What Hurts Your Credit Score in Canada

Payment history is 35% of your credit score — the single largest factor. A payment recorded as 30 days late causes a meaningful score drop, typically 50-100 points depending on your starting score. The higher your score before the late payment, the larger the drop. A 60-day late payment causes more damage, and a 90-day late payment is one of the most harmful individual events your credit file can experience. Late payments stay on your Equifax report for 6 years from the date of the late payment, though their scoring impact fades progressively as time passes and you build positive history.

When a creditor determines an account is uncollectable, they write it off and may assign or sell it to a collection agency. That collection account then appears on your credit report as a separate negative item — distinct from the original late payments that preceded it. A collection account is one of the most visible red flags for lenders. In Alberta, collection accounts stay on your Equifax report for 6 years from the date of original delinquency. Paying off the collection changes its status but does not remove it from your report — though paid collections are viewed more favourably than unpaid ones.

A charge-off occurs when a creditor writes your account off as a loss — typically after 6 consecutive missed payments. The debt still exists and can be collected; the creditor has simply stopped classifying it as a collectible asset on their books. A charge-off is a severe negative item and signals to lenders that you stopped paying entirely. Like collections, charge-offs stay on your report for approximately 6 years from the date of first delinquency.

A consumer proposal is a legal agreement under the Bankruptcy and Insolvency Act where you negotiate to repay a portion of your debt over time. All accounts included in the proposal are noted on your credit report, and a public record of the proposal filing appears separately. Equifax retains a consumer proposal for 3 years from the date the proposal is fully paid, or 6 years from the filing date — whichever comes first. During the proposal period, financing options are limited but not impossible. Several lenders in our network work with active consumer proposals.

A first-time personal bankruptcy is the most severe credit event and remains on your Equifax report for 6-7 years from the date of discharge, and on your TransUnion report for 6 years from discharge. A second bankruptcy stays for 14 years. During active bankruptcy, financing options are significantly limited but not zero — certain lenders will work with active bankruptcy files with trustee coordination. After discharge, rebuilding begins immediately and can be meaningful within 2-3 years of consistent positive behaviour.

Credit utilization — the ratio of your current credit card balances to your total credit limits — accounts for approximately 30% of your score. Carrying balances above 30% of your limit starts to pull your score down. Above 70-80% causes significant damage. Utilization is calculated each month based on your statement balances, which means paying balances down before your statement closes can rapidly improve this factor without waiting years for negative items to age off.

A fully maxed credit card (100% utilization on a single card) is a strong negative signal even if your overall utilization is low. Lenders see a maxed card as an indicator of financial stress or poor credit management. If you have the capacity, paying a maxed card below 50% utilization — and ideally below 30% — will produce a faster score improvement than almost any other action.

Applying for multiple types of credit in a short period — credit cards, personal loans, a car loan, a line of credit — creates multiple hard inquiries that are not subject to rate-shopping protection. Each non-mortgage, non-auto inquiry is counted separately. Lenders interpret a cluster of inquiries as a sign that you may be in financial distress or taking on more debt than you can handle. Apply for new credit intentionally and selectively.

Closing a credit card account you have had for a long time does two things: it reduces your total available credit (which can raise your utilization percentage), and it removes that account's history from the average age of your accounts. If the card has an annual fee you cannot justify, closing it may be the right call — but if it is a no-fee card with a long history, keeping it open and using it occasionally can help maintain your score.

Each credit card application triggers a hard inquiry and opens a new account, both of which can reduce your average account age. For someone with a thin credit file, one or two new accounts in a short period can cause a noticeable score dip. Build credit methodically — one account at a time, managed well — rather than opening multiple accounts simultaneously.

Late Payments (30-90 days)

6 years from the date of the late payment

Impact fades progressively after 2-3 years of positive behaviour

Collection Accounts

6 years from date of original delinquency

Paying the collection changes status but does not remove the entry

Charge-Offs

6 years from date of first delinquency

The original lender may also sell the debt to a collector (separate entry)

Consumer Proposal

3 years from fully paid, or 6 years from filing — whichever is first

Filing date and completion date both appear on report

First-Time Bankruptcy

6-7 years from date of discharge

TransUnion retains for 6 years from discharge

Second Bankruptcy

14 years from date of discharge

All included accounts also noted on report

Hard Inquiries

3 years (impact fades significantly after 12 months)

Auto loan inquiries within 45 days count as one

Years 1-2: Active Recovery Phase

The period immediately following a credit event is when the damage is sharpest. Lenders will see the negative item as recent and weight it heavily. This is also when positive behaviour has the most impact — every on-time payment, every paid-down balance, every month without a new negative item is building evidence of change. Lenders who work with challenged credit situations specifically look at what has happened in the most recent 12-24 months, not just the overall file.

Years 3-4: Meaningful Improvement Window

By year three, negative items have aged enough that their scoring weight has diminished significantly. If you have added 24-36 months of consistent positive payment history — an auto loan, a secured credit card, or a credit-builder account — your score may have recovered substantially even with the original negative items still on file. Many buyers who went through insolvency in this window qualify for improved rates by year three to four.

Years 5-6: Near-Completion of Natural Credit Repair

Most negative items are within one to two years of dropping off your report entirely. Scoring models weight recent history heavily — a 5-year-old collection with strong recent behaviour behind it may barely affect your score. Buyers in this range often find they qualify for near-prime lender programs at significantly better rates than they could access at year one. If you are in this window, now is an excellent time to re-assess your financing options.

Add Positive Payment History Deliberately

The most effective credit rebuilding tool is adding a credit account you manage perfectly — every payment, every month. A responsibly managed auto loan does exactly this: it reports a positive installment payment to the bureau monthly, building a consistent track record. A secured credit card with a low balance paid in full each month serves the same function on the revolving side. The combination of both is more powerful than either alone.

Reduce Credit Card Utilization

Unlike late payments and collections which require years to fade, utilization responds immediately. If your statement closes with a lower balance this month, your score improves next month when the bureau updates. For someone with damaged credit who also carries high card balances, paying those down can produce noticeable score gains within 30-60 days.

Dispute Errors on Your Report

Errors on credit reports are more common than most people realize. An account reported as late when it was paid, a collection from an unknown creditor, a balance that was paid off but still showing as active — these errors depress your score for no legitimate reason. Request your free annual report from Equifax and TransUnion, review every entry, and file disputes on anything inaccurate. Corrections from verified disputes typically appear within 30 days.

Introduce No New Negatives

While existing negative items age off and positive history accumulates, the most important thing you can do is not reset the clock with new delinquencies. A new late payment on a rebuilding account is disproportionately damaging because lenders weight recent items most heavily. Automate your minimum payments on every account so that no payment is accidentally missed during the recovery period.

How much does a late payment hurt your credit score in Canada?

A single 30-day late payment can drop your score by 50-100 points depending on your current score and credit history length. The higher your starting score, the more damage one missed payment causes. A 90-day late payment is significantly more damaging and stays on your Equifax report for 6 years from the date of the late payment.

How long does a collection stay on your credit report in Alberta?

In Alberta, a collection account stays on your Equifax credit report for 6 years from the date of the original delinquency — not from when the collection was assigned. TransUnion follows similar retention rules. Paying off a collection does not remove it from your report, but it does change the status from 'unpaid' to 'paid', which is viewed more favourably by lenders.

Which negative credit events take the longest to fall off your credit report?

A second-time bankruptcy has the longest retention period — 14 years from discharge on Equifax. A first-time bankruptcy follows at 6-7 years from discharge. Collections and charge-offs stay for 6 years from the date of original delinquency. A consumer proposal stays for 3 years from completion or 6 years from filing, whichever comes first. Hard inquiries have the shortest lifespan at 3 years, with their scoring impact fading after 12 months. The practical takeaway: insolvency filings cause the longest-lasting credit file damage, but their scoring weight diminishes meaningfully as positive history accumulates on top.

Does a consumer proposal hurt your credit score?

Yes, a consumer proposal is a significant negative item. Equifax retains a consumer proposal for 3 years from the date it is fully paid, or 6 years from the filing date — whichever comes first. During the proposal, all accounts included in it are noted as 'included in consumer proposal' which signals financial distress to lenders. However, a consumer proposal is generally less damaging than a bankruptcy to long-term financing options.

Does high credit card utilization hurt my credit score?

Yes — credit utilization is the second largest scoring factor at approximately 30% of your score. Carrying balances above 30% of your credit limit negatively impacts your score. Carrying balances above 70-80% causes significant score damage. The good news is that utilization is one of the fastest factors to improve: paying down your balance this month improves your score by next month's reporting cycle.

Can I still get a car loan with collections or a consumer proposal?

Yes. Specialist lenders in our network work with buyers who have collections, consumer proposals, or bankruptcy on their file. The key factors are your current income stability, how recent the credit event is, and the size of your down payment. Collections and proposals that are several years old with positive behaviour since then are evaluated differently than fresh ones.