scores below 720.”

In light of how much like America we want to be, just imagine what our lenders are doing.

7 comments on “Canada’s credit score fiasco

  1. I love you Gail! Tell it like it is! But here's my question: what can we, the average Joes down here, do about it? Should we be looking for legislation? Who do you call? Can we boycott our way out of it? I'm just really struggling to picture a way to stop the avalanche.


  2. Credit scores for jobs? Just stupid. Why would it even factor in to how good a candidate is? I agree something needs to be done about it.


  3. I have been gaining a lot of usable and exemplifying stuff in your website.


  4. Hi Gail, I've been a fan of yours for many years now and I follow your advice on money saving and debt repayment. Having said that, I need to correct you on your comment regarding needing a credit score above 720 in order to get good interest rates on a mortgage. As a mortgage agent in the GTA, I'm very familiar with credit reports and the impact of credit score on mortgage interest rate. Generally, lenders are looking for credit scores above 650 in order to classify the client as an "A". "A" clients get the best interest rates available. Some will go as low as 620…but most have a 650 minimum. Of course, everyone should strive to have the highest credit score possible for their own financial health and peace of mind. However, I just wanted to clarify that a score above 650 will benefit from best pricing in terms of mortgages.


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  6. Very useful information about Canada’s credit score. Thanks for sharing.


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