What is a credit score, and why should you care?

Updated on June 1, 2026 | Originally published on October 1, 2025

If you're reading this, you likely want to improve your credit health or understand how lenders evaluate you. It all comes down to one number: your credit score.

Your credit score is one of the most critical numbers in your financial life. Let's break down exactly what a credit score is, how it’s calculated, and why it matters for your goals.

What exactly is a credit score?

A credit score is a number that represents your creditworthiness. It’s used by lenders to determine if you’re a good candidate for a loan and what interest rate you’ll be offered. Your credit score is based on your credit history, which is a record of your borrowing and repayment activity. Think of it as a financial report card that tells lenders how you manage borrowed money.

Your score is calculated using the data found in your credit history—a record of your borrowing and repayment activity compiled by credit bureaus. For a deep dive into how scores are bracketed and what specific number you need for different financial milestones, check out our comprehensive guide to credit scores in Canada.

Why does your credit score matter?

A strong credit score is the key to unlocking major financial milestones. A good credit score can mean the difference between getting approved for a credit card and being denied. A bad credit score can also lead to higher interest rates on loans and credit cards, which can cost you hundreds or even thousands of dollars over the life of the loan. Want to see where your current number falls on the spectrum? Explore our breakdown of what qualifies as a good or bad credit score in Canada.

If you see a sudden drop in your score, it could be an indication that something is wrong—perhaps you’ve been making late payments or maxing out your credit cards. By catching these problems early, you can take steps to fix the underlying issues before they wreak havoc on your financial health.

What contributes to your credit score?

Your credit score isn't arbitrary; it's calculated using five distinct financial levers:

• Payment history
• Credit utilization
• Length of credit history
• Public records
• Recent inquiries

While these are important factors, this isn’t an exhaustive list. Some lenders may look at additional factors prior to providing you with credit: For example, a mortgage company will want to know your income and other personal information. What lenders truly want to know is that, if they give you a loan, you can and will pay it off.

What is a credit report?

A credit report is a detailed summary of your entire credit history. Financial institutions send information about your money habits and loans to credit bureaus (also known as credit reporting agencies). Your credit report is created when you take out credit for the very first time.

When you review your credit report, you may find errors that could be hurting your score. If you find errors on your credit report, you can file a dispute online or by mail. Include any supporting documentation that you have to back up your claim. The bureau will investigate and make any necessary corrections to your credit report.

How to check your credit score (without hurting it)

Checking your own credit score is considered a soft inquiry, meaning you can look at it as often as you like with no impact on your rating. With Neo, keeping tabs on your financial health is seamless. You can view your credit score and get real-time insights into your financial momentum online with Neo Credit Score Monitoring¹.

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Disclaimers:

This article provides information and is not intended to provide any personalized tax, investment, financial, or legal advice. You are encouraged to seek professional advice before making financial decisions.

¹ Credit score monitoring is provided by TransUnion and is not available with Essentials.