One of the key numbers that will impact your financial journey is your credit score. It will influence your “creditworthiness” to lenders (ex. mortgages, cars, credit cards, lines of credit, etc.) and that score will ebb and flow throughout your lifetime. There are a number of benefits of monitoring your credit score. And thankfully there are some free tools to help us monitor it. So, let’s take a deeper dive and get a better sense of understanding your credit score.
Understanding your credit score is a great notch on improving your financial literacy.
Jump directly into any of the sections by using the links below.
- What Is A Credit Score?
- Ranges Of Credit Scores
- What’s A Good Credit Score?
- 5 Factors That Determine Your Credit Score
- Impact Of Your Credit Score
- Benefits Of Monitoring Your Credit Score
- Credit Sesame – Free Credit Score And Credit Reports
- Credit Karma – Free Credit Score And Report Monitoring
What Is A Credit Score?
Essentially your credit score is an indicator of your financial health or creditworthiness. It gives potential lenders (or sources of credit) an indication of the risk you might present should they decide to borrow you money.
Obviously if a borrower is going to lend you money they want to know the likelihood of you repaying them back.
Your specific credit score is based on the information found in your credit report. What is a credit report? Your credit report is a summary of your financial history that includes how you pay your financial obligations and your borrowing activity.
Credit bureaus, like TransUnion, Equifax and Experian (not in Canada), receive information on individuals from financial institutions, credit card companies and any sources of credit. This would often include mortgages, loans, lines of credit, credit cards and other personal financial activity.
All of these details are stored in your credit report.
A calculation based on all that information is then made to determine your credit score for prospective lenders.
Ranges Of Credit Scores
The range of credit scores differs depending on your location and the actual company sourcing that score or bureau providing the credit report information.
To simplify we will consider the general consensus and most often used ranges of credit scores in both the US and Canada.
In America, the most commonly used credit score is the FICO credit score and that ranges from 300 to 850. FICO is used by the vast majority of banks and credit lenders.
In Canada, the credit-reporting agencies Equifax and TransUnion use a scale of 300 to 900.
The higher the score the better, it identifies a lower level of risk and higher likelihood of repaying borrowed money.
What’s A Good Credit Score?
Again we’re going to have to speak in wide-ranging generalities here given the differing reporting bureau ranges and credit score nuances.
Here are the broad ‘rule of thumb’ credit tiers.
- Excellent Credit: 750+ (US) | 780+ (Canada)
- Good/Very Good Credit: 700 – 749 (US) | 720 to 779 (Canada)
- Fair/Good Credit: 650 – 699 (US) | 650 – 719 (Canada)
- Poor/Average Credit: 600 – 649 (US & Canada)
- Bad Credit: 300 – 599 (US & Canada)
These tiers are not gospel. The subjective determination of the “good” or “bad” will depend on how the lendor views it. A credit score of 750 or 850 in Canada isn’t very different.
Your credit score will continually move up and down depending on specific factors.
5 Factors That Determine Your Credit Score
1. Payment History (35%)
The largest determinant of your credit score is your payment history to lenders and creditors. Ultimately this showcases whether you are paying your bills, loans and money owed on time.
To improve or maintain a high credit score always pay the full installment (or amount owing) and on time.
2. Amount Owing & Credit Utilization (30%)
The second factor of your credit score comes from the total debt owing and your credit utilization. If you have $25,000 in total available credit and your amount owing always falls in the $20,000 range, you have a high credit utilization at 80%. A high utilization will negatively impact your credit score.
A rough guideline is to try and maintain lower than a 30% utilization. To improve or maintain a high credit score, try to manage that utilization rate and pay down your balances.
3. Credit History Age (15%)
The third factor determining your credit score is related to the age of your credit accounts. This includes both the oldest credit account you have and the age of all your credit accounts. In the eyes of the bureaus and lenders, having “older” credit is better as it showcases a longstanding ability and experience of managing credit.
To improve or maintain a high credit score, it’s typically not a good idea to open several new accounts in a short time frame.
4. Recent Credit Applications (10%)
When lenders (like banks and credit card companies) submit an application you’ve submitted for some form of credit, generally that requires a “hard pull” on your credit report. They’re sourcing your credit report to determine whether they want to lend you credit. Several inquiries in a short time frame can hurt your credit score.
Good news is when you check your own credit report through the services mentioned below, Credit Sesame (US) and Credit Karma (CA), it’s technically a “soft pull” and won’t affect your credit score.
5. Credit Types Used (10%)
The final factor determining your credit score is the type of credit accounts you have. There are two basic types of accounts: revolving accounts and installment loans. Within those accounts there are different assets, like cars, homes, credit cards, student loans, personal loans, etc.
The more diverse your credit accounts are, the better it can be for your credit score. It shows an ability to manage a wide-range of credit types. However, this only represents 10% of your credit score so don’t stress about not having different assets represented.
Factors That DON’T Determine Your Credit Score
Your age, marital status, bank account balances, employment status, level of income, cell phone bills and checking your own credit report DO NOT impact your credit score.
The five factors noted above are the only key determinants of your credit score.
Impact Of Your Credit Score
So we’ve determined what a credit score is, where the broad tiers of scores range and the factors that do and don’t determine our credit score.
So what does this actually mean and what is the real-world impact of your credit score?
Your credit score will play a major role in your overall financial journey. From the ability to even access credit and then the opportunity to receive that credit at the most optimal interest rates.
A high credit score can save you hundreds of thousands of dollars in your life.
Here are just some examples of how your credit score impacts your life.
- Prospective employers might run a credit check against your records as part of the hiring process.
- Landlords are more frequently running credit checks for renters before signing lease agreements.
- Mortgage lenders will use your credit score to determine both eligibility to access credit and also the interest rate you receive.
- Car dealerships and private financing will do the same as mortgage lenders before you can purchase a vehicle or be eligible for specific financing rates.
- Credit card companies will review your credit score as part of the application before giving you access to their products.
- Financial institutions will use your credit score as a determinant for personal loans, lines of credits, business loans and other products or services they offer.
These are only a few examples of how your credit score will factor into your everyday life.
Benefits Of Monitoring Your Credit Score
The ability to access credit and receive optimal credit rates are the net positives of having a high credit score. There are also benefits of monitoring your credit score and report as part of your general financial upkeep system.
- Improving your credit score is much easier when you’re actively monitoring your credit score and the different areas of your report.
- Refinancing or adjusting credit becomes an opportunity as your credit improves. You might qualify for lower interest rates on your mortgage, student loans or personal loans. Monitoring your credit score ensures you can take advantage of those opportunities as your score increases.
- Avoiding fraud in this digital age of identity theft and security breaches is key. Monitoring your credit score ensures you can identify any fraud issues on your credit report as soon as possible.
- Disputing discrepancies is easier when you’re actively monitoring your credit report and can quickly identify any issues.
Thankfully, there are great online providers that allow individuals to monitor our credit reports to reap these benefits for free.
Credit Sesame – Free Credit Score And Credit Reports
Credit Sesame is a free service that allows people within the United States and Canada to get a free monthly score, free credit monitoring and even $50,000 of free identity theft insurance.
Yes, that’s all included within the Basic account at Credit Sesame. You won’t be required to enter your credit card information or only have limited-time free access. This is a 100% legit service that is reputable and well-respected.
Credit Sesame The Company
Credit Sesame was launched in 2010 and their current company HQ resides in Mountain View, CA.
Their current membership totals over 18 million sign ups.
Their 2025 acquisition of STACK allow the company to expand it’s services into Canada.
Security On Credit Sesame
Credit Sesame has ‘secure status’ from Norton, McAfee and ETrust, as well as accreditation from the Better Business Bureau. They use 256-bit encryption.
No financial institution or online business is 100% vaulted in this digital hacking age but Credit Sesame has all the necessary stamps of approval.
As part of the sign-up process, Credit Sesame will ask you for the final 4-digits of your Social Security Number, not the full number. This is another feature to help confirm your identity and protect your information.
Services Included For Free With Credit Sesame
As mentioned above, your free Credit Sesame account will provide you:
- Daily score refreshes (from TransUnion)
- Credit report summary
- Credit monitoring
The Credit Sesame platform also shares recommended financial products, including loans and credit cards. These recommendations are based on your credit score and seek to help you save money or best align you with potential mortgages, car loans, personal loans, student loans and credit cards.
Sign Up To Credit Sesame For Free
Signing up for Credit Sesame takes 60 – 90 seconds, doesn’t require a credit card and is entirely free.
If you want to stay on top of your credit score, monitor your credit activity and also get free ID theft insurance, this is a great service.
Credit Karma – Free Credit Score And Report Monitoring
In similar fashion to Credit Sesame, Credit Karma is a platform that gives free access to your credit score and report plus credit monitoring.
Credit Karma is available to Canadians and Americans.
You won’t be required to enter your credit card information or only have limited-time free access. This is a 100% legit service that is reputable and well-respected.
Credit Karma The Company
Credit Karma is an American based company that was founded in 2006 with headquarters in San Francisco, CA.
They brought their services to Canada in late-2016 and their total global user base is over 130 million sign ups.
Security On Credit Karma
Security and data protection is noted throughout Credit Karma’s website and during the registration process.
- Credit Karma uses 128-bit encryption to secure the transmission of data.
Credit Karma will not sell or rent your personal information to 3rd parties for any purpose. - Your Credit Karma account is read only – you aren’t able to execute any transactions of financial actions on their website.
- The company is independently certified by digicert.
Services Included For Free With Credit Karma
As mentioned in the initial introduction, your free Credit Karma account will provide you:
- Your credit score and reports
- Free credit monitoring
- Education and financial literacy resources
Similar to Credit Sesame, Credit Karma also shares recommended financial products, including loans and credit cards. These recommendations are based on your credit score and seek to help you save money or best align you with potential mortgages, car loans, personal loans, student loans and credit cards.
Credit Karma also has a blog that features an archive of financial articles.
Sign Up To Credit Karma For Free
Signing up for Credit Karma is quick and easy. It takes less than 2 minutes, doesn’t require a credit card and is entirely free.
If you want to stay on top of your credit score, monitor your credit activity and also get free ID theft insurance, this is a great service.
Conclusion: Understanding Your Credit Score – How To Check It For Free
Your credit score is a number that will stick with you throughout your financial journey.
If you can get a better framework of understanding your credit score and stay on top of it, you could save thousands of dollars. When it comes to personal finance tips, understanding your credit score is an easy one to accomplish.
Personal finances are of course, personal.
But, as long you as you’re making payments on time, holding some long term accounts and not applying to new credit too frequently, you should be able to stabilize a strong score.
Do you monitor your credit score and report? What service do you use to check and does it help you with understanding your credit score?
