Confused About Credit Scores? Here's Everything You Need To Know About Credit in Ontario

If you’ve ever wondered how credit scores work in Canada and their impact on your financial decisions, you’re not alone. Credit scores play a vital role in everything from securing a mortgage to lowering your insurance premiums. 

Here are some things you should know (including a few lesser-known tips & facts!) from Paige McKenna, personal lines expert at Scrivens:

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What Are Credit Scores and Why Do They Matter?

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Credit scores in Canada range from 300 to 900 and are calculated based on several factors, including payment history, debt levels, and credit history length.

“Credit scores are especially important when applying for loans, mortgages, or credit cards,” says McKenna. “When it comes to insurance, the focus shifts to payment history, bankruptcy concerns, and the length of your credit history.”

Although credit scores don’t affect car financing decisions, they do play a significant role in securing competitive rates for mortgages and other large purchases, like homes.

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Key Factors That Influence Your Credit Score

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Several elements impact your credit score including your payment history and if you are paying your bills on time and in full, outstanding loans and debts, your current credit utilization, and the length of your established credit history.

“These factors combine to paint a picture of your financial health,” McKenna explains. “Maintaining good habits is key to a strong score.”

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Credit Scores and Insurance in Ottawa

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Did you know a good credit score can help lower your home insurance premiums? While auto insurance rates aren’t influenced by credit scores in Ontario, home insurance is a different story.

“Home insurance discounts for good credit scores can range from $5 to $1,300,” McKenna notes. “If your current policy doesn’t include credit scoring, you can request it and consent to a soft credit check to potentially unlock savings.”

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TIP: Soft credit checks do not affect your credit score and provide insurers with limited information.

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Even if you have a less-than-perfect credit history, insurers won’t increase your premiums. There’s no harm in trying to apply for a discount.

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Misconceptions About Credit Scores in Ontario

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One of the biggest myths is that applying for insurance impacts your credit score.

“Many homeowners believe that soft credit checks for insurance purposes will harm their credit score, but that’s not the case,” says McKenna. “This misunderstanding can cause people to miss out on potential discounts.”

Another misconception is that poor payment history will automatically disqualify you from savings. McKenna stresses, “There’s no penalty for asking insurers to apply credit scoring to your policy.”

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How to Build or Repair Your Credit Score

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Improving your credit score is achievable with these 4 practical steps:

1. Make timely payments by paying your credit card bills and loans on time, every time.

2. Aim to lower your credit utilization by paying off outstanding balances.

3. Always try to pay more than the minimum amount due on your credit card.

4. Check your credit report regularly to see where you stand. Awareness is key.

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Tips for Young Adults in Ontario

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Establishing credit history is critical for young adults. McKenna recommends starting with a credit card or small loan and ensuring timely payments.

“Building good habits early sets the foundation for financial stability,” she says. “Avoid maxing out credit limits and pay more than the minimum to show lenders you’re responsible.”

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Insurance and Credit Scores, What You Should Know

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In Ontario, insurers are bound by regulations to use only soft credit checks for assessing premiums.

“There are other ways to save on insurance beyond credit scores,” McKenna adds. “Adding alarm systems, keeping your home updated, and investing in water mitigation systems can all reduce costs.”

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Take Control of Your Credit

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Understanding and managing your credit score is a powerful step toward financial empowerment. Whether you’re a first-time homebuyer or a seasoned homeowner, knowing how credit impacts your insurance and financial options in Ontario can save you money and stress.

If you’re unsure where to start, speak with your insurer to explore how your credit score could unlock discounts on your home insurance.

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