Why My Credit Score Is Low: The Real Reason It’s Harder to Get Approved in Canada

Waking up to a dip in your credit score feels like a cold splash of water. I remember getting that alert from Equifax - my score dropped by twenty points for reasons I didn’t even notice at first. I’d paid my bills, hadn’t opened any new accounts, and still, there it was, lower than before.

If you’re asking yourself “Why is my credit score low?” you’re not alone. Many Canadians find themselves surprised by their score, even when they think they’re doing everything right.

Key Takeaway

Missed or late payments and high credit card balances are the main drivers of low credit scores in Canada. [1]
Too many new accounts or credit checks can hurt your score, even if you think you’re building credit.
Consistent, small steps - on-time payments, lower card usage, and fewer applications - are the best way to rebuild.

Understanding Low Credit Scores in Canada

Credits: Graham Stephan

It’s easy to think a credit score is just a number, but in Canada, it follows you everywhere. We’ve seen folks at Cars With Chloe struggle - good people, solid jobs, but still, their credit report Canada tells a different story. Here’s what actually shapes that score.

Key Factors Affecting Your Credit Score

Payment History and Its Impact

Your payment history makes up the largest chunk of your score. Miss a payment, and it sticks around. Even one or two late payments can drop your score by 50 points or more. We’ve watched this happen to clients who forgot a $60 cell phone bill. It takes years for those late marks to fade.

Credit Utilization Ratio Explained

Credit utilization ratio means how much of your available credit you’re using. If your card limit is $3,000 and your balance is $1,500, you’re at 50%, which is too high in the eyes of lenders. Anything above 30% might mark you as a risk. I learned this the hard way - maxing out two cards in college, thinking I could pay them down later. My score plummeted and it took months of careful payments to get it back.

Keep balances under 30% of your credit limit.
Spread purchases between cards if you need to use more credit.
Pay down high balances in small, regular chunks.
Avoid taking cash advances, as they look worse on your report.

Influence of Credit Accounts and Inquiries

Effects of Multiple Open Accounts

Too many open credit accounts can hurt more than help. I used to think having five cards would boost my credit, but it actually made lenders suspicious. They ask themselves, “Could this person suddenly rack up debt?” That risk can drop your score, even if you’re not using all the cards. [2]

Keep one or two long-standing credit accounts open.
Only open new credit if you really need it.
Close unused store cards - they often have low limits and can be easy to forget about.
Don’t close your oldest card, as this shortens your history.

Impact of Frequent Credit Inquiries

Every time you apply for a new credit product, a hard inquiry shows up. Too many in a short period can lower your score. When we help people at Cars With Chloe, we often see a cluster of inquiries, especially when folks are shopping for a car or a loan. The bureaus see this as a red flag.

Limit credit applications to what you truly need.
Group similar applications (like car loans) within a two-week window.
Monitor your report for unauthorized inquiries.
Consider waiting a few months between applications.

Role of Public Records and Credit History Length

Negative Public Records and Their Consequences

Bankruptcies, collections, consumer proposals - these weigh down your credit score for years. We’ve worked with people who, after a single bankruptcy, struggled for nearly a decade to rebuild. Public records are the heaviest anchors on your report.

Importance of Credit History Duration

The longer your credit history, the better. Lenders like to see years of responsible activity. If you just opened your first card, or closed your oldest one, your score might drop. My own oldest card is from 2008, and I keep it open with a small recurring payment just to keep that long history active.

What a Low Credit Score Means for Canadians

It’s more than a number. A low score closes doors, raises costs, and can even affect where you live or work.

Credit Score Ranges and Definitions

Poor, Fair, and Excellent Scores in Canada

Credit scores in Canada are split like this:

Poor credit score: below 560
Fair credit score: 560–659
Good credit score: 660–724
Very good credit score: 725–759
Excellent credit score: 760 and above

The average Canadian sits around 760. If you’re below that, you’re not alone, but you’ll face more barriers.

Average Canadian Credit Score Context

Plenty of us feel like we’re doing worse than everyone else. At Cars With Chloe, we see the real numbers - lots of Canadians have fair or even poor credit, often because of just one or two mistakes.

Consequences of a Low Credit Score

Challenges in Loan and Credit Approvals

Banks and lenders use your credit score to judge your trustworthiness. With a low score, getting approved for low or mid credit score in auto loans, mortgages, or even a cell phone contract can be tough. We’ve had clients who couldn’t get a car loan until they worked to rebuild.

Fewer approvals for credit cards and loans.
Might need a co-signer or larger down payment.
Some landlords and employers check credit before renting or hiring.

Higher Interest Rates and Financial Costs

Low scores mean higher rates. On a $20,000 car loan, a difference of 4% can add over $2,000 in interest over five years. Even insurance premiums can rise if your score is low.

Strategies to Improve Your Credit Score

You don’t need to overhaul your life to see improvement. Steady, simple habits work best.

Payment and Credit Management Techniques

Paying Bills on Time and Minimum Payments

Set up automatic payments for recurring bills. I missed fewer payments after putting my phone and hydro bills on auto-pay through my bank. Even the minimum payment protects your score.

Pay every bill by its due date.
Use reminders or calendar alerts.
If you can’t pay in full, always pay at least the minimum.
Catch up quickly if you fall behind.

Managing Credit Utilization Effectively

Find ways to lower your balances without closing accounts. I started paying off my cards weekly instead of monthly, and it made a difference.

Make multiple payments each month if possible.
Ask your bank for a credit limit increase (but don’t use the extra credit).
Transfer balances to cards with lower utilization.
Avoid maxing out cards, even in emergencies.

Responsible Credit Behavior

Limiting New Credit Applications

Space out new credit requests. When I wanted a new credit card, I waited six months after my last application. It kept my score steady.

Don’t apply for credit you don’t really need.
Shop around for rates within a short timeframe.
Wait before applying again if you’ve been denied.
Protect your credit by freezing it if you suspect fraud.

Building and Maintaining Credit History

Keep old accounts active with a small monthly bill or subscription. Closing old cards can shorten your history and lower your score.

Use your oldest credit card for a recurring bill.
Don’t close accounts unless there’s an annual fee you can’t afford.
Check your report for errors that could shorten your history.

Additional Support Options

Debt Management Programs

If you’re overwhelmed, debt management programs can help. We’ve seen these programs work for people who felt stuck. They consolidate payments and often lower interest rates.

Research local non-profit credit counselling.
Ask about payment plans and interest reductions.
Make sure your payments are reported to the bureaus.
Watch for scams - stick with reputable organizations.

Credit Monitoring and Dispute Resolution

Check your credit report Canada from both Equifax and TransUnion at least once a year. I found two errors on mine last spring - fixing them gave my score an unexpected boost.

Order your credit report free Canada once a year from each bureau.
Review all accounts and details carefully.
Dispute any errors in writing, including supporting documents.
Use credit monitoring if you’ve had identity theft or fraud.

Navigating Credit Scores and Reports in Canada

Knowing how your score is calculated and how to check it puts you in control.

Understanding Credit Bureaus and Scores

Canada has two main credit bureaus: Equifax and TransUnion. Both have slightly different info, so check both. They use credit score algorithms like VantageScore Canada, weighing payment history, utilization, account age, types of credit, and new inquiries. Most lenders use a score in the 600s as a cutoff for better rates.

Accessing and Monitoring Your Credit Report

You can order your credit report free Canada online or by mail. For scores, some banks offer free access, or you can pay for a detailed report. Checking your own score is a soft inquiry - it won’t hurt your number.

Get both Equifax and TransUnion reports.
Monitor for new or unauthorized accounts.
Make sure old negatives have dropped off after seven years.

Identifying and Disputing Credit Report Errors

Mistakes happen more often than you’d think. When you spot one, act fast.

Look for wrong addresses or missed payments you know you made.
File disputes online or by mail, including proof.
Follow up until errors are corrected.
Use your updated report to track improvements.

Credit Score’s Role in Financial Planning

Your credit score affects more than loans. We’ve seen clients at Cars With Chloe blocked from their dream apartment or even a job because of a low score. It can even decide how much you pay for insurance or whether you need a deposit for utilities.

Better scores mean lower rates and easier approvals.
Use your score as a benchmark for financial health.
Plan ahead for big purchases - start building your score months in advance.

FAQ

Could late payments on bills other than credit cards affect my credit score?

Yes, late payments on bills like utilities, phone, or rent can sometimes be reported to credit bureaus if they go unpaid for a long time or are sent to collections. These late payments can lower your credit score even if you pay your credit cards on time, because they show difficulty managing overall financial responsibilities.

How does having a high credit utilization ratio lower my credit score?

A high credit utilization ratio means you are using a large portion of your available credit, which can signal to lenders that you might be relying too much on borrowed money. Even if you pay your bills on time, maxing out or nearly maxing out your credit cards can drag your credit score down.

Can cancelling old credit accounts cause my credit score to drop?

Closing old credit accounts can lower your credit score because it reduces your overall available credit and shortens your credit history. A longer credit history is usually better for your score, so closing accounts that you have had for many years could unintentionally hurt your credit.

How do errors on my credit report contribute to a low credit score?

Mistakes like incorrect account details, wrongly reported late payments, or accounts that don’t belong to you can unfairly lower your credit score. It’s important to check your credit report regularly and dispute any errors with the credit bureaus to make sure your score reflects your true credit behavior.

Does applying for many loans or credit cards in a short time affect my credit score?

Yes, applying for multiple loans or credit cards within a short period can lower your credit score. Each application results in a hard inquiry on your credit report, which signals to lenders that you might be seeking a lot of credit. This can make lenders view you as a higher risk, reducing your score temporarily.

Practical Advice: What to Do Next

If your credit score is low, you’re not stuck. Most Canadians have faced this at some point, ourselves included.

Start by checking both your Equifax credit score and TransUnion credit score.
Set up reminders and automate bill payments.
Pay down your highest balances first and keep old accounts open.
Avoid unnecessary new credit and watch for errors on your report.
Reach out for help if you need it - there’s no shame in asking.

At Cars With Chloe, we work with all kinds of credit backgrounds. We know a low credit score isn’t forever, and we’ve seen people turn things around with time and effort.

Every on-time payment, every lower balance, every smart choice counts. Keep at it - you might be surprised at how quickly your credit rebounds, and how many new doors open as it does.

If you’re ready to take the next step, there’s no reason to wait on a better credit score before driving the car you need. We see every day that a lower score doesn’t mean you’re out of options. You can compare flexible financing offers, including options for across other cities, no matter your credit history. It only takes a couple of minutes to start, and most people get an answer the same day.

Visit Cars With Chloe’s online application to pick your vehicle and see what you qualify for - there’s no obligation, just a straightforward way to get moving again.

References

https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/improve-credit-score.html
https://www.cnbc.com/select/how-having-multiple-credit-cards-impacts-credit-score/