Why Is My Credit Score Low? Understanding the Common Causes
If you're wondering, “Why is my credit score low?” you’re not alone. Many Canadians ask the same question, especially after a frustrating credit denial or seeing a score that feels lower than expected. A score under 650 can limit your options and make approvals harder, and if you’ve been trying to manage your credit responsibly, it can feel discouraging or even unfair. The good news is that credit scores can change quickly with the right steps. This guide explains the most common reasons scores drop and, more importantly, how to fix them. Once you understand what’s causing the issue, you can take clear, confident action to rebuild. For broader recovery options, you can also explore our Bad Credit – Credit Card Solutions page for next steps.
Sep 14, 2026
TL;DR
The most common reasons for a low credit score are: Late or missed payments (35% of your score), high credit utilization above 30% (30% of your score), short or limited credit history, too many recent credit applications, collections or charge-offs, and errors on your credit report. Each issue can be fixed with consistent habits and the right rebuilding tools.
How Credit Scores Are Calculated?
If you want a deeper breakdown of what’s considered bad credit in Canada, you can visit our Understanding Bad Credit Score and What Credit Score Is Considered Bad Credit in Canada for range definitions and examples.
The 7 Most Common Reasons Your Credit Score Is Low
So how does a late payment affect your credit score? What about maxing out a credit card? Let’s take a look at the most common factors that lower credit score.
1. Late or Missed Payments (Biggest Impact)
This is the heavyweight category. Payment history makes up 35% of your score, which means even one slip can leave a mark. A payment that’s 30+ days late can drop your score 50–100 points, and a 90-day late payment can hurt even more.
Knowing when to pay off your credit card balance will help you avoid derogatory marks on your credit score. One common misconception: Paying your credit card “on time” means by the due date, not the statement date.
Late payments stay on your credit report for seven years, but the impact fades as the record gets older — especially if your recent payments are consistent.
Did You Know?
A single 30-day late payment can drop a good score (around 700) by 90–110 points, according to Canadian credit scoring models. A 90-day late payment may cause a 130–150-point drop.
If late payments are part of your situation, rebuilding starts with stabilizing your payment habits. And if you need a tool designed for rebuilding, the Earna Visa* Card can help by reporting your on-time payments to both Equifax and TransUnion.
2. High Credit Utilization
Credit utilization refers to how much of your total available credit you’re using. The formula is simple:
(Total balances ÷ Total credit limits) × 100
Scores begin dropping once you go above 30%, and anything above 50% signals elevated risk.
For example, if your combined credit limits are $5,000 and your balance sits at $3,000, your utilization is 60%, a level that will absolutely pull your score down.
Quick Tip: One of the fastest ways to boost your score is to lower your utilization without closing accounts. Even shifting a portion of the balance to a lower-interest product or paying down a chunk before your statement date helps.
For more strategies, see our Build and Improve Credit Score pillar.
3. No Credit History or Too Short a History
This one frustrates many Canadians. You can’t build credit without credit… but you can’t get credit without a history. If you've had credit for less than two years, or have no credit at all, the bureaus simply don’t have enough information to score you fairly.
This also affects newcomers to Canada who may have long histories in another country but start from scratch here.
Solution: Use beginner-friendly credit builders like secured or low-limit cards. To find out which options will work best for you specifically, see Unsecured vs. Secured Credit Cards, which outlines options designed for people with limited or no history.
The Earna Visa* Card is also a fit here because it reports your progress monthly and grows with you through automatic limit increases.
4. Too Many Recent Credit Applications
Every time you apply for a new credit product — a card, loan, line of credit, or financing plan — lenders perform a hard inquiry. Each one typically lowers your score by about 5 points, and applying for several products in a short period signals financial stress to lenders.
But here’s what doesn’t hurt your score:
Quick Answer: Does checking your credit score lower it?
No. Checking your own score does not lower it. It is a soft inquiry with zero impact. Only lender-initiated hard pulls affect your score. You can check your score for free through Equifax, TransUnion, or Government of Canada–approved financial education programs.
5. Collections and Charge-Offs
If your account becomes severely delinquent, your lender may send it to collections or charge it off as bad debt. Both events are serious red flags and may cause 100+ point drops.
These records stay on your credit report for seven years in Canada (Equifax and TransUnion policies). Paying them off is still worthwhile because:
It stops interest and collection activity
Some creditors may update the status to “paid in full”
It looks better to future lenders
In some instances, you may be able to negotiate “pay for delete,” although policies vary between agencies and creditors.
6. High Debt-to-Income Ratio
Your debt-to-income ratio (DTI) isn’t directly factored into your credit score, but lenders do consider it when evaluating applications. If your total monthly debt payments take up a high percentage of your income, lenders may decline you even if your score isn’t terrible.
A high DTI often ties back to the other factors we’ve already talked about — especially high utilization and multiple accounts carrying balances. Reducing balances, refinancing high-interest debt, or increasing income are the most effective ways to improve this metric.
7. Errors on Your Credit Report
This one surprises people; more than 20% of Canadians have errors on their credit reports, according to consumer protection groups and provincial regulators.
Errors can include:
Wrong account information
Incorrect payment statuses
Identity mix-ups
Fraudulent accounts
Outdated negative items
You can request your free report annually from Equifax and TransUnion (Government of Canada: Financial Consumer Agency of Canada confirms this), and dispute any errors directly.
Earna Feature Spotlight
Rebuilding credit starts with a product that reports your good habits — not just your mistakes. The Earna Visa* Card does exactly that. We use a more holistic approval process (not just your credit score), and we report your on-time payments to both Equifax and TransUnion. As you build consistency, your credit limit increases automatically every six months to reward your progress.
If you’re focused on turning things around, Earna can be part of that plan.
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About the authors
Nicole Littlejohn
Nicole is an SEO content writer and strategist creating clear, audience-first content rooted in search intent and real-world experience. Informed by nearly a decade of work in communication and coaching—and a strong interest in mental health and emotional intelligence research—her approach focuses on clarity, connection, and meaningful impact.
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Quick answers to questions you may have
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