If you’ve got a 710 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 710 credit score falls within the range generally called “good.”
So, what does that mean? Let’s break it all down.
Credit scores in Canada
Your credit score, depicted as a numerical value between 300 and 900, serves as a comprehensive overview of your financial history and behavior. It is a reflection of your creditworthiness, indicating to lenders your ability to manage financial obligations responsibly. This score is calculated based on various factors, painting a detailed picture of your financial habits.
Here’s how Equifax rates its credit scores:
Scores between 300 and 579 are considered poor
Scores between 580 and 669 are considered fair
Scores between 670 and 739 are considered good
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 710, that means you are within the range of what is considered to be a fairly decent credit score in Canada. A score of 710 is considered a decent credit score that many people shoot for when trying to improve their credit. It earns the ranking of ‘good’ and is a solid credit score.
However, even at this high score level, there are still things you can do to improve your score and to help keep it at that night high level. In essence, a higher credit score signals to credit bureaus and potential lenders that you are a reliable borrower. This, in turn, opens the door to a multitude of financial benefits. 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 710 credit score is higher than the average score but is still far from what someone would call a bad credit score. 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
Numerous factors can lead to a gradual decline in your credit score over time. Credit bureaus diligently collect data from every Canadian to calculate credit scores, and certain actions can trigger a decrease in your credit rating. These actions include:
Late or Missed Payments: This is a critical factor. Failing to meet your financial obligations, whether they involve credit card payments or other loans, can significantly harm your credit score. A substantial 35% of your credit score hinges on your ability to consistently meet your payment deadlines. Thus, it's imperative to review your credit history for any instances of past late or missed payments.
High Utilization Ratio: This term refers to how close you are to maxing out your available credit. For example, if you have a credit card with a generous limit of $10,000 and you carry a balance of $8,000, your utilization ratio stands at 80%, which is notably high. To enhance your credit score effectively, it's advisable to maintain your utilization ratio below 30%.
Age of Credit: The duration for which you've held credit accounts plays a pivotal role. This underscores the importance of carefully considering account closures. Having a well-balanced mix of credit accounts serves as evidence of your lengthy history of responsible credit management. The age of your credit accounts can affect up to 15% of your overall credit score.
Past Negative Credit Events: Previous credit difficulties, such as bankruptcy, collection issues, or other adverse notations on your credit report, can have a detrimental impact on your credit score. While it is possible to rehabilitate your credit after such events, these entries on your credit record result in a 10% reduction in your overall credit score and may linger for years.
Credit Inquiries: Credit inquiries fall into two categories: soft and hard inquiries. Each instance of accessing your credit file is recorded as an inquiry. A hard inquiry can lead to a decrease in your credit score, while a soft inquiry has no impact. Hard inquiries occur only when you apply for a new line of credit. Inquiries account for 10% of your overall credit score and are essential to monitor.
Understanding these factors that influence your credit score is vital for maintaining and improving your creditworthiness. By staying informed and managing your credit responsibly, you can take proactive steps to safeguard and enhance your financial standing.
How to improve your 710 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 710 or at a similar level.
Timely Bill Payments: The punctuality of your payments has a significant impact on your credit score. Ensure that you promptly pay all your bills, including credit cards, loans, and utilities. Late or missed payments can harm your credit, so consider setting up reminders or automatic payments to maintain a solid financial track record.
Reduce Credit Card Balances: High credit card balances relative to your credit limit can negatively affect your credit score. As mentioned earlier, it's advisable to aim for a credit utilization ratio below 30%. Dedicate efforts to pay down existing balances and avoid maxing out your credit cards.
Diversify Your Credit Portfolio: Develop a well-rounded mix of credit types, including credit cards, loans, and a mortgage, to have a positive impact on your credit score. However, exercise caution when taking on new credit, ensuring that you can manage it responsibly and can maintain good payment history.
Maintain a Long Credit History: Understand that building credit is a long-term effort. The length of your credit history is a significant factor. Keep older accounts open, even if they are not actively used, as they contribute to the average age of your accounts. Closing older accounts can shorten your credit history, potentially resulting in a lower credit score.
Regularly Monitor Your Credit Report: Obtain a free copy of your credit report from major credit bureaus like Equifax or TransUnion at least once a year, more often if necessary. Review it for inaccuracies, such as incorrect account details or late payment records, and promptly report any discrepancies for correction.
Limit New Credit Card Applications: Remember that each new credit application results in a hard inquiry on your credit report, which can temporarily lower your credit score. Apply for credit only when necessary and consider spacing out applications to minimize their impact on your score as a hard pull on your score.
Establish a Positive Payment History: If you have limited credit or a thin credit file, consider alternative methods for building credit, such as getting a secured credit card or becoming an authorized user on someone else's credit card. Make small purchases and consistently pay off your balances to establish a positive payment history.
Seek Professional Guidance: If you're facing financial challenges or credit issues and need personalized assistance, it's a wise idea to seek help from a reputable credit counseling agency. They can provide valuable insights, assist with budgeting, and offer strategies to improve 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 positive credit history, which has been proven to increase scores over time, assuming on-time subscription payments.
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 interested in getting a loan, such as a mortgage, car loan, or line of credit, it’s important to know what your credit score is. After all, it’s your credit score that lenders use to determine who to loan their money to – and what rates to offer them. Generally speaking, the higher your credit score, the more likely you’ll be to qualify for a good loan.