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Knowing where your credit lies on the credit score range is important. Depending on your scores and ranking, you may receive lower interest rates and may be more likely to be approved for loans and credit cards. There are two different credit reporting agencies in Canada, Equifax and Transunion. Each has its own approach to determining scores. Generally, a credit company or lender will look at both your credit score and your credit report to determine your creditworthiness. You are the only one who can improve your credit scores, this makes understanding your credit that much more important.
What Is A Good Credit Score In Canada?
A good credit score in Canada is typically one that is 680 or higher. Of course, there are many different types of credit scores (more about different types of credit scores here), and keep in mind that the credit scores a lender sees are usually different from those that you might have access to. Additionally, your Equifax credit scores might be different from your TransUnion scores. The image below illustrates the different credit score ranges in Canada and can help you determine if your credit score is a good credit score.
Canadian Credit Ratings And What They Mean
Lenders and creditors typically use a credit score to determine you’re likelihood of making payments on time. It’s important to note that your credit score in Canada is only one of the factors that lenders will evaluate when approving you for new credit.
- Excellent (Scores 780+) – Individuals with a rate of 780 or over may enjoy the best interest rates on the market. They also will typically always be approved for a loan.
- Very Good (Scores 779-720) – This is considered near perfect and individuals with a rate in this range may still enjoy some of the best rates available.
- Good (Scores 719-680) – An individual who has a credit score that falls within this range has good credit and will typically have little to no trouble getting approved for the new credit.
- Average (Scores 679-620) – While this is still a good range, individuals with this score may receive slightly higher interest rates than those with higher scores. According to Equifax, at the end of 2012, the average national credit score was 696.
- Poor (Scores 619-580) – Scores in this range indicate that the individual is high risk. It may be difficult to obtain loans and if approved, they will be offered higher interest rates.
- Very Poor (Scores 579- 500) – Scores in this range are rarely approved for anything, but credit can be repaired.
- Terrible (less than 500) – Individuals whose credit scores are less than 500 may not get approved for new credit and should seek credit improvement help.
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Factors That Can Affect A Credit Score
There are 5 main factors that can affect the calculation of a credit score. If you’re interested in improving your credit these are the areas that you should focus on.
History of Payments (~35%)
This is determined by the payments you have made to lenders or creditors. This ultimately reflects on how frequently you pay your loans or bills on time. Anyone looking to improve their credit scores should always make their payments on time, without fail.
Debt/ Credit Utilization (~30%)
This shows the amount of outstanding debt a consumer has compared to the amount of available credit they have. For example, if you have a total credit limit of $5,000 and consistently carry a high balance, your credit score may be negatively affected. To help improve your credit scores, pay down your debt and make sure you need your balance to lower than 35% of your available credit.
Credit Length (~15%)
This factor is straightforward, the longer a credit account has been open, the better it is for your credit scores. If you’re considering cancelling a credit card, make sure you cancel a new one and keep the older ones open.
New Inquiries (~10%)
Every time a potential lender or creditor pulls your credit, your credit score may take a small and temporary hit. If you apply for a lot of new credit within a short period of time, your credit score may drop and other creditors will be able to see that you’ve recently applied for a lot of credit which they may consider to be a red flag.
Having a variety of different types of credit accounts may help improve your credit. This shows potential creditors and lenders that you are a responsible borrower and can handle the responsibility that comes with having several different credit accounts.
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How To Read Your Credit Report
Your credit report contains both personal information and financial information. Your credit report illustrates who you are as a borrower, both the good and the bad. Checking it allows you to keep an eye on your accounts, make sure there are no errors, and even potentially prevent the damaging effects of fraud. Your credit report is the report card of your financial life and understanding how to read it can help you take control of your finances and be prepared for any of your future credit needs.
Learn more on how to read your credit report.
Your Credit Report Contains The Following Information
- Date of birth
- Current and previous address(s)
- Current and previous phone number(s)
- Social insurance number (SIN)
- Driver’s licence information
- Passport number
- Current and previous employer(s)
- Credit accounts and their transaction, including credit cards (retail as well), personal loans, car loans, lines of credit
- Cell phone and internet accounts
- Credit requests from creditors, lenders, landlords or employers
- Bankruptcy, consumer proposals, consolidation, and debt management programs
- Legal judgements
- Credit accounts in collections
- Closed accounts because of fraud committed by the account holder
- Fraud alerts
- Identity verification
Each of your credit accounts will be given a rating that includes a letter and a number.
|Installment||(I)||Accounts that receive an “I” are installment style accounts that are paid off in predetermined fixed amounts. For example, a car loan.|
|Open||(O)||Accounts that receive an “O” are open, which means they can be used up to a preset limit. An example of an open credit account is a line of credit.|
|Revolving||(R)||Accounts that receive an “R” are considered revolving credit because your payments change based on how much of your limit you borrow. A credit card would receive an “R”.|
|Mortgage||(M)||Depending on the credit bureau you pull your report from, your mortgage may or may not show up. If it does, it will be represented by an “M”.|
|0||Account is too new to rate|
|1||Account has been paid off as agreed|
|2||Late by 31-59 days|
|3||Late by 60-89 days|
|4||Late by 90-119 days|
|5||Late by more than 120 days|
|6||Account not used|
|7||Account is associated with consolidation, consumer proposal, or debt management program.|
|8||Account associated with a repossession|
|9||Account is in collections or bankruptcy|
Did you know that bad credit can affect your daily life? Learn more here.
What is a bad credit score in Canada?
Can I get a free credit score in Canada?
How can I improve my credit score in Canada?
What credit score do I need to get a mortgage?
Is 700 a good credit score?
The good news is that the health of your credit is completely in your hands and you have the power to improve it simply through the way you manage your credit products. Responsible use of your credit cards and loans, over time, can improve your credit score and therefore allow you to qualify for other larger loans, for example, a mortgage, in the future.
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