How Does Credit Work in Canada vs the United States?

Credit reporting and credit scores vary from country-to-country, with some credit systems being vastly different. One case to compare is how credit scores work in Canada versus the United States. These two neighboring countries have very similar credit systems, but Canada’s credit rating system sets them apart.

Does Canada have credit scores?

Yes, Canada has it’s own credit scores. Canada has two national credit bureaus, Equifax and TransUnion.

Similarities between credit scores in the U.S. and Canada

First we can compare the similarities in credit systems between the two countries. Canada and the United States work on a similar credit scoring system, issuing three-digit scores. In Canada scores range between 300 and 900, while in the U.S. 850 is the maximum score.

In both countries the credit scores are calculated off of five factors: Payment History, Debt Burden, Length of History, Types of Credit, and Recent Searches. Each of these factors are weighed to calculate your three-digit credit score.

Differences in credit scores in the U.S. and Canada

While the Canadian credit scoring system is very similar to that in the United States, they have an additional credit rating system that sets it apart. The Canadian credit ratings consist of a letter and a number and are assigned by lenders and given to credit reporting agencies.

How the Canadian credit rating system works

Every borrower is assigned a number on a scale of 1-9 and a letter, either I, O, or R. The numbers and letters are combined to tell lenders how credit worthy a borrower is. Below is a guide to what the numbers and letters mean.

Number 1-9.

  • “1” means you pay all of your bills within 30 days of the due date
  • “9” means you never pay your bills
  • “0” means the account is too new to determine your payment habits

Letter I, O or R.

  • “I” means you have an installment loan, or a loan for which you make a fixed payment each month until a predetermined date.
  • “O” means you have an open credit account, or an account with a balance that must be paid back at the end of each period.
  • “R” means you have revolving credit, like credit cards, in which you make regular payments, but the balance and minimum payment may vary.

If you have a credit rating of I1, you are looked at as very trustworthy borrower. If you have a R9, chances are you’re going to have a hard time getting credit approvals, or you will be facing high interest rates.

Expats and Credit Scores in Canada

Unfortunately, credit doesn’t travel. An Expat relocating to Canada will start with a credit score of zero. This can make purchasing large ticket items, such as a vehicle, difficult and costly. International AutoSource offers Expats without a local Canadian credit history excellent car leasing, financing, and rentals options. Download our free guide to buying a car in Canada!

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