What is a good credit score in Canada?
A credit score is a three-digit number based on the calculations in your credit report. Your score represents how well you manage credit. In Canada, a score can range from 300 to 900. The higher your credit score, the better.
Lenders look at your credit score to gauge whether you qualify for a loan or not.
Credit score range
725-759: Very Good
Although different banks and lenders have their own standards for rating credit scores, a score of 700 and above is usually considered good and gives you access to better interest rates.
How is your credit score calculated?
There is little information provided on how credit bureaus calculate your credit score. CRAs consider this information their “secret.” However, they provide a list of factors that affect your credit rating. These are:
- Payment History – A good record of on-time credit payments will boost your rating. Paying late will have a negative impact on your score. Delinquencies also have a similar effect.
- Utilization and Balances – A credit card balance above 50% of your credit limit will negatively impact your rating. Avoid maxing out your credit and aim for balances under 30%, according to TransUnion.
- Credit History – You earn more points the longer you have your account/s opened. Avoid closing any account if you plan on applying for a loan in the future.
- Credit Inquiries – Too many credit inquiries and applications in a short timespan make it look like you are desperate for financial help. Avoid applying for credit unless you need it.
- Credit Mix – A good combination of credit accounts and loans make a healthy credit profile. Try a mix of retail store cards, personal loans, a line of credit, mortgage, etc. instead of sticking to only credit cards.
Why is it important to have a good credit score?
Your credit score is used by employers, landlords, utility companies, insurers, and lenders to assess your credit behavior. It is an important aspect of your financial profile because it affects decisions when:
- Applying for a job
- Applying for a loan
- Applying for an apartment or rental housing
- Renting a vehicle
- Getting insured
How to maintain a good credit score?
- Always pay your bills on time
- Don't close your old credit cards, keep them to maintain a longer credit history
- Limit your applications for new credit as it could impact negative impact on your credit score
- Keep your credit card balances low (Your balances should be around 30% of your credit limit)
- Keep an eye on your credit report and ensure that any errors are corrected. Order your credit report from each credit bureau at least once per year.
How to find out your credit score?
You can find out your credit score for a fee from these credit bureaus: