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A good credit score is more than just a number. Lenders use this calculation to determine creditworthiness and how likely a borrower is to repay a loan. Quite simply, the lender can weigh an applicant’s risk level.

That means a good credit score can be the difference between an exemplary interest rate and a less than ideal interest rate. It can also improve the chances of getting approved for more significant amounts of credit or certain products, like a mortgage, for example.

For those that are credit-active, a credit score is always in flux and needs to be maintained. However, new credit consumers need to build a credit score, and those with poor credit history must rebuild their rating, which takes time.

For this reason, it is vital to stay up to date with your credit report and that critical three-digit number — your credit score. Doing so can help you track your progress, prepare for big life milestones, and catch any suspicious activity.

Learn what a good credit score is and what you can do to improve or maintain your rating.

Good credit scores

Credit scores range between 300 and 900, with higher numbers being more desirable.

Although each credit bureau or bank may have a slightly different method to calculate credit scores, they generally fall within this range:

  • Poor: 300 to 659
  • Good: 660 to 724
  • Very good: 725 to 759
  • Excellent: 760 to 900

Those with credit scores below 660 may find it challenging to get approved for credit or pay higher interest rates.

Pro tip: In Canada, you can order your credit report at least once a year for free from the two main credit bureaus, Equifax, and TransUnion. Spacing out your requests every six months can help you stay informed throughout the year.

How is a credit score calculated?

These are useful guidelines to follow, though it is important to note that each credit bureau, bank, or financial institution will have its method and interpretation of a credit score.

  • Payment history: This factor accounts for 35% of your credit score. Your payment history looks at how you manage accounts and whether you pay your bills on time.
  • Credit utilization: This detail determines 30% of your score. Your credit utilization is the amount of credit you use versus the total amount of revolving credit you can access. Using less than 30% of your available credit can ensure you stay within that safe zone.
  • Credit history: This section controls 15% of your score and shows lenders how long you have managed credit. The longer you have accounts open, the better.
  • Credit mix: This part is worth 10% of your score and shows lenders that you can manage different types of accounts, for example, a credit card and a line of credit.
  • Inquiries: This portion accounts for 10% of your score and indicates how often you apply for credit. Making multiple applications within a brief period can suggest an urgent need for credit and work against you.

Ultimately, using credit responsibly over several years and maintaining healthy financial habits can result in a good, if not very good, credit score.

Be proactive about your credit score

Here are some things you can do to improve or maintain your score:

  • Pay bills on time. Missing or making a late payment will impact your score. Always pay your bills on time and in full, even if you are disputing a charge.
  • Keep credit utilization low. If you can increase your credit limit or upgrade from a starter credit card, you may improve your utilization ratio. However, it is always a good idea to be mindful of your credit limit when making purchases and keep balances low.
  • Check your credit score often. Experts recommend checking your credit score at least once a year. If you can, check it more often.
  • Only apply for credit when you need it. Applying for lots of credit within a short period can raise red flags to lenders and decrease your credit score.
  • Do your research. Try and stay up to date with your score and improve it, if necessary, before making major financial decisions like buying a home. You may be able to get a better mortgage rate.

On the other hand, bad credit information can have adverse effects on your credit score and stay in your credit report for several years. Fortunately, there is always room for improvement if you find yourself in this situation. Again, credit scores fluctuate. So, if your score goes down, it can always come back up.

Lastly, you should contact both Equifax and TransUnion if you believe there has been an error on your report. Sometimes it happens. Whether it’s a mistake from having a common name or identity theft, it is crucial to sort out these details and protect your score.

A good credit score can help you reach your financial goals and, ideally, get the best loan terms and interest rates.

Hayley Osmond

Hayley Osmond is an editor and writer in the personal finance space, where she uses her eight years of media and marketing experience to bring content to life. She specializes in money products, including mortgages, home and auto insurance, and credit cards. Hayley holds a Broadcast Journalism diploma from Sheridan College and was awarded the Shaw Media Journalism and Media Award for graduating at the top of her class. Her work has appeared in Global News and diverse digital corporate training materials behind the scenes.

Hayley is passionate about making complex subjects, such as home buying and financial literacy, concise and intriguing. Her work has garnered media coverage from The Globe and Mail, blogTO, Yahoo! News, and CityNews 680 and has been syndicated across other publications.

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