If you’re new to the world of credit scores, you might be wondering: what’s a good credit score? Say you’re applying for a new credit product, like a line of credit, car loan, or a mortgage. You search online and discover how to see your credit report, which includes your credit score. The results come back and you’ve got a 760 credit score, but you’re unsure if that’s good or bad. The great news for you is that a 760 credit score is a very good credit score. Let’s break down how credit scores in Canada work.
Credit scores in Canada
There are two credit bureaus that issue credit scores in Canada: TransUnion and Equifax. They collect credit information on all Canadian adults who have a credit history – those who have taken out any form of credit in the past, such as a credit card – and they provide that information to banks and lenders to help them determine a person’s “credit worthiness”. Which is used to determine how likely a person is likely to pay back a loan they’ve been given.
A credit score is a three digit number, ranging from 300 to 900, and there are five credit ranges that these scores fall into: poor, fair, good, very good, and excellent. As we mentioned earlier, a 760 credit score is considered very good – but what about the rest of the possible scores? Here’s how it all shakes out.
Poor credit scores: 300 to 579
This is the lowest category for credit scores in Canada. Those with a poor credit score will find it difficult to secure a loan, since lenders view them as high risk. If you’ve got a score in this range, it likely means you’ve had some issues with credit in the past. You might have several missed payments on things like credit cards or card loans, or you might even have accounts that are so far behind they’ve defaulted. If you’ve declared bankruptcy recently, that’s another reason your credit might be considered poor.
If your credit falls within this range, the good news is that there are things you can do to improve your credit score. We’ll cover that in a bit.
Fair credit scores: 580 to 669
If you’ve got a fair credit score, you’re a step closer to building solid credit. While those with poor scores may have trouble getting approved for credit at all, Canadians with fair credit scores will likely have an easier time – though they’d be considered subprime candidates, which means they wouldn’t qualify for the best loans or rates. If you fall into the fair category, expect your credit options to be limited and your interest rates to be higher than those with better credit.
Good credit scores: 670 to 739
If you’ve got a good credit score, congrats: you’ve got better credit than the average Canadian. Lenders are willing to offer credit products to those who fall into this category, but those borrowers can expect to pay slightly higher rates than those in higher categories, such as those with very good credit scores and excellent credit scores.
If you’ve got a good credit score, you’ll want to shop around with various lenders before opening a new loan to make sure you get the best rate possible.
Very good credit scores: 740 to 799
If you’ve got a very good credit score, you’ve demonstrated to lenders that you’re a responsible borrower. You’ve likely made almost (if not all) of your payments on time, you’ve got a good mix of credit products, and you’ve got a solid history of borrowing. Chances are, your loan balances are lower than the average Canadian as well. Lenders will view you very favourably if you fall into this category and you shouldn’t have much trouble qualifying for most credit products.
Excellent credit scores: 800 to 900
Those in the excellent range are considered the lowest risk borrowers in Canada. If you’ve got an excellent credit score, your payments have all been made on time, you’ve got a long history with credit products, and your loan balances are low. You would qualify for the best loans in Canada at the best rates. And chances are, banks are regularly contacting you to offer even more credit products, since you’re viewed as a responsible borrower.
How to keep or improve your very good credit score
Here are some things to avoid if you’ve got a very good credit score and would like to keep it that way – or even improve it. After all, you might be close to breaking into the excellent credit score range.
Keep credit utilization low
Your utilization ratio is the percentage of credit currently being used versus available credit. Say you’ve got one loan account, a credit card, with a limit of $10,000. If you’re carrying a balance of $8,000, you’re using 80% of that credit. And that’s considered high.
Credit bureaus advise Canadians to keep their utilization below 30%, so it’s important to keep an eye on how much credit you’re using. If you find your utilization ratio creeping up, do everything you can to bring it back down: make lump sum payments towards your credit, revisit your budget to allow for more payments, and pay for more things with cash.
Limit credit inquiries
A credit inquiry is recorded each time you apply for a new credit product. Credit inquiries result in what’s called a “hard” credit check and is one reason your credit score may fall. So make sure you aren’t applying for new credit products too often.
Make all payments on time
This might seem like a given, but we all live busy lives and things fall between the cracks. Make a list of all your credit accounts and add them to your budget. Note payment due dates and make sure you’re making on-time payments. Even one missed payment can result in a ding to your credit score, and no one wants that.
Have a mix of credit products
While you’ll want to limit the amount of credit you apply for in a short time period, it’s important to have various credit accounts on your file. This could mean having a cell phone, a line of credit, a credit card, a student loan, a mortgage, and a car loan – or any mix of those. If you can demonstrate to lenders that you’re able to manage multiple credit types, it’ll show them that you have good financial habits and are able to manage credit – and your finances in general – well.
Build a credit history
The truth about credit is that the longer your credit history, the better your score will be – that’s assuming you’ve shown good credit habits, like making all on-time payments. You can’t rush this part of the equation, so you shouldn’t worry too much about it. Open a line of credit when you’re eligible – in Canada, that’s at the age of 18, and start practicing healthy credit habits.
If you’re having trouble qualifying for credit products, there are other ways to build credit history. KOHO offers Credit Building, which is a secure and easy way to build credit over time, just by paying a monthly subscription fee. It costs $10 a month (or as low as $7 a month if you sign up for either the Essential or Extra accounts) and there’s no credit checks, no application, and you can cancel any time.
Credit Building also comes with access to a Financial Coach, who can help you manage all things money, and the ability to view your credit score on demand. Which means you can stay on top of your score and make sure you’re improving it over time.
What does a 760 credit score mean?
A 760 credit score is something to be proud of. If you’ve got a very good credit score, you’ve shown the credit bureaus that you’re able to manage your finances and have a handle on your credit. Having a very good credit score opens up a world of opportunities for you: you’ll qualify for some of the best loans in Canada and will even have an easier time when searching for a rental apartment, since landlords will almost always do a credit check for potential tenants.
If your credit isn’t quite as good as you’d like it to be, take comfort in knowing that it can be improved over time. While there’s no instant way to improve your credit, we’ve outlined a few ways that you can improve your score over time.