Credit Glossary for Canadians: Every Term You Need to Know

Credit Score Fundamentals

Credit Glossary for Canadians: Every Term You Need to Know

Mar 20, 202630 min read

Credit affects almost every financial decision you make — from renting an apartment to getting a cell phone plan, from applying for a car loan to buying your first home. Yet most Canadians encounter credit terminology only when something goes wrong: a denied application, an unexpected drop in their score, or a collection notice they do not understand.

This comprehensive credit glossary defines every term you are likely to encounter on your credit journey. Written in plain language with Canadian-specific context, it covers everything from basic concepts to advanced credit strategies. Whether you are just starting to build credit or actively rebuilding after financial difficulties, understanding these terms puts you in control.

A — Credit Terms Starting with A

Account in Good Standing

A credit account that is current, meaning all payments have been made on time and the account is not in default or collections. In Canada, accounts in good standing are reported with an R1 rating (for revolving credit) or I1 rating (for instalment credit), indicating payments are made as agreed. Maintaining accounts in good standing is the single most important factor in building and maintaining a strong credit score.

Adverse Action

A negative decision made by a lender or creditor based on information in your credit report, such as denying your application for credit, reducing your credit limit, or increasing your interest rate. In Canada, creditors are generally required to inform you when they take an adverse action based on credit report information, though the specific requirements vary. You have the right to request a copy of the credit report that was used in the decision.

Annual Percentage Rate (APR)

The total yearly cost of borrowing expressed as a percentage, including interest and certain fees. In Canada, lenders are required by law to disclose the APR on credit products, making it easier to compare the true cost of different loans and credit cards. The APR is typically higher than the stated interest rate because it includes additional costs. For credit cards, the APR is usually the same as the interest rate since most card fees are not included in the APR calculation.

Authorized User

A person who is given permission to use another person’s credit card account but is not legally responsible for repaying the debt. In Canada, being added as an authorized user can help build credit, as some card issuers report the account activity to the authorized user’s credit file. However, this practice varies among Canadian issuers. The primary cardholder remains fully responsible for all charges, including those made by the authorized user. This strategy is sometimes used to help family members with limited or no credit history establish a credit file.

Available Credit

The difference between your total credit limit and your current balance on a revolving credit account. If your credit card has a $10,000 limit and you have a $3,000 balance, your available credit is $7,000. In Canada, maintaining high available credit (meaning low utilization) is important for your credit score. Lenders view borrowers who use only a small portion of their available credit as lower risk.

B — Credit Terms Starting with B

Bad Credit

A general term describing a credit profile that makes it difficult to qualify for credit products at standard terms. In Canada, a credit score below 600 is generally considered bad credit, though this threshold varies by lender and product. Bad credit can result from missed payments, defaults, collections, bankruptcy, consumer proposals, or high debt levels. The good news is that credit can be rebuilt over time through consistent positive financial behaviour.

Balance

The total amount currently owed on a credit account. For credit cards and lines of credit, this includes purchases, cash advances, interest charges, and fees minus any payments and credits. Your balance at the time your statement is generated (the “statement balance”) is typically what gets reported to the credit bureaus. In Canada, this reporting usually happens once per month on or near your statement date.

Balance Transfer

The process of moving an outstanding balance from one credit card to another, typically to take advantage of a lower interest rate. Many Canadian credit cards offer promotional balance transfer rates (sometimes as low as 0-3.99%) for a specified period (usually 6-12 months). Balance transfer fees in Canada typically range from 1-3% of the transferred amount. This strategy can save significant money on interest if the balance is paid off during the promotional period.

Bankruptcy

A legal process under the Bankruptcy and Insolvency Act that allows individuals who cannot pay their debts to obtain a fresh start. In Canada, bankruptcy must be filed through a Licensed Insolvency Trustee (LIT). A first-time bankruptcy remains on your credit report for 6-7 years after discharge (depending on the credit bureau and province), and a second bankruptcy stays for 14 years. While bankruptcy provides relief from overwhelming debt, it severely impacts your credit and may require surrendering certain assets.

Beacon Score

A credit score model used by Equifax Canada, based on the FICO scoring system. The Beacon score ranges from 300 to 900 and is calculated using information in your Equifax credit file. While Equifax also uses other scoring models, the Beacon score remains widely used by Canadian lenders. TransUnion Canada uses the CreditVision score, which also ranges from 300 to 900 but uses a different calculation methodology. Both scores consider similar factors but may produce different numbers for the same person.

Bureau (Credit Bureau)

An organization that collects, maintains, and distributes credit information about consumers. Canada has two national credit bureaus: Equifax Canada and TransUnion Canada. These bureaus receive information from lenders, creditors, collection agencies, and public records. They compile this information into credit reports and generate credit scores. Not all creditors report to both bureaus, which is why your Equifax and TransUnion reports may contain different information.

C — Credit Terms Starting with C

Charge-Off

A declaration by a creditor that a debt is unlikely to be collected. In Canada, creditors typically charge off debts after 180 days (six months) of non-payment. A charge-off does not mean the debt is forgiven — you still owe the money, and the creditor may sell the debt to a collection agency or pursue legal action. Charge-offs are one of the most damaging entries on a Canadian credit report and remain for six to seven years from the date of the last activity on the account.

Collection (Collections Account)

A debt that has been transferred or sold to a collection agency for recovery. In Canada, when a creditor is unable to collect a debt, they may hire a collection agency or sell the debt to one. The collection account is reported separately on your credit report and can significantly lower your credit score. In Canada, collection agencies are regulated at the provincial level, and each province has specific rules about how, when, and how often collectors can contact you. Collection accounts remain on your credit report for six years from the date of the last payment or activity in most provinces.

Consumer Proposal

A formal, legally binding agreement made through a Licensed Insolvency Trustee (LIT) in which you offer to pay your creditors a portion of what you owe, extend the time you have to pay the debt, or both. A consumer proposal is an alternative to bankruptcy under Canada’s Bankruptcy and Insolvency Act. You can include up to $250,000 in unsecured debt (excluding your mortgage). A consumer proposal remains on your credit report for 3 years after completion or 6 years from the filing date, whichever comes first. It is often a preferred option for Canadians who can afford to repay a portion of their debts.

Credit Counselling

Professional guidance to help individuals manage debt and improve their financial situation. In Canada, non-profit credit counselling agencies operate in every province and can provide free or low-cost services including budgeting assistance, financial education, and debt management programs. Reputable agencies are members of Credit Counselling Canada or the Canadian Association of Credit Counselling Services. Be cautious of for-profit debt settlement companies that charge upfront fees — these are different from legitimate credit counselling services.

Credit History

The record of how you have used and managed credit over time. Your Canadian credit history is maintained by Equifax Canada and TransUnion Canada and includes information about all your credit accounts, payment patterns, public records (bankruptcies, judgments), and inquiries. The length of your credit history is an important factor in your credit score — a longer history with positive information generally leads to a higher score. This is why it is important to keep your oldest credit accounts open, even if you rarely use them.

Credit Limit

The maximum amount a lender allows you to borrow on a revolving credit account such as a credit card or line of credit. In Canada, credit limits are determined based on your income, credit score, existing debt levels, and the lender’s risk criteria. Your credit limit directly affects your credit utilization ratio — one of the most important factors in your credit score. Requesting a credit limit increase can improve your utilization ratio, but the request may trigger a hard inquiry on your credit report.

Credit Mix

The variety of different credit account types in your credit file. In Canada, credit mix typically accounts for about 10% of your credit score calculation. A healthy credit mix might include a combination of revolving credit (credit cards, lines of credit) and instalment credit (car loans, personal loans, mortgages). Having diverse credit types shows lenders you can manage different kinds of debt responsibly. However, do not open accounts you do not need solely to improve your credit mix.

Credit Monitoring

A service that tracks changes to your credit report and alerts you to significant activity. In Canada, both Equifax and TransUnion offer credit monitoring services for a monthly fee. These services can alert you to new accounts opened in your name, changes in your credit score, hard inquiries, and other activity that could indicate identity theft or fraud. Some Canadian banks and fintech companies also offer free credit score monitoring to their customers.

Credit Rating (Trade Line Rating)

A two-character code on your Canadian credit report that indicates the type of credit and your payment history for each account. The first character is a letter indicating the type of credit: R for revolving, I for instalment, O for open, and M for mortgage. The second character is a number from 0 to 9 indicating your payment status.

Credit Report

A detailed document maintained by credit bureaus that contains your credit history, personal identification information, credit account details, public records, and inquiry history. In Canada, you have the right to access your credit report for free from both Equifax and TransUnion. You can request your report by mail, online, phone, or in person. Reviewing your credit report regularly is essential to catch errors, detect fraud, and understand how lenders see your creditworthiness.

1. Request Your Free Credit Report: Contact Equifax Canada (equifax.ca) and TransUnion Canada (transunion.ca) to request your free credit report. You are entitled to one free report per year by mail, and both bureaus offer free digital access options as well.



2. Review Personal Information: Check that your name, address, date of birth, and social insurance number are correct. Errors in personal information can indicate mixed files or identity theft.



3. Examine Account Details: Review each credit account for accuracy. Verify balances, credit limits, payment history, and account status. Look for accounts you do not recognize, which could indicate fraud.



4. Check Public Records: Review any public record entries such as bankruptcies, consumer proposals, or judgments. Ensure they are accurate and are being removed at the appropriate time.



5. Dispute Errors: If you find inaccuracies, file a dispute with the credit bureau. Both Equifax and TransUnion have online dispute processes. Include supporting documentation and be specific about what is incorrect.

Credit Score

A three-digit number, typically ranging from 300 to 900 in Canada, that represents your creditworthiness based on the information in your credit report. Higher scores indicate lower risk to lenders and result in better terms and rates on credit products. In Canada, credit scores are generated by Equifax (using the Beacon/FICO model) and TransUnion (using the CreditVision model). The main factors affecting your score are payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%).

Credit Utilization

The percentage of your available credit that you are currently using, calculated by dividing your total credit card balances by your total credit limits. In Canada, credit utilization is the second most important factor in your credit score (after payment history), accounting for approximately 30% of your score calculation. Financial experts recommend keeping your overall utilization below 30%, and ideally below 10%, for the best impact on your score. Utilization is calculated both per-card and across all revolving accounts.

D — Credit Terms Starting with D

Delinquency

The state of being behind on payments for a credit account. In Canada, delinquency is reported to credit bureaus in stages: 30 days past due, 60 days past due, 90 days past due, and so on. Each stage of delinquency causes additional damage to your credit score. Even a single 30-day late payment can lower your score by 50-100 points, depending on your overall credit profile. Late payments remain on your Canadian credit report for six to seven years from the date of the missed payment.

Debt-to-Income Ratio

A financial metric that compares your total monthly debt payments to your gross monthly income. While not a direct component of your credit score, the debt-to-income ratio is a critical factor Canadian lenders use to evaluate credit and loan applications. In Canada, this concept is closely related to the Total Debt Service (TDS) ratio used in mortgage lending. A lower debt-to-income ratio indicates you have more financial capacity to handle additional debt.

Dispute

A formal process to challenge inaccurate or incomplete information on your credit report. In Canada, both Equifax and TransUnion are required by provincial and federal privacy legislation to investigate disputes and correct or remove inaccurate information. You can file disputes online, by mail, or by phone. The credit bureau must investigate within 30 days and notify you of the results. If the information is found to be inaccurate, it must be corrected or removed. You can also dispute directly with the creditor who reported the information.

E — Credit Terms Starting with E

Equifax Canada

One of the two national credit bureaus operating in Canada. Equifax collects credit information from lenders, creditors, and public records, compiles it into credit reports, and generates credit scores (using the Beacon/FICO model). Equifax serves both consumers (who can access their own reports and scores) and businesses (who use credit information for lending decisions, employment screening, and other purposes). Equifax Canada is a subsidiary of Equifax Inc., a global information solutions company.

Expired Debts (Statute-Barred Debts)

Debts that have passed the legal limitation period for collection through the courts. In Canada, limitation periods vary by province, ranging from 2 to 6 years. After the limitation period expires, the creditor can no longer sue you to collect the debt. However, the debt still exists, and it may still appear on your credit report. It is important to note that making a payment or even acknowledging the debt in writing can restart the limitation period in some provinces. Expired debts are different from debts that have been removed from your credit report.

F — Credit Terms Starting with F

FICO Score

A credit scoring model developed by Fair Isaac Corporation, widely used in North America. In Canada, Equifax uses a version of the FICO model (called the Beacon score) to generate credit scores. FICO scores range from 300 to 900 in Canada and consider five main factors: payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit (10%). While the FICO model is the foundation, the specific version used in Canada may differ from those used in the United States.

Financial Consumer Agency of Canada (FCAC)

A federal government agency that protects the rights and interests of consumers of financial products and services in Canada. The FCAC ensures federally regulated financial institutions comply with consumer protection laws, promotes financial literacy, and provides tools and resources to help Canadians make informed financial decisions. The FCAC also handles complaints about federally regulated financial institutions and is an excellent resource for understanding your rights as a credit consumer.

Fraud Alert

A notice placed on your credit file that warns creditors to take extra steps to verify your identity before opening new accounts. In Canada, you can place a fraud alert (also called an initial security alert) on your Equifax and TransUnion files if you believe you are a victim of identity theft or fraud. The alert typically remains active for six years and requires lenders to take additional verification steps before issuing credit in your name. This is different from a credit freeze, which completely prevents new credit from being issued.

G — Credit Terms Starting with G

Grace Period

The period between the end of a billing cycle and the payment due date during which no interest is charged on new purchases. In Canada, credit card issuers are required by law to provide a minimum 21-day grace period on new purchases. However, the grace period typically applies only if you paid your previous statement balance in full. If you carry a balance from month to month, interest usually accrues on new purchases from the date of the transaction with no grace period. Cash advances and balance transfers typically do not have a grace period.

Guarantor

A person who agrees to be responsible for repaying a debt if the primary borrower fails to do so. In Canada, co-signing or guaranteeing a loan appears on the guarantor’s credit report and affects their borrowing capacity. If the primary borrower misses payments, the negative information also appears on the guarantor’s credit report. Before agreeing to be a guarantor, Canadians should understand that they are taking on full financial and legal responsibility for the debt.

H — Credit Terms Starting with H

Hard Inquiry (Hard Pull)

A credit report check that occurs when you apply for credit and the lender reviews your credit file to make a lending decision. In Canada, hard inquiries are recorded on your credit report and can temporarily lower your credit score by a few points. Multiple hard inquiries for the same type of credit (such as mortgage or auto loan shopping) within a short period (typically 14-45 days, depending on the scoring model) are usually treated as a single inquiry. Hard inquiries remain on your Canadian credit report for three years but typically affect your score for only 12 months.

High Credit

The highest balance ever recorded on a credit account. On your Canadian credit report, the high credit figure for instalment loans shows the original loan amount, while for revolving accounts, it shows the highest balance you have carried. Some scoring models consider the high credit in their calculations, and lenders may review it to understand your credit usage patterns.

I — Credit Terms Starting with I

Identity Theft

The fraudulent use of someone else’s personal information — typically their name, social insurance number, date of birth, or financial account details — to commit fraud or other crimes. In Canada, identity theft is a growing concern. The Canadian Anti-Fraud Centre reported that Canadians lost over $500 million to fraud in recent years. Credit-related identity theft includes opening new credit accounts in your name, making unauthorized charges on existing accounts, or taking over your financial accounts. Monitoring your credit report regularly is one of the best ways to detect identity theft early.

Instalment Credit

A type of credit where you borrow a specific amount and repay it in fixed, regular payments (instalments) over a set period. Common examples in Canada include car loans, personal loans, student loans, and mortgages. Instalment accounts are reported on your credit report with an “I” prefix (e.g., I1 for paid as agreed). Having a mix of instalment and revolving credit in your profile can positively impact your credit score.

Interest Rate

The cost of borrowing money, expressed as a percentage of the outstanding balance. In Canada, interest rates on credit products vary widely: credit cards typically charge 19.99-29.99%, personal loans range from 6-30%+ depending on creditworthiness, and lines of credit are often linked to the prime rate plus a margin. The interest rate you are offered depends heavily on your credit score, income, and the type of credit product. Canadians with higher credit scores consistently receive lower interest rates.

J — Credit Terms Starting with J

Joint Account

A credit account shared by two or more people who are equally responsible for the debt. In Canada, joint accounts are reported on each account holder’s credit report. Both positive and negative information (including missed payments) appears on all account holders’ reports. Joint accounts are different from authorized user arrangements, where only the primary account holder is legally responsible. Common joint accounts in Canada include joint credit cards, joint lines of credit, and joint mortgages.

Judgment

A court decision requiring a debtor to pay a specified amount to a creditor. In Canada, judgments for unpaid debts can appear on your credit report and significantly damage your credit score. A judgment may result in wage garnishment, bank account seizure, or property liens. In Canada, judgments remain on your credit report for six to seven years from the date they are filed. Paying a judgment is better for your credit than leaving it unpaid, though the record of the judgment itself will remain on your report for the full reporting period.

K–L — Credit Terms Starting with K and L

Key Rate (Bank of Canada Overnight Rate)

The target interest rate that the Bank of Canada sets for overnight lending between financial institutions. While not directly a credit term, the key rate influences all Canadian lending rates. When the Bank of Canada raises or lowers the key rate, variable-rate credit products (lines of credit, variable mortgages, HELOCs) adjust accordingly. Changes to the key rate also indirectly affect fixed-rate products over time. The Bank of Canada announces rate decisions eight times per year on pre-set dates.

Late Payment

A payment made after the due date specified in your credit agreement. In Canada, late payments are one of the most damaging items on a credit report. Payments that are 30 or more days late are reported to the credit bureaus and remain on your report for six to seven years. The severity of the impact depends on how late the payment is (30, 60, 90, or 120+ days), how recently it occurred, and how many late payments you have. Even one late payment can significantly reduce your credit score.

Lien

A legal claim on property or assets as security for a debt. In Canada, liens can be placed by creditors, the Canada Revenue Agency (for unpaid taxes), contractors (construction liens), or through court judgments. Liens can affect your ability to sell or refinance property and may appear on your credit report. Liens must be satisfied (paid) or released before a property can be sold with clear title.

M — Credit Terms Starting with M

Minimum Payment

The smallest amount you must pay on a credit card or revolving credit account each billing period to keep the account in good standing. In Canada, minimum payments are typically the greater of a fixed dollar amount ($10-$25) or a percentage of the outstanding balance (usually 1-3%), plus interest and fees. Paying only the minimum keeps your account current but results in paying substantially more interest over time. Canadian credit card statements are required to show how long it would take to pay off the balance making only minimum payments.

Mixed File

A credit report that contains information belonging to two or more individuals, typically people with similar names, addresses, or social insurance numbers. In Canada, mixed files are a recognized problem and can lead to inaccurate credit scores and incorrect lending decisions. If you discover information in your credit report that does not belong to you, file a dispute with the credit bureau immediately. Mixed files are more common among people with common names or family members with similar names living at the same address.

N — Credit Terms Starting with N

Negative Information

Any information on your credit report that indicates a problem with your credit management, including late payments, collections, charge-offs, bankruptcies, consumer proposals, and judgments. In Canada, negative information remains on your credit report for varying periods: late payments and collections for six to seven years, first bankruptcies for six to seven years after discharge, second bankruptcies for 14 years, and consumer proposals for three years after completion or six years from filing. The impact of negative information on your score diminishes over time, even before it is removed from your report.

Non-Sufficient Funds (NSF)

A situation where a payment (cheque, pre-authorized debit, or electronic transfer) is rejected because there are not enough funds in the account to cover it. In Canada, NSF fees from banks typically range from $42 to $48 per occurrence. While NSF occurrences are not directly reported to credit bureaus, they can indirectly affect your credit if they cause a credit payment to be missed or if your bank reports the pattern to credit bureaus. Repeated NSF occurrences may also cause your bank to close your account.

O — Credit Terms Starting with O

Open Credit

A type of credit where the full balance is due at the end of each billing period. Examples include charge cards (like some American Express cards) and certain utility accounts. On Canadian credit reports, open credit accounts are identified with an “O” prefix (e.g., O1 for paid as agreed). Open credit is less common than revolving or instalment credit but contributes to your credit mix.

Opt-Out

The process of requesting that credit bureaus not include your information in pre-screened credit offers. In Canada, you can opt out of receiving pre-approved credit card and loan offers by contacting Equifax and TransUnion. Opting out does not affect your credit score or your ability to apply for credit. It simply prevents lenders from using your credit information to send you unsolicited offers.

P — Credit Terms Starting with P

Payment History

A record of your payments on credit accounts, including whether payments were made on time, late, or missed entirely. In Canada, payment history is the single most important factor in your credit score, accounting for approximately 35% of the calculation. Your payment history for each account is reported monthly to the credit bureaus and includes the current status plus up to seven years of historical data. Consistent on-time payments are the foundation of a strong credit score.

Pre-Approved

A preliminary determination by a lender that you likely qualify for a credit product, based on basic criteria or a soft credit check. In Canada, pre-approval does not guarantee final approval — a full application and hard credit check are still required. Pre-approved offers are common for credit cards and personal loans. Being pre-approved means you met the lender’s initial screening criteria, but final approval depends on a complete review of your financial situation.

Prime Rate

The interest rate that Canadian banks charge their most creditworthy customers, used as a benchmark for variable-rate lending products. Each bank sets its own prime rate, but they typically move in lockstep following changes to the Bank of Canada’s overnight rate. Variable-rate credit products (lines of credit, variable-rate mortgages, some credit cards) are priced relative to the prime rate (e.g., prime + 2%). Understanding the prime rate helps you anticipate changes to your variable-rate credit costs.

R — Credit Terms Starting with R

Revolving Credit

A type of credit that allows you to borrow, repay, and borrow again up to a set credit limit. Credit cards and lines of credit are the most common forms of revolving credit in Canada. Your monthly payment varies based on your outstanding balance. Revolving credit accounts are reported on your credit report with an “R” prefix. How you manage revolving credit — particularly your utilization ratio — has a significant impact on your Canadian credit score.

Risk Score

A numerical value that predicts the likelihood of a borrower defaulting on a credit obligation. In Canada, risk scores are used internally by lenders and are not always visible to consumers. Your credit score is a type of risk score, but lenders may also use their own proprietary scoring models that incorporate additional information beyond what is in your credit report, such as your banking relationship, income, and assets.

S — Credit Terms Starting with S

Secured Credit Card

A credit card that requires a cash deposit as collateral, typically equal to the credit limit. In Canada, secured credit cards are one of the primary tools for building or rebuilding credit. Major issuers of secured credit cards in Canada include Home Trust (Visa), Capital One, and several other financial institutions. The security deposit reduces the lender’s risk, making these cards accessible to people with bad credit, no credit, or recent bankruptcy. When used responsibly — making purchases and paying the balance on time each month — secured cards help establish a positive payment history on your credit report.

Soft Inquiry (Soft Pull)

A credit report check that does not affect your credit score. In Canada, soft inquiries occur when you check your own credit, when a lender pre-screens you for a credit offer, when an existing creditor reviews your account, or when an employer checks your credit (with your consent). Soft inquiries appear on the version of your credit report that you see but are not visible to other lenders and do not impact your credit score in any way.

Social Insurance Number (SIN)

A nine-digit number issued by the Government of Canada for tax and government program purposes. In the context of credit, your SIN is used by credit bureaus to accurately identify your credit file and prevent mixed files. While lenders may request your SIN on credit applications, providing it is not always mandatory (except for tax-reporting purposes such as savings accounts or investment products). Protecting your SIN is critical for preventing identity theft.

T — Credit Terms Starting with T

Thin File

A credit report with limited credit history, typically containing fewer than three trade lines or accounts. In Canada, thin files are common among newcomers to the country, young adults, and people who have avoided using credit. Having a thin file makes it difficult to generate a credit score, which in turn makes it harder to qualify for credit products. Building a credit file by opening a secured credit card, becoming an authorized user, or using a credit-builder loan can help resolve a thin file.

Trade Line

An individual credit account listed on your credit report. Each trade line in your Canadian credit report includes the creditor’s name, account number (partially masked), account type, date opened, credit limit or original loan amount, current balance, payment history, and account status. The number and quality of your trade lines form the foundation of your credit profile. Most credit scoring models need at least one active trade line with six months of history to generate a score.

TransUnion Canada

One of the two national credit bureaus operating in Canada. TransUnion collects and maintains credit information, generates credit reports, and produces credit scores (using the CreditVision scoring model). Along with Equifax Canada, TransUnion is the other primary source of credit information in Canada. Not all creditors report to both bureaus, so checking both reports is recommended. TransUnion is a subsidiary of TransUnion LLC, a global information solutions company.

U–Z — Credit Terms Starting with U through Z

Unsecured Credit

Credit that is not backed by collateral or a security deposit. Most credit cards, personal lines of credit, and student loans in Canada are unsecured. Because the lender has no asset to claim if you default, unsecured credit typically comes with higher interest rates than secured credit. Your creditworthiness (as determined by your credit score, income, and other factors) is the primary basis for approval and terms on unsecured products.

Utilization Ratio

See Credit Utilization above. This is the same concept — the percentage of available credit being used — just referred to by a different name. Both terms are commonly used in Canadian credit discussions.

Voluntary Deposit (Quebec)

A legal mechanism available in the province of Quebec that allows a debtor to deposit a portion of their salary with the court for distribution to creditors, protecting the balance of their wages from seizure. This Quebec-specific option is an alternative to bankruptcy and consumer proposals for Quebec residents. A voluntary deposit appears on the credit report and affects the individual’s credit score, but it provides legal protection from creditor harassment and wage garnishment.

Wage Garnishment

A legal process where a portion of your wages is withheld by your employer and sent directly to a creditor to repay a debt. In Canada, wage garnishment can occur through a court order obtained by a creditor or through the Canada Revenue Agency (for unpaid taxes without a court order). Each province has rules about the maximum percentage of wages that can be garnished. Wage garnishment does not appear directly on your credit report, but the underlying debt or judgment that led to the garnishment will.

Write-Off

See Charge-Off above. In Canada, “write-off” and “charge-off” are often used interchangeably. Both terms refer to a creditor’s accounting decision that a debt is unlikely to be collected. The debt still exists and can still be pursued through collections or legal action.

Credit Score Factor Breakdown

Understanding credit terminology is not just academic — it is practical knowledge that empowers you to make better financial decisions, communicate effectively with lenders, and take control of your credit journey. Whether you are building credit for the first time or rebuilding after a setback, the terms in this glossary will help you navigate the Canadian credit landscape with confidence.

Bookmark this page and return to it whenever you encounter an unfamiliar credit term. Knowledge is one of the most powerful tools you have for improving your financial future.