If you’ve got a 636 credit score, you might be wondering if that’s a good score or a bad score. According to Equifax Canada, one of the country’s two major credit bureaus (organizations that issue credit scores), a 636 credit score falls within the range generally seen as average or slightly below average depending on where you live. So, what does that mean exactly for your finances? Let’s break it all down.
Credit scores in Canada
Your credit score is a numeric representation, typically ranging from 300 to 900, that encompasses a broad spectrum of financial information. This score is influenced by several factors. In a nutshell, the higher your score, the more favorable you appear to credit bureaus and, consequently, to potential lenders. A lofty credit score opens the door to numerous financial benefits, including eligibility for lower-cost loans, improved job prospects (especially in fields like financial services where employers may assess credit scores during background checks), and an enhanced likelihood of securing a rental property.
Here’s how Equifax rates its credit scores:
Scores between 300 and 579 are considered poor/bad
Scores between 580 and 669 are considered fair/average
Scores between 670 and 739 are considered good/moderate
Scores between 740 and 799 are considered very good
Scores between 800 and 900 are considered excellent
The average credit score in Canada, according to TransUnion, is 650. If you’ve got a credit score of 636, that means you are very close to what generally is considered to be a fairly decent credit score in Canada.A score of636 is considered decent enough score that is fairly average for most Canadians. It is a score that many people shoot for when trying to improve their credit. And even at this high score level, there are still things you can do to improve your score and to help keep it at that high level. More on that in a bit.
First, though, let’s take a closer look at the average credit scores in some of Canada's major cities.
City Average credit score Vancouver 705 Victoria 694 Calgary 667 Edmonton 649 Saskatchewan 659 Saskatoon 656 Winnipeg 661 Toronto 696 Ottawa 688 Montreal 687 Quebec City 683 Halifax 664 Fredericton 658
As you can see, a 636 credit score falls below that average score but is still far from the lowest scores seen in each of these cities. There are several reasons why your score can rise and fall even as you try to maintain a high score, like many of these scores.
Factors that negatively impact your credit score
Several factors contribute to the gradual decline of your credit score over time. Credit bureaus gather information on each Canadian to calculate credit scores, and certain individual actions can lead to a diminishing score. These include:
Late or Missed Payments: Failing to meet loan payments, whether for credit cards or other financial obligations, significantly impacts your credit rating. About 35% of your credit score depends on your ability to consistently fulfill loan obligations and make timely payments. It's crucial to examine your credit history for any instances of missed payments.
High Utilization Ratio: A high utilization ratio indicates nearing the upper limit of available credit. For example, maintaining an $8,000 balance on a credit card with a $10,000 limit results in an 80% utilization ratio, which is considerably elevated. To effectively boost your credit score, it's advisable to keep your utilization ratio below 30%.
Age of Credit: The age of your credit accounts is a significant factor, influencing up to 15% of your overall credit score. This underscores the importance of thoroughly reviewing your credit history before considering account closures. A well-balanced range of credit accounts demonstrates a lengthy track record of responsible credit management.
Past Negative Credit Events: Prior credit challenges like bankruptcy or collection issues have a detrimental impact, contributing to a 10% reduction in your overall credit score. While credit rehabilitation is possible, these entries can linger on your credit record for years.
Credit Inquiries: Credit inquiries, categorized as soft and hard inquiries, document each instance of accessing your credit file. A hard inquiry, resulting from seeking new credit, can reduce your credit score, while a soft inquiry has no impact. Inquiries account for 10% of your overall credit score and should be monitored, especially when seeking new credit.
How to improve your 636 credit score
Now that you have a better understanding of credit scores in Canada and their functioning, let's explore how you can enhance your own score, even if it's currently at 636or at a similar level.
Timely Bill Payments: Ensure the punctuality of your payments, spanning credit cards, loans, and utilities, as this significantly impacts your credit score. To maintain a solid financial track record, consider setting up reminders or automatic payments to avoid late or missed payments.
Reduce Credit Card Balances: Efforts dedicated to lowering existing credit card balances can mitigate the negative impact on your credit score, particularly when balances are high relative to your credit limit. Aim for a credit utilization ratio below 30% and avoid maxing out your credit cards.
Diversify Your Credit Portfolio: Enhance your credit score by cultivating a well-rounded mix of credit types, encompassing credit cards, loans, and a mortgage. Exercise caution when acquiring new credit, ensuring responsible management and a consistent payment history.
Maintain a Long Credit History: Building credit is a gradual process, and the length of your credit history holds significant weight. Keep older accounts open to contribute to the average age of your accounts, as closing them may shorten your credit history, potentially lowering your credit score.
Regularly Monitor Your Credit Report: Obtain a free annual copy of your credit report from major bureaus and scrutinize it for inaccuracies, reporting discrepancies promptly for correction.
Limit New Credit Card Applications: Apply for new credit judiciously, as each application triggers a hard inquiry that temporarily lowers your credit score. Space out applications to minimize their impact.
Establish a Positive Payment History: If you have limited credit, consider alternative methods like secured credit cards or becoming an authorized user on someone else's card. Consistently pay off balances to build a positive payment history.
Seek Professional Guidance: In the face of financial challenges, consult a reputable credit counseling agency for personalized assistance, valuable insights, support, and strategies to build your credit score.
Build credit using a credit building tool: There are certain financial products that are designed to help you build credit over time. One of those is KOHO’s Credit Building. For as little as $7 a month, you can use this service to help establish a positive credit history.
KOHO offers three different ways to build your credit, so you’ve got options. All three options come with access to a Financial Coach and your credit score, on demand.
If you're considering obtaining a loan, be it for a mortgage, car loan, or line of credit, understanding your credit score is crucial. Your credit score is the metric lenders rely on to assess eligibility and determine the interest rates they offer. In essence, a higher credit score enhances your likelihood of qualifying for favorable loan terms. So, it's essential to be aware of your credit score, as it plays a significant role in shaping your borrowing opportunities and the associated rates you might be offered.