Credit Scores 101

Credit scores

Credit scores in Canada are a huge part of a person’s financial credibility. If you have a strong credit score, you can easily apply for rentals, loans and rewards credit cards without having to worry about your credit score hindering your chances of being approved. In Canada, a credit score can grant or hinder your access to several goods and services. Credit scores ranging from 660-900 are good to excellent scores.

Credit bureaus, such as, Equifax and TransUnion calculate your credit scores and update them frequently. Credit bureaus use your personal information in your credit file to calculate your scores. Factors used to calculate your credit score include the following:

• Payment history
• Existing debt
• Length of credit history

You can easily view your own credit score through Equifax and TransUnion. A credit check done by you won’t affect your credit score and is called a soft check.

On the other hand, a credit check pulled by a lender or credit issuer can result in a hard check and can slightly lower your score. Hard credit checks only take place when you apply for a mortgage, loan or credit card. Usually, hard credit checks need authorization by the account holder before they are processed.

Understanding your credit score

Here’s a breakdown of credit scores in Canada:

• 740 and more: If your credit score is more than 740, you have excellent credit. A high score like this shows that you can repay all of your debts on time and handle your credit extremely responsibly. You can easily be approved for loans and other services, as lenders and issuers will see you as a financially responsible borrower.
• 660- 740: This is considered a good credit score. Most Canadians tend to fall into this range. Remember to avoid going over your credit limit to help increase your credit score.
• 600-660: A score in this range shows that you are a high risk applicant, so you’ll experience difficulty when applying for credit. Make sure you regularly pay off your minimum statement balances diligently. You can also consider talking to a credit counsellor.
• 300 to 599: A credit score in this range is considered as bad credit. Your score shows that you are unable to repay debt and struggle with finances. You will need to repay any existing loans or credit balance. If you have a high credit card balance, you can consider getting a balance transfer credit card or secured credit card to rebuild your credit. With such a low credit score, you won’t be eligible for most opportunities. Learn about balance transfer credit cards and secured credit cards to see how you can start rebuilding your credit today.