What is a Bad Credit Score?

Date Published: April 19, 2023 (Updated March 30, 2026)•11 min read

Key Takeaways

• Below 560 is classified as a poor credit score in Canada

• 560–659 is "fair" — still limiting, but not the worst tier

• Negative items stay on your credit report for up to 6–7 years

• Bad credit affects mortgages, rentals, car loans, and insurance

• A damaged file is not permanent. Most people can improve and reach "good" within 2–3 years of consistent habits

• No file and a damaged file are different problems requiring different solutions

What Is a Bad Credit Score in Canada?

A result below 560 is typically viewed as below 560 on the 300–900 scale used by both bureaus. If your result falls between 560 and 659, you're in the "fair" range — not great, but meaningfully different from "poor." The good news? Neither one is permanent, and reaching a stronger position is absolutely possible.

If you've just checked your result and your stomach dropped a little, take a breath. You're not alone. According to one major bureau, roughly 20% of Canadians carry scores below 600. That's millions of people navigating the exact same uncertainty you might be feeling right now. This page will help explain what that number actually means, what caused it, and what you can realistically do about it.

Your credit score is calculated by Canada's two credit bureaus — Equifax and TransUnion — based on the information in your file. It's essentially a snapshot of how you've managed borrowed money over time. Creditors, landlords, insurers, and sometimes even employers use it to evaluate borrowers.

The important thing to understand is this: a damaged rating isn't a character judgment. It's a data point. And data points can change.

Bad Credit Score Ranges in Canada

In Canada, scores range from 300 to 900. Anything below 560 is typically classified as the lowest tier, while 560–659 falls into the fair category. Both ranges limit your options, but the limitations are different, and understanding where you sit matters.

Here's how the ranges generally break down:

It's worth noting that Equifax uses its Risk Score 2.0 model and TransUnion uses CreditVision, so your score may differ slightly between the two bureaus. Neither score is more "correct,” they're simply calculated using somewhat different methodologies.

One thing to watch for: if your number is sitting around 595 or 610, you're technically in the fair tier, not the lowest one. That distinction matters because some creditors, particularly credit unions and B-category institutions, will work with fair-tier borrowers.

What Causes a Bad Credit Score?

A damaged file rarely comes from a single mistake. It's usually the result of a combination of factors that have accumulated over months or years. Here's an overview of how each bureau weighs the key factors.

Missed or late payments (about 35% of your total). History is the single biggest factor. Even one payment more than 30 days late gets reported and can drag your number down significantly. If this happens multiple times, it can compound the damage quickly. The simplest fix: pay every bill on schedule.

High utilisation ratio (about 30% of your total). Your utilisation ratio is the percentage of available credit you're currently using. For example, if you have $5,000 available on a card and carry a $4,500 balance, your ratio is 90%. That sends a red flag to creditors. Experts recommend keeping your ratio below 30%, and ideally under 10%.

Collections and charge-offs. When you stop paying a debt entirely, the original lender may eventually sell it to a collection agency. That collection then appears on your file as a separate negative entry, often causing a steep drop in your score.

Insolvency or consumer proposal. These are among the most significant negative events on a borrower's file. A first filing stays on record for 6 to 7 years after discharge, depending on your province. A consumer proposal remains for 3 years after completion, or 6 years after filing, whichever comes first.

Too many hard inquiries. Every time you apply for a card, a loan, or a new phone plan, the provider pulls your file. These "hard inquiries" stay on file at one bureau for 3 years and your file at the other bureau for up to 6 years. A few are completely normal, but a cluster of applications in a short window suggests financial distress.

Short or thin credit history. If you're new to credit — perhaps you recently moved to Canada, or you're a young adult who's only had a card for a short time — you may have a low result simply because there isn't enough data, which is different from having a damaged record.

How Long Do Negative Items Stay on Your File?

Most negative items have a defined shelf life on your file. Here's an overview based on current reporting timelines from both major agencies, as well as guidance from the Financial Consumer Agency of Canada.

The key takeaway here is that nothing lasts forever. Even the most damaging event eventually falls off your file (even if it takes a long time).

The impact of negative items weakens over time, even before they disappear. A collection from five years ago won't weigh as heavily as a missed payment from last month.

If you'd like to see exactly what's on your report, both bureaus are required to provide you with a free credit report once per year. You can also check your score anytime through iCash's Credit Health tool, powered by Equifax. It's free and uses a soft inquiry so that it won't affect your score.

How Does a Low Credit Score Affect You?

The impact of a damaged rating reaches further into your daily life than most people expect. It's not just about getting denied for a card. Here are the areas where a damaged rating can create obstacles — and where the right advice and financial planning can help.

Loan and card approvals. Most major Canadian banks require a minimum of around 660 to approve standard products. Below that threshold, you'll either be declined or offered poor terms. Below 600, your options narrow to alternative lending options and secured products. Qualifying becomes much harder.

Mortgages. This is where a damaged file hits hardest. Canada's big banks generally require a score of at least 680 for a mortgage. Below that, you'll need to work with a B lender, where interest rates are typically 1–2% higher and a 20% minimum is usually required.

Car loans. Dealership financing usually requires a fair result at minimum. With a damaged rating, you may face larger mandatory down payments or be limited to higher-rate subprime auto financing.

Renting. Many landlords run background checks as part of the application process. A damaged rating could result in a rejected rental application or a request for a co-signer, additional months of rent upfront, or a larger security deposit.

Employment. In certain industries — particularly finance, banking, government, and positions involving access to sensitive information — employers may review your file during the hiring process. A negative report won't necessarily disqualify you, but it could raise concerns, especially if it shows unresolved collections or a recent insolvency filing.

Insurance. In some provinces, home and auto insurance providers factor your file into their premium calculations. A damaged rating can translate to higher monthly premiums, which is an added cost many people don't anticipate.

Banking may also suffer — some institutions limit the accounts or products available to applicants with damaged files.

Bad Credit vs. No Credit. How Are They Different?

These two situations might look similar on the surface, but they require completely different strategies.

A damaged file means you have a history, but it contains negative information like missed bills, collections, high utilisation, or worse. The bureaus have data on you, and that data isn't great. Repairing a profile from here is about restoring damaged trust with creditors.

No credit means the bureaus have little or no file on you at all. This is common among newcomers, young adults who haven't yet opened any accounts, and people who have always operated on cash. Having no credit doesn't mean you've done something wrong — creditors simply don't have enough information to evaluate you.

The solutions are different too. If you have a damaged file, the priority is paying down existing debt, bringing delinquent balances current, and building a consistent track record. If you have no credit, the priority is establishing a file through a secured product, a builder loan, or becoming an authorized user on a family member's card.

How to Rebuild Your Rating

Building a stronger profile is a process, not an overnight fix. But improvement often starts faster than people expect. Some actions show results within 30 to 60 days. Here's practical advice you can act on today.

Pay every bill on schedule, every single month. Because payment history carries the most weight (35%), even a few months of consistent on-time payments start to shift the needle. Set up autopay or calendar reminders to avoid slipping. If you have any past-due account balances, bring each one current as soon as possible. This includes utilities, phone bills, and any other recurring obligations.

Reduce your utilisation ratio below 30%. If you can get it under 10%, even better. You can do this by paying down existing balances, requesting a larger ceiling on a card (without increasing spending), or spreading charges across multiple cards rather than maxing out one. Keeping that number down signals to creditors that you handle borrowing responsibly.

Don't close older accounts. The age of your accounts matters. Closing an old account shortens your average history and can temporarily hurt your score. Even if you're not actively using an older card, keep it open — it works in your favour.

Limit new applications. Every hard inquiry adds a small ding. If you need to shop for a loan or mortgage, try to complete all applications within a two-week window. Credit scoring models typically treat multiple inquiries for the same product type as a single inquiry if they happen close together. This will help you avoid unnecessary damage.

Consider a secured credit card. If you can't qualify for a traditional card, a secured card requires a cash deposit that becomes your limit. Use it for small purchases, pay the balance in full each month, and the positive history gets reported to the bureaus. It's one of the most reliable tools for building or rebuilding.

Review your file for errors. According to the government's Financial Consumer Agency of Canada, errors on reports are more common than you'd think. Review your file from both agencies, and dispute anything inaccurate — a corrected error can sometimes produce an immediate boost (even if it's just a small one).

Seek professional guidance. If you're unsure where to start, a non-profit counselling agency can help you create a plan tailored to your specific situation. Many organisations offer complimentary consultations.

A realistic timeline: with consistent effort, most people can improve from the lowest tier to fair within 12 to 24 months, and from fair to good within 2 to 3 years. It depends on the severity of the negative items and how aggressively you manage them.

Can You Still Get Credit with a Poor Score?

Yes, you can. A damaged rating doesn't lock you out of every financial product. Your options are more limited and often more expensive, but they do exist.

Alternative lenders. B-category and subprime institutions serve borrowers who don't qualify for traditional banks. These include mortgage finance companies, monoline providers, and licensed online services. While rates are higher, these products can serve as a bridge while you rebuild.

Secured credit products. Secured credit cards and secured lines require a deposit, which reduces exposure for the creditor. They function like regular products and are reported to the bureaus, making them a useful building tool.

Co-signers. Having someone with strong credit co-sign a loan or rental application can help you qualify when your number alone wouldn't be enough. Keep in mind that the co-signer takes on legal responsibility for the debt, so this arrangement requires trust on both sides.

Builder loans. Some Canadian lending institutions and fintech companies offer small loans specifically designed to help you build or rebuild credit. The loan amount is held in a locked account while you make monthly payments, and once the loan is paid off, you receive the funds. Every instalment is reported to both bureaus.

Before applying for any product, it's a good idea to know exactly where you stand. Check for free through iCash. It takes less than three minutes, uses a soft inquiry, and won't impact your score.

Frequently Asked Questions

Is 560 considered a bad rating? 

A result of 560 falls right at the boundary between the lowest tier and fair. At 560, most major banks will still view you as higher-risk, and you'll likely face limited options with higher interest rates. Qualifying for mainstream products at this level is difficult, but not impossible with the right approach.

Does checking my own rating hurt it? 

No. Checking your own result is considered a "soft inquiry" and has zero impact on your rating. You can check it as often as you like without any negative effect. Only "hard inquiries" made by lenders when you apply for financing affect your score.

Can I get a mortgage with bad credit? 

It's possible, but not through a traditional bank. You'd likely need to work with a B or private mortgage provider, which means higher interest rates and a 20% minimum down. A mortgage broker can help match you with providers who work with borrowers in the lower tiers.

How quickly can I improve my rating? 

It depends on the specific issues pulling your rating down. Correcting a reporting error can produce a noticeable change within 30 days. Paying down high card balances can improve your score within one to two billing cycles. Recovering from an insolvency event or consumer proposal takes longer — typically 2 to 3 years of consistent positive habits to reach "good" territory. The key is to manage your debt carefully.

Is a score of 760 good or bad? 

A 760 is excellent. It places you in the top tier of Canadian borrowers and qualifies you for the best credit products available. You will be approved for virtually anything at this level.