Tom Markham
Chief Commercial Officer at ClearScore
How much does a default affect your credit score?
27 October 2026
15 min read
Contents
Key takeawaysShort answerWhat does it mean to default on a loan in Canada?How much does a default affect your credit score?What happens if I default on a personal loan?How does a default appear on your Canadian credit report?How much do collections affect your credit score?How long do collections stay on a credit report in Canada?Do CRA collections affect your credit score?Does paying a default improve your credit score?How to recover your credit score after a defaultCan you get a loan after defaulting on a loan?How to avoid defaulting on a loanHow ClearScore can help you monitor and rebuild your creditFrequently asked questionsKey takeaways: defaults and Canadian credit scoresA plain-language guide to defaults, collections and credit recovery in Canada, including how ClearScore can help you track your credit.
Key takeaways
A default generally means an account has fallen seriously behind and the lender has reported it as unpaid or in default.
Because payment history is an important part of your credit score, a default can have a significant effect, though there is no fixed number of points that applies to everyone.[^1][^3]
Paying a default or collection account usually does not remove it right away, but it can show lenders that the debt was resolved.[^2]
Negative information stays on a Canadian credit report for a set period, which depends on the type of information and the rules that apply where you live.[^2]
You can challenge information that is inaccurate, but accurate information cannot simply be deleted.
You can use ClearScore to check your TransUnion credit score and report for free and watch how your credit changes over time.
Short answer
A default will usually make your credit score lower, and it can make borrowing harder or more expensive for a period of time.[^1] The exact effect depends on your starting point, the rest of your credit history, the details of the account and the scoring model being used.[^3] A default matters. It does not define you, and its influence may lessen as you build positive payment history.
What does it mean to default on a loan in Canada?
What does it mean to default on a loan?
Defaulting on a loan means you have not met the terms of your credit agreement, usually by missing payments over a period of time.
What does defaulting on a loan mean?
In practice, it means the lender no longer expects normal repayment. The account may be closed to further use, passed to a collection agency or written off as unpaid.
The difference between a missed payment, delinquency and default
A missed payment is one payment you did not make on time. When several payments are missed, the account falls further behind. A default is the point at which you have breached the terms of your credit agreement, usually through sustained non-payment, and the lender treats the account as no longer performing; the lender then reports that status to the credit bureaus.
When does a lender consider a loan to be in default?
This varies by lender and product. Many lenders act after a few months of missed payments, but your agreement sets out the terms.
Default versus collections: what is the difference?
A default is a reported account status. A collection account is an unpaid debt that has been transferred or referred to a collection agency.
How much does a default affect your credit score?
How lenders and credit bureaus record a default
Lenders report account activity to Canada's two credit reporting agencies, Equifax Canada and TransUnion Canada. A default is recorded as part of your payment history.
Why the effect depends on your starting credit score
Canadian credit scores generally range from 300 to 900, with average scores ranging around 650 to 725.[^4] Someone with a long, clean history may notice a larger drop than someone whose report already shows missed payments. The direction is the same. The size is not.
How payment history affects your credit score
Payment history carries real weight in how scores are calculated, alongside how much of your available credit you use, how long you have had credit, recent applications and the types of credit you hold.[^1]
How the amount and type of debt may influence the impact
A larger balance or a recent default may carry more weight with some lenders than a small, older account. Scoring models differ, so results can vary.[^3] Credit bureaus such as Equifax Canada and TransUnion Canada collect and hold information about how you've managed credit, and lenders may use different scores, scoring models and criteria, so the score a lender sees can differ from the one you see on ClearScore.
How multiple missed payments can make the damage worse
Each missed payment adds to the pattern. A single late payment reads differently from a run of missed payments followed by a collection account.
Typical credit-report consequences
Stage | What may be recorded | Possible effect on borrowing |
|---|---|---|
| Stage One missed payment | What may be recorded Late payment marker | Possible effect on borrowing May be modest, depending on history |
| Stage Several missed payments | What may be recorded Worsening payment status | Possible effect on borrowing May reduce approval odds |
| Stage Default | What may be recorded Account reported as unpaid or in default | Possible effect on borrowing Can have a significant impact |
| Stage Collections | What may be recorded Separate collection account | Possible effect on borrowing May compound the original effect |
What happens if I default on a personal loan?
What happens after the first missed payment?
The lender usually contacts you and may report the missed payment. Reaching out early often opens more options.
When can the lender charge fees or interest?
Fees and interest depend on your agreement. Missed payment charges and continuing interest can increase the amount you owe.
When might the lender demand the full balance?
Some agreements allow the lender to demand the full outstanding balance once the account is in default.
Can a lender send a personal loan to collections?
Yes. Unpaid debts may be referred or sold to a collection agency.[^2]
Can a lender take legal action?
A default may lead to collection activity, higher costs and, in some cases, legal action.[^1]
What happens if the loan is secured versus unsecured?
A secured loan is tied to an asset, such as a vehicle. If payments stop, the lender may have the right to repossess it. An unsecured loan has no asset attached, so collection and legal routes are more common.
Can default affect a co-signer or guarantor?
Yes. A co-signer shares responsibility for the debt, so the account may appear on their credit report too.
How does a default appear on your Canadian credit report?
What is an R9 credit rating?
Canadian credit reports often use an "R" rating for revolving accounts, from R1 (pays on time) to R9. An R9 generally signals a bad debt, a collection account or a balance written off as unpaid.
How defaulted loans are reported by Equifax and TransUnion
Both agencies record the account, the balance, the payment history and the status. Details may differ slightly between the two, because not every lender reports to both.
The difference between the original creditor and a collection account
You may see two entries: the original loan and the collection account. This does not mean you owe the debt twice.
How to check whether a default has been reported
You can request your credit report from Equifax Canada and TransUnion Canada, or view your TransUnion report through a free service such as ClearScore.
How to dispute inaccurate default information
If something looks wrong, you can file a dispute with the credit reporting agency and the lender. Inaccurate information can be corrected. Accurate information cannot be removed on request.
How much do collections affect your credit score?
What happens when a debt is sent to collections?
The agency takes over recovery of the debt and may report the account in its own name.
Does a collection account lower your credit score?
It generally can, because it signals an unpaid debt.[^2] The size of the effect depends on your wider credit history.
How collections affect lenders' decisions
Some lenders look closely at open collections and may decline applications or offer less favourable terms while a collection remains unpaid.
Do paid collections still affect your credit score?
A paid collection usually stays on your report for the remainder of its reporting period, but the status changes to show it was settled.
Account status | How it may appear | What lenders may see |
|---|---|---|
| Account status In default, unpaid | How it may appear Open default | What lenders may see Highest level of concern |
| Account status In collections, unpaid | How it may appear Active collection account | What lenders may see Ongoing unresolved debt |
| Account status Paid in full after default | How it may appear Default marked paid | What lenders may see Debt resolved |
| Account status Settled for less | How it may appear Settled or partial payment | What lenders may see Resolved, but not in full |
How long do collections stay on a credit report in Canada?
How long do collections stay on a credit report in Canada?
Negative information is commonly reported for up to around six years in many cases, but the exact period depends on the type of information and the rules that apply where you live.[^2]
When does the reporting period begin?
It usually starts from the date of the missed payment or the date the account first fell behind, not the date you repay.
Does paying a collection reset the reporting period?
Paying generally does not restart the clock for credit reporting purposes, though the status is updated.
Provincial and territorial differences
Credit reporting rules fall partly under provincial and territorial law, so retention periods and your rights can differ depending on where you live.
Credit-report retention versus debt-collection limitation periods
These are two separate things. Retention is how long information appears on your report. A limitation period relates to how long a creditor has to start legal action, and it varies by province or territory.
How to check the removal date
Your credit report usually shows the date the information is expected to drop off. Checking it regularly helps you plan.
Item | Typical reporting approach in Canada |
|---|---|
| Item Late or missed payment | Typical reporting approach in Canada Reported for a defined period, commonly several years |
| Item Default or written-off debt | Typical reporting approach in Canada Reported for a defined period, often up to about six years |
| Item Collection account | Typical reporting approach in Canada Reported for a defined period after the account fell behind |
| Item Credit application (inquiry) | Typical reporting approach in Canada Generally about 3 years with Equifax Canada and up to 6 years with TransUnion Canada |
| Item Consumer proposal | Typical reporting approach in Canada Removed 3 years after the debts in the proposal are paid off, or 6 years after it was signed, whichever comes first |
| Item Bankruptcy | Typical reporting approach in Canada Usually removed 6 years after discharge (7 years with TransUnion in Newfoundland and Labrador, Ontario, Prince Edward Island and Quebec), or 14 years for a second or later bankruptcy |
Periods depend on the information type and applicable provincial rules, so confirm details with the credit reporting agency.[^2]
Do CRA collections affect your credit score?
What happens when the CRA collects unpaid tax debt?
The Canada Revenue Agency has its own collection powers, which may include set-offs against benefits or refunds and, in some cases, garnishment.
Is CRA debt automatically reported to the credit bureaus?
Tax debt is not generally reported to Equifax or TransUnion in the same routine way that consumer loans are.
Can CRA collections affect borrowing indirectly?
Yes. If you borrow to pay tax debt, or if repayments leave you short elsewhere, the knock-on effect may show up in your credit report.
CRA liens, legal action and credit applications
A registered lien may become part of the public record and could come up during a mortgage or refinancing application.
How tax debt differs from a bank or personal-loan default
Tax debt sits outside normal credit reporting but can still carry serious financial consequences.
When to seek professional advice
If tax debt feels unmanageable, you may wish to speak to a licensed insolvency trustee, a non-profit credit counsellor or a tax professional.
Does paying a default improve your credit score?
Does paying a default improve your credit score immediately?
Often not immediately. You may not see a change straight away, because the record of the default remains.[^2]
How a paid default is shown on a credit report
The balance usually updates to zero and the status shows the debt as paid or settled.
Why paying a default may still benefit future credit applications
Many lenders treat a resolved debt differently from an open one, so repayment may help your wider application picture.
Can settling for less than the full balance affect your credit profile?
A partial settlement may be recorded as settled rather than paid in full. Some lenders view this less favourably.
Should you request written confirmation?
Keeping written confirmation of payment is a sensible habit. It helps if the record is not updated correctly.
How to confirm the status was updated
Check your credit report after a reasonable period. If the status has not changed, contact the lender or agency.
How to recover your credit score after a default
Check your score, report and account status. Look at all three, not just the number.
Dispute anything inaccurate or incomplete. Errors do happen, and reports can be corrected.[^5]
Bring current accounts up to date where you can.
Pay every bill on time. Consistency is the strongest signal you can send.
Credit card balances. Lower credit utilization, which means how much of your available credit you are using, may help over time.
Several applications at once. Multiple applications in a short window can look risky.
Consider a secured credit card cautiously. Compare fees and confirm the issuer reports to the credit bureaus.
Older accounts. Length of credit history can matter.
Build an emergency fund and a repayment plan. Even small savings can prevent the next missed payment.
Monitor your report for fraud and new errors.
Action | Purpose | Possible timeframe |
|---|---|---|
| Action Pay bills on time | Purpose Builds positive payment history | Possible timeframe Gradual, over months |
| Action Lower card balances | Purpose May improve credit utilization | Possible timeframe Can show at next reporting cycle |
| Action Dispute errors | Purpose Corrects inaccurate data | Possible timeframe Varies by case |
| Action Limit applications | Purpose Reduces new inquiries | Possible timeframe Ongoing habit |
| Action Monitor regularly | Purpose Spots problems early | Possible timeframe Ongoing |
Timeframes vary depending on your circumstances and the scoring model used.
Can you get a loan after defaulting on a loan?
How lenders assess an applicant after a default
Lenders look at the whole picture: how recent the default is, whether it was resolved, your income and your current debts. A lower score can materially affect lending decisions, though not always a refusal.[^3]
Why loan offers may have higher interest rates
Lenders price for risk. Offers after a default may come with higher interest or lower limits.
The role of income, affordability and current debts
Affordability still matters. Stable income and manageable debt can strengthen an application.
Secured loans, co-signers and alternative lending
These may widen your options, but they also shift risk. A co-signer becomes responsible for the debt.
Compare total cost, not just approval odds
Look at the total amount repayable, the interest rate, the term and all fees.
Use eligibility checks and soft searches
Where available, a soft search can indicate likely offers without affecting your credit score, though approval still depends on the lender's own checks.
How to avoid defaulting on a loan
Contact the lender before you miss a payment.
Ask about hardship options or a revised payment arrangement.
Repayment priorities depend on your circumstances, and a non-profit credit counsellor can help you work them out.
Review the full cost of refinancing or consolidation before committing.
Avoid new borrowing to cover payments you cannot afford.
Speak to a reputable non-profit Canadian credit counsellor.
Watch for warning signs: using credit for essentials, making minimum payments only, or losing track of due dates.
How ClearScore can help you monitor and rebuild your credit
ClearScore is a free service you can use to check your TransUnion credit score and full credit report. ClearScore is a credit broker, not a lender. It offers:
Regular monitoring so you can track changes over time.
Personalized tips and educational guidance in plain language.
Loan and credit card comparisons using soft searches, which do not affect your score.
Car finance offers you can compare alongside loans and credit cards.
Alerts that may help you spot incorrect default or collection information sooner.
Limitations are worth knowing. ClearScore shows TransUnion data, so your Equifax Canada report may differ. Lenders use their own criteria, and no service can remove accurate information or guarantee an offer or a score increase.
Frequently asked questions
How many points does a default take off your credit score?
There is no single number. The effect depends on your credit history, the account details and the scoring model.[^3]
Is a default worse than a late payment?
Generally yes, because a default signals a more serious and longer-running problem.
What happens if I default on a personal loan?
You may face added fees and interest, a demand for the full balance, collection activity and, in some cases, legal action.[^1]
How much do collections affect your credit score?
A collection account can have a significant effect while it remains unpaid, though the size varies by person.[^2]
How long do collections stay on a credit report in Canada?
Commonly up to around six years, depending on the information type and applicable provincial rules.[^2]
Do CRA collections affect your credit score?
Tax debt is not usually reported to the credit bureaus in the same way as consumer loans, but it can affect your finances and may appear in public records if a lien is registered.
Does paying a default improve your credit score?
It may help over time and shows the debt was resolved, but it does not usually remove the record.[^2]
Can a default be removed from a credit report?
Inaccurate information can be disputed and corrected. Accurate information stays until its reporting period ends.
Can I get a mortgage after a default?
It may be possible, depending on how recent the default is, your income, your deposit and the lender's criteria.
How long does it take to recover a credit score after a default?
There is no set timeframe. Your credit report and score can change as new information is reported.
Is ClearScore free in Canada?
Yes. You can check your TransUnion credit score and report at no cost.
Does checking my score on ClearScore lower it?
No. Checking your own score is a soft search and does not affect it.
Key takeaways: defaults and Canadian credit scores
A default can significantly affect your credit report and score, and it may make borrowing harder or more expensive for a time.[^1] Collections can add to that effect while the debt stays unpaid. Paying the debt usually will not erase the record, but it shows lenders the matter was resolved. Negative information is reported for a defined period, not forever.[^2]
Your next step can be simple. Check your credit report and score with ClearScore, confirm every entry is accurate, and keep building steady payment habits from here.
[^1]: Financial Consumer Agency of Canada, "Making a plan to become debt-free" (2025) - https://www.canada.ca/en/financial-consumer-agency/services/debt/plan-debt-free.html
[^2]: Financial Consumer Agency of Canada, "Information on your credit report" (2025) - https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/information-credit-report.html
[^3]: Financial Consumer Agency of Canada, "Credit report and score basics" (2025) - https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/credit-report-score-basics.html
[^4]: Financial Consumer Agency of Canada, Canadian Financial Capability Survey (2021) - https://www.canada.ca/en/financial-consumer-agency/programs/research/canadian-financial-capability-survey-2019.html
[^5]: CBC News (2025) - https://www.cbc.ca/news/gopublic/equifax-credit-score-vanished-1.7542059
This article provides general information only and does not constitute financial advice. Individual financial circumstances vary, and you may wish to seek independent advice before making financial decisions. Information is accurate at the time of writing and may change.
Tom Markham
Chief Commercial Officer at ClearScore
27 October 2026
15 min read
Contents
Key takeawaysShort answerWhat does it mean to default on a loan in Canada?How much does a default affect your credit score?What happens if I default on a personal loan?How does a default appear on your Canadian credit report?How much do collections affect your credit score?How long do collections stay on a credit report in Canada?Do CRA collections affect your credit score?Does paying a default improve your credit score?How to recover your credit score after a defaultCan you get a loan after defaulting on a loan?How to avoid defaulting on a loanHow ClearScore can help you monitor and rebuild your creditFrequently asked questionsKey takeaways: defaults and Canadian credit scoresMeet the author
Chief Commercial Officer at ClearScore
Tom Markham
Tom is Chief Commercial Officer at ClearScore, with over 18 years in financial services. He leads partnerships that help millions get access to the right credit, and writes to help you understand your score and find the products that fit.
How much does a default affect your credit score?
Tom Markham
Chief Commercial Officer at ClearScore
27 October 2026
15 min read
Contents
Key takeawaysShort answerWhat does it mean to default on a loan in Canada?How much does a default affect your credit score?What happens if I default on a personal loan?How does a default appear on your Canadian credit report?How much do collections affect your credit score?How long do collections stay on a credit report in Canada?Do CRA collections affect your credit score?Does paying a default improve your credit score?How to recover your credit score after a defaultCan you get a loan after defaulting on a loan?How to avoid defaulting on a loanHow ClearScore can help you monitor and rebuild your creditFrequently asked questionsKey takeaways: defaults and Canadian credit scoresA plain-language guide to defaults, collections and credit recovery in Canada, including how ClearScore can help you track your credit.
Key takeaways
A default generally means an account has fallen seriously behind and the lender has reported it as unpaid or in default.
Because payment history is an important part of your credit score, a default can have a significant effect, though there is no fixed number of points that applies to everyone.[^1][^3]
Paying a default or collection account usually does not remove it right away, but it can show lenders that the debt was resolved.[^2]
Negative information stays on a Canadian credit report for a set period, which depends on the type of information and the rules that apply where you live.[^2]
You can challenge information that is inaccurate, but accurate information cannot simply be deleted.
You can use ClearScore to check your TransUnion credit score and report for free and watch how your credit changes over time.
Short answer
A default will usually make your credit score lower, and it can make borrowing harder or more expensive for a period of time.[^1] The exact effect depends on your starting point, the rest of your credit history, the details of the account and the scoring model being used.[^3] A default matters. It does not define you, and its influence may lessen as you build positive payment history.
What does it mean to default on a loan in Canada?
What does it mean to default on a loan?
Defaulting on a loan means you have not met the terms of your credit agreement, usually by missing payments over a period of time.
What does defaulting on a loan mean?
In practice, it means the lender no longer expects normal repayment. The account may be closed to further use, passed to a collection agency or written off as unpaid.
The difference between a missed payment, delinquency and default
A missed payment is one payment you did not make on time. When several payments are missed, the account falls further behind. A default is the point at which you have breached the terms of your credit agreement, usually through sustained non-payment, and the lender treats the account as no longer performing; the lender then reports that status to the credit bureaus.
When does a lender consider a loan to be in default?
This varies by lender and product. Many lenders act after a few months of missed payments, but your agreement sets out the terms.
Default versus collections: what is the difference?
A default is a reported account status. A collection account is an unpaid debt that has been transferred or referred to a collection agency.
How much does a default affect your credit score?
How lenders and credit bureaus record a default
Lenders report account activity to Canada's two credit reporting agencies, Equifax Canada and TransUnion Canada. A default is recorded as part of your payment history.
Why the effect depends on your starting credit score
Canadian credit scores generally range from 300 to 900, with average scores ranging around 650 to 725.[^4] Someone with a long, clean history may notice a larger drop than someone whose report already shows missed payments. The direction is the same. The size is not.
How payment history affects your credit score
Payment history carries real weight in how scores are calculated, alongside how much of your available credit you use, how long you have had credit, recent applications and the types of credit you hold.[^1]
How the amount and type of debt may influence the impact
A larger balance or a recent default may carry more weight with some lenders than a small, older account. Scoring models differ, so results can vary.[^3] Credit bureaus such as Equifax Canada and TransUnion Canada collect and hold information about how you've managed credit, and lenders may use different scores, scoring models and criteria, so the score a lender sees can differ from the one you see on ClearScore.
How multiple missed payments can make the damage worse
Each missed payment adds to the pattern. A single late payment reads differently from a run of missed payments followed by a collection account.
Typical credit-report consequences
Stage | What may be recorded | Possible effect on borrowing |
|---|---|---|
| Stage One missed payment | What may be recorded Late payment marker | Possible effect on borrowing May be modest, depending on history |
| Stage Several missed payments | What may be recorded Worsening payment status | Possible effect on borrowing May reduce approval odds |
| Stage Default | What may be recorded Account reported as unpaid or in default | Possible effect on borrowing Can have a significant impact |
| Stage Collections | What may be recorded Separate collection account | Possible effect on borrowing May compound the original effect |
What happens if I default on a personal loan?
What happens after the first missed payment?
The lender usually contacts you and may report the missed payment. Reaching out early often opens more options.
When can the lender charge fees or interest?
Fees and interest depend on your agreement. Missed payment charges and continuing interest can increase the amount you owe.
When might the lender demand the full balance?
Some agreements allow the lender to demand the full outstanding balance once the account is in default.
Can a lender send a personal loan to collections?
Yes. Unpaid debts may be referred or sold to a collection agency.[^2]
Can a lender take legal action?
A default may lead to collection activity, higher costs and, in some cases, legal action.[^1]
What happens if the loan is secured versus unsecured?
A secured loan is tied to an asset, such as a vehicle. If payments stop, the lender may have the right to repossess it. An unsecured loan has no asset attached, so collection and legal routes are more common.
Can default affect a co-signer or guarantor?
Yes. A co-signer shares responsibility for the debt, so the account may appear on their credit report too.
How does a default appear on your Canadian credit report?
What is an R9 credit rating?
Canadian credit reports often use an "R" rating for revolving accounts, from R1 (pays on time) to R9. An R9 generally signals a bad debt, a collection account or a balance written off as unpaid.
How defaulted loans are reported by Equifax and TransUnion
Both agencies record the account, the balance, the payment history and the status. Details may differ slightly between the two, because not every lender reports to both.
The difference between the original creditor and a collection account
You may see two entries: the original loan and the collection account. This does not mean you owe the debt twice.
How to check whether a default has been reported
You can request your credit report from Equifax Canada and TransUnion Canada, or view your TransUnion report through a free service such as ClearScore.
How to dispute inaccurate default information
If something looks wrong, you can file a dispute with the credit reporting agency and the lender. Inaccurate information can be corrected. Accurate information cannot be removed on request.
How much do collections affect your credit score?
What happens when a debt is sent to collections?
The agency takes over recovery of the debt and may report the account in its own name.
Does a collection account lower your credit score?
It generally can, because it signals an unpaid debt.[^2] The size of the effect depends on your wider credit history.
How collections affect lenders' decisions
Some lenders look closely at open collections and may decline applications or offer less favourable terms while a collection remains unpaid.
Do paid collections still affect your credit score?
A paid collection usually stays on your report for the remainder of its reporting period, but the status changes to show it was settled.
Account status | How it may appear | What lenders may see |
|---|---|---|
| Account status In default, unpaid | How it may appear Open default | What lenders may see Highest level of concern |
| Account status In collections, unpaid | How it may appear Active collection account | What lenders may see Ongoing unresolved debt |
| Account status Paid in full after default | How it may appear Default marked paid | What lenders may see Debt resolved |
| Account status Settled for less | How it may appear Settled or partial payment | What lenders may see Resolved, but not in full |
How long do collections stay on a credit report in Canada?
How long do collections stay on a credit report in Canada?
Negative information is commonly reported for up to around six years in many cases, but the exact period depends on the type of information and the rules that apply where you live.[^2]
When does the reporting period begin?
It usually starts from the date of the missed payment or the date the account first fell behind, not the date you repay.
Does paying a collection reset the reporting period?
Paying generally does not restart the clock for credit reporting purposes, though the status is updated.
Provincial and territorial differences
Credit reporting rules fall partly under provincial and territorial law, so retention periods and your rights can differ depending on where you live.
Credit-report retention versus debt-collection limitation periods
These are two separate things. Retention is how long information appears on your report. A limitation period relates to how long a creditor has to start legal action, and it varies by province or territory.
How to check the removal date
Your credit report usually shows the date the information is expected to drop off. Checking it regularly helps you plan.
Item | Typical reporting approach in Canada |
|---|---|
| Item Late or missed payment | Typical reporting approach in Canada Reported for a defined period, commonly several years |
| Item Default or written-off debt | Typical reporting approach in Canada Reported for a defined period, often up to about six years |
| Item Collection account | Typical reporting approach in Canada Reported for a defined period after the account fell behind |
| Item Credit application (inquiry) | Typical reporting approach in Canada Generally about 3 years with Equifax Canada and up to 6 years with TransUnion Canada |
| Item Consumer proposal | Typical reporting approach in Canada Removed 3 years after the debts in the proposal are paid off, or 6 years after it was signed, whichever comes first |
| Item Bankruptcy | Typical reporting approach in Canada Usually removed 6 years after discharge (7 years with TransUnion in Newfoundland and Labrador, Ontario, Prince Edward Island and Quebec), or 14 years for a second or later bankruptcy |
Periods depend on the information type and applicable provincial rules, so confirm details with the credit reporting agency.[^2]
Do CRA collections affect your credit score?
What happens when the CRA collects unpaid tax debt?
The Canada Revenue Agency has its own collection powers, which may include set-offs against benefits or refunds and, in some cases, garnishment.
Is CRA debt automatically reported to the credit bureaus?
Tax debt is not generally reported to Equifax or TransUnion in the same routine way that consumer loans are.
Can CRA collections affect borrowing indirectly?
Yes. If you borrow to pay tax debt, or if repayments leave you short elsewhere, the knock-on effect may show up in your credit report.
CRA liens, legal action and credit applications
A registered lien may become part of the public record and could come up during a mortgage or refinancing application.
How tax debt differs from a bank or personal-loan default
Tax debt sits outside normal credit reporting but can still carry serious financial consequences.
When to seek professional advice
If tax debt feels unmanageable, you may wish to speak to a licensed insolvency trustee, a non-profit credit counsellor or a tax professional.
Does paying a default improve your credit score?
Does paying a default improve your credit score immediately?
Often not immediately. You may not see a change straight away, because the record of the default remains.[^2]
How a paid default is shown on a credit report
The balance usually updates to zero and the status shows the debt as paid or settled.
Why paying a default may still benefit future credit applications
Many lenders treat a resolved debt differently from an open one, so repayment may help your wider application picture.
Can settling for less than the full balance affect your credit profile?
A partial settlement may be recorded as settled rather than paid in full. Some lenders view this less favourably.
Should you request written confirmation?
Keeping written confirmation of payment is a sensible habit. It helps if the record is not updated correctly.
How to confirm the status was updated
Check your credit report after a reasonable period. If the status has not changed, contact the lender or agency.
How to recover your credit score after a default
Check your score, report and account status. Look at all three, not just the number.
Dispute anything inaccurate or incomplete. Errors do happen, and reports can be corrected.[^5]
Bring current accounts up to date where you can.
Pay every bill on time. Consistency is the strongest signal you can send.
Credit card balances. Lower credit utilization, which means how much of your available credit you are using, may help over time.
Several applications at once. Multiple applications in a short window can look risky.
Consider a secured credit card cautiously. Compare fees and confirm the issuer reports to the credit bureaus.
Older accounts. Length of credit history can matter.
Build an emergency fund and a repayment plan. Even small savings can prevent the next missed payment.
Monitor your report for fraud and new errors.
Action | Purpose | Possible timeframe |
|---|---|---|
| Action Pay bills on time | Purpose Builds positive payment history | Possible timeframe Gradual, over months |
| Action Lower card balances | Purpose May improve credit utilization | Possible timeframe Can show at next reporting cycle |
| Action Dispute errors | Purpose Corrects inaccurate data | Possible timeframe Varies by case |
| Action Limit applications | Purpose Reduces new inquiries | Possible timeframe Ongoing habit |
| Action Monitor regularly | Purpose Spots problems early | Possible timeframe Ongoing |
Timeframes vary depending on your circumstances and the scoring model used.
Can you get a loan after defaulting on a loan?
How lenders assess an applicant after a default
Lenders look at the whole picture: how recent the default is, whether it was resolved, your income and your current debts. A lower score can materially affect lending decisions, though not always a refusal.[^3]
Why loan offers may have higher interest rates
Lenders price for risk. Offers after a default may come with higher interest or lower limits.
The role of income, affordability and current debts
Affordability still matters. Stable income and manageable debt can strengthen an application.
Secured loans, co-signers and alternative lending
These may widen your options, but they also shift risk. A co-signer becomes responsible for the debt.
Compare total cost, not just approval odds
Look at the total amount repayable, the interest rate, the term and all fees.
Use eligibility checks and soft searches
Where available, a soft search can indicate likely offers without affecting your credit score, though approval still depends on the lender's own checks.
How to avoid defaulting on a loan
Contact the lender before you miss a payment.
Ask about hardship options or a revised payment arrangement.
Repayment priorities depend on your circumstances, and a non-profit credit counsellor can help you work them out.
Review the full cost of refinancing or consolidation before committing.
Avoid new borrowing to cover payments you cannot afford.
Speak to a reputable non-profit Canadian credit counsellor.
Watch for warning signs: using credit for essentials, making minimum payments only, or losing track of due dates.
How ClearScore can help you monitor and rebuild your credit
ClearScore is a free service you can use to check your TransUnion credit score and full credit report. ClearScore is a credit broker, not a lender. It offers:
Regular monitoring so you can track changes over time.
Personalized tips and educational guidance in plain language.
Loan and credit card comparisons using soft searches, which do not affect your score.
Car finance offers you can compare alongside loans and credit cards.
Alerts that may help you spot incorrect default or collection information sooner.
Limitations are worth knowing. ClearScore shows TransUnion data, so your Equifax Canada report may differ. Lenders use their own criteria, and no service can remove accurate information or guarantee an offer or a score increase.
Frequently asked questions
How many points does a default take off your credit score?
There is no single number. The effect depends on your credit history, the account details and the scoring model.[^3]
Is a default worse than a late payment?
Generally yes, because a default signals a more serious and longer-running problem.
What happens if I default on a personal loan?
You may face added fees and interest, a demand for the full balance, collection activity and, in some cases, legal action.[^1]
How much do collections affect your credit score?
A collection account can have a significant effect while it remains unpaid, though the size varies by person.[^2]
How long do collections stay on a credit report in Canada?
Commonly up to around six years, depending on the information type and applicable provincial rules.[^2]
Do CRA collections affect your credit score?
Tax debt is not usually reported to the credit bureaus in the same way as consumer loans, but it can affect your finances and may appear in public records if a lien is registered.
Does paying a default improve your credit score?
It may help over time and shows the debt was resolved, but it does not usually remove the record.[^2]
Can a default be removed from a credit report?
Inaccurate information can be disputed and corrected. Accurate information stays until its reporting period ends.
Can I get a mortgage after a default?
It may be possible, depending on how recent the default is, your income, your deposit and the lender's criteria.
How long does it take to recover a credit score after a default?
There is no set timeframe. Your credit report and score can change as new information is reported.
Is ClearScore free in Canada?
Yes. You can check your TransUnion credit score and report at no cost.
Does checking my score on ClearScore lower it?
No. Checking your own score is a soft search and does not affect it.
Key takeaways: defaults and Canadian credit scores
A default can significantly affect your credit report and score, and it may make borrowing harder or more expensive for a time.[^1] Collections can add to that effect while the debt stays unpaid. Paying the debt usually will not erase the record, but it shows lenders the matter was resolved. Negative information is reported for a defined period, not forever.[^2]
Your next step can be simple. Check your credit report and score with ClearScore, confirm every entry is accurate, and keep building steady payment habits from here.
[^1]: Financial Consumer Agency of Canada, "Making a plan to become debt-free" (2025) - https://www.canada.ca/en/financial-consumer-agency/services/debt/plan-debt-free.html
[^2]: Financial Consumer Agency of Canada, "Information on your credit report" (2025) - https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/information-credit-report.html
[^3]: Financial Consumer Agency of Canada, "Credit report and score basics" (2025) - https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/credit-report-score-basics.html
[^4]: Financial Consumer Agency of Canada, Canadian Financial Capability Survey (2021) - https://www.canada.ca/en/financial-consumer-agency/programs/research/canadian-financial-capability-survey-2019.html
[^5]: CBC News (2025) - https://www.cbc.ca/news/gopublic/equifax-credit-score-vanished-1.7542059
This article provides general information only and does not constitute financial advice. Individual financial circumstances vary, and you may wish to seek independent advice before making financial decisions. Information is accurate at the time of writing and may change.
Tom Markham
Chief Commercial Officer at ClearScore
27 October 2026
15 min read
Contents
Key takeawaysShort answerWhat does it mean to default on a loan in Canada?How much does a default affect your credit score?What happens if I default on a personal loan?How does a default appear on your Canadian credit report?How much do collections affect your credit score?How long do collections stay on a credit report in Canada?Do CRA collections affect your credit score?Does paying a default improve your credit score?How to recover your credit score after a defaultCan you get a loan after defaulting on a loan?How to avoid defaulting on a loanHow ClearScore can help you monitor and rebuild your creditFrequently asked questionsKey takeaways: defaults and Canadian credit scoresMeet the author
Chief Commercial Officer at ClearScore
Tom Markham
Tom is Chief Commercial Officer at ClearScore, with over 18 years in financial services. He leads partnerships that help millions get access to the right credit, and writes to help you understand your score and find the products that fit.