What Is a Credit Score — and Why Does It Matter?
A credit score is a number between 300 and 900. It tells lenders how likely you are to pay back a loan. The higher the number, the better. In Canada, most lenders use Equifax and TransUnion to check your score.
If your score is below 600, many regular banks will not approve you. That is called "bad credit." But it does not mean you are out of options. It just means you need to work with lenders — and brokers like AutoBanker — who understand your situation.
Credit Score Ranges in Canada
300 – 559 — Poor. Very hard to get approved at regular banks.
560 – 659 — Fair. Subprime lenders can help. Higher interest rates apply.
660 – 724 — Good. Most lenders approve. Decent rates available.
725 – 759 — Very Good. Good rates. Easy approval at most lenders.
760 – 900 — Excellent. Best rates. Lenders compete for your business.
💡 Good news: AutoBanker works with clients at every score level — including below 500. We find lenders who focus on your income, not just your number.
What Makes Up Your Credit Score?
Your credit score is calculated from several pieces of information in your credit file. Here is how each piece is weighted in Canada:
35%
Payment History
Do you pay your bills on time? This is the biggest piece. One missed payment can drop your score quickly.
30%
Credit Utilization
How much of your available credit are you using? Try to stay under 30% of your limit on each card.
15%
Credit History Length
How long have you had credit? Older accounts help your score. Do not close old accounts if you can avoid it.
10%
Credit Mix
Having different types of credit (a card, a loan, a line of credit) shows you can manage various products well.
10%
New Credit Inquiries
Each hard credit check slightly lowers your score. Applying to many lenders at once can hurt you. A broker does just one check.
How a Car Loan Rebuilds Your Credit
A car loan is a type of installment loan. That means you make the same payment every month for a set period — like 48 or 60 months. Installment loans are great for rebuilding credit because:
- Every on-time payment gets reported to Equifax and TransUnion.
- It adds to your "payment history" — the largest factor in your score (35%).
- It adds a new type of credit to your file (credit mix — 10%).
- Over time, it lengthens your credit history (15%).
In short, a responsibly managed car loan touches three of the five credit score factors at once. It is one of the most powerful rebuilding tools available.
How Fast Can Your Score Go Up?
Every person's situation is different. But here is a realistic timeline you can expect:
-
Month 3
Your account starts showing on your credit file. Score starts to move.
-
Month 6
You may see a jump of 20–40 points with consistent on-time payments.
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Month 12
Most clients see meaningful improvement. Some move from "poor" to "fair" range.
-
Month 24
Many clients reach the "good" range (660+). Regular bank loans become available.
Other Smart Moves to Raise Your Score Faster
A car loan is a great start. But pairing it with these habits will speed up your recovery:
Pay Every Bill on Time
Set up automatic payments for your car loan and any other bills. One late payment can erase weeks of progress.
Keep Credit Card Balances Low
Try to use less than 30% of any credit card limit. If your limit is $1,000, keep the balance under $300.
Check Your Credit Report for Errors
Mistakes on your credit report are more common than you think. Get your free report and dispute any errors you find.
Don't Apply for Too Much New Credit at Once
Every hard credit check slightly lowers your score. Only apply for credit when you really need it.
Keep Old Accounts Open
Even if you do not use an old credit card, keeping it open helps your credit history length. Closing it can hurt your score.
Common Mistakes That Keep Scores Low
- Missing payments even by a few days. Even one missed payment can drop your score 50–100 points.
- Maxing out credit cards. High utilization is a major red flag to lenders.
- Applying at five different dealerships. Each hard inquiry lowers your score. Use a broker instead — one inquiry, many lenders.
- Ignoring old collections. An unpaid collection account hurts you every month. Consider paying it off to stop the damage.
- Closing your oldest credit account. Length of history matters. Keep that old account open, even if you never use it.
Start Rebuilding Your Credit Today
Get a car loan that reports positive payments to Equifax and TransUnion every month. AutoBanker finds the right lender and the right vehicle to start your comeback.
Apply Now — Start Rebuilding →
📚 Helpful Resources
Authoritative Canadian sources to help you understand, monitor, and improve your credit score.