Chances are, you’ve heard about credit scores. Having good credit opens the doors to more credit products and can help you get the lowest rates. But what is considered ‘good’ credit? Is 600 a good credit score?
Key Points:
- A 600 credit score in Canada is classified as ‘fair’.
- Having a credit score of 600 might limit your options when it comes to loans and credit products.
- A 600 credit score might also mean higher interest rates and lower loan amounts.
- If you can’t qualify for a loan with a traditional lender, you may still have success with alternative lenders.
What Does It Mean To Have A 600 Credit Score In Canada?
While your credit scores are only one of the factors used by lenders and creditors to determine your creditworthiness, low credit scores can influence your ability to access affordable credit and other services.
A 600 credit score in Canada would be considered ‘fair’. With a score around this level, you would likely be considered a higher risk in the eyes of lenders.
While you may still be able to get approved for credit with this score, you may be limited in options. If you do get approved, your interest rate may be higher than it would be with a higher credit score. Plus, the loan amount or credit limit you have access to may be limited.
What Can You Get With A 600 Credit Score?
Sometimes, fair credit scores mean that it can be difficult to access financial products, even resulting in higher interest and ultimately larger payments. To give yourself the best chance of gaining access to the products and services you need, it’s important to understand how your credit may affect your ability to qualify.
600 Credit Score For Personal Loans
If you walk into a bank with a 600 credit score looking for a personal loan, you may leave disappointed. Banks usually lend to those with credit scores of 650 and over.
Even with an alternative lender who may be more willing to overlook the credit, there are still pitfalls. Alternative lenders generally charge higher interest rates and may require collateral or a cosigner for you to qualify.
Car Loans And 600 Credit Score
It may be easier to qualify for a car loan than a mortgage with a 600 credit score, but it’s still suboptimal. Since the car itself acts as the collateral for the loan, you may qualify with a lower score. However, some lenders may still see you as high risk and may require a cosigner and a sizable down payment.
With a 600 credit score, you could try applying with a dealership rather than a bank, as many dealers lend to those with subprime credit. However, even then, most are inclined to lend to those with a credit score that is slightly higher.
Alternative approaches include pursuing a second-hand vehicle for a lower price through an auto retailer. Many offer in-house financing that enables you to deal with only one party, simplifying the process.
Credit Cards And 600 Credit Score
Generally speaking, ‘good’ credit is required to get approved for a traditional unsecured credit card in Canada. That means you’ll typically need a score of at least 660 to get a credit card.
With a credit score of 600, you may have trouble getting approved for a conventional credit card. In this case, you may want to look at alternatives to traditional cards, like the following.
Best Credit Cards For 600 Credit Score
The internet is awash with flashy cards boasting impressive rewards. However, these credit cards are often only available to those with higher credit scores. When you look for a credit card with a 600 credit score, aim for long-term planning. It is better to stick to one option and use it steadily to help build your credit. Among the options for which you qualify are:
- Retail Cards — Have you ever been shopping and been offered a store credit card? These are usually really easy to access, even with lower credit scores. They often offer in-store incentives and can usually help build credit, so they can be a good option if your score is a little on the lower end.
- Prepaid Cards — Prepaid cards are those that are preloaded with a specific amount of money. When you shop using the card, you cannot exceed the amount loaded onto the account. While these don’t help build credit, many companies like KOHO have designed their cards to have similar benefits as conventional credit cards, such as cash back rewards and discounts.
- Secured Cards — Requiring no credit check to qualify, these cards help you establish a steady payment history, which may help you improve your credit scores. However, you’ll be required to make a deposit to secure the card.
- Student Cards — If you’re a student who’s looking to build credit, you could apply for a student credit card. These are designed for students starting out, offering the opportunity to enter the job market with a good credit standing. They usually have no annual fee and have very few requirements to qualify. However, the limits are often lower and there may be certain limitations on transactions.
Mortgages And 600 Credit Score
To get a mortgage in Canada, you’ll likely need a credit score of at least 640, though anywhere from 620 to 680 would be considered, depending on the lender. So, a credit score of 600 would likely mean you’d have more difficulty securing a mortgage.
Where To Apply For Credit With A 600 Credit Score
Generally speaking, traditional lenders like banks and credit unions may not work with borrowers with fair credit. Lenders like these typically have higher credit score requirements when it comes to loans and credit products.
Alternative Mortgage Lenders And 600 Credit Score
With a credit score of 600, your best bet is to apply for a loan with an alternative lender. These lenders are not federally regulated, which means they don’t have to adhere to the same rules that federally regulated leaders do. As such, alternative lenders have more flexibility when it comes to the kinds of loan criteria they want their clients to meet.
Many alternative lenders work with consumers with lower credit scores. But in exchange for loan approval, you may be charged higher interest. As such, your loan may be more expensive if you take the alternative lending route. You may also be required to make a larger down payment in the case of a mortgage, and the loan amount you can qualify for may be lower as well.
Ways To Improve Your Credit Score
If your credit score is around 600, you may want to take steps to improve it. Here are some steps you should take to help grow your credit score.
Pay Your Bills On Time
Meeting your bill payment due dates is the best thing you can do for your credit score. Since your payment history holds the most weight when it comes to calculating your credit score (~35%), paying your bills on time every month is crucial.
Lower Your Credit Utilization Ratio
The amount of credit you use compared to how much credit you have available is important for your credit score. Your credit utilization ratio accounts for around 30% of your credit score calculation, depending on the credit scoring model used.
Generally speaking, you should aim to keep your credit utilization ratio to no more than 30%. For instance, if your credit card limit is $5,000, then you should try to cap your credit expenses to $1,500 ($5,000 x 30%). One way to make it a little easier to keep your utilization ratio low is to try paying off your card twice a month.
Increase Your Credit Limit
If you want to focus on your credit utilization ratio to try to help improve your credit, asking for a credit limit increase on your credit card can be a good idea. By keeping your spending level the same, a higher credit limit can help decrease your ratio, which may have a positive impact on your credit.
Use A Secured Credit Card
If you have difficulty accessing a standard credit card, consider taking out a secured card. As discussed above, a secured credit card requires a deposit, so you’re not actually spending on credit. Your payments will be reported to the credit bureaus, which may help improve your credit if you make them on time.
Keep Tabs On Your Credit Profile
Monitoring your credit profile and activity should be part of your credit-building strategy. This involves pulling your credit report on a regular basis to make sure all information on your report is accurate and up-to-date.
You can access your credit report for free from the credit bureaus, as well as several online resources. Review your report to make sure everything is as it should be. If you notice any errors, dispute them with the credit bureaus and have them fixed right away. Fixing inaccuracies can help improve your credit score.
Benefits Of Improving Your Credit Score
Boosting your credit score will afford you plenty of benefits, including the following:
- Increase your chances of getting approved for loans and credit products
- Secure higher loan amounts and credit limits
- Get lower interest rates
- Increase your chances of getting a job
- Improve your lease application for an apartment
- Reduce insurance policy premiums
Bottom Line
Your credit score is an important factor that affects your access to loans, credit cards, and mortgages. It can even impact your ability to get a job or an apartment. If you have a 600 credit score, you may have some difficulty accessing loan products. While you may have more luck working with an alternative lender in this case, you may also want to consider taking some time to improve your credit score before applying for new credit.
