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What is a good credit score in Canada? And why does it matter?

Hey there, Mark here! Today, we’re diving into a topic that’s crucial for anyone navigating their financial journey in Canada – credit scores. Understanding what a good credit score is in Canada can be like trying to solve a mystery, but don’t worry, I’ve got your back. Let’s unravel this puzzle together!

Understanding Credit Scores in Canada

The Basics of Credit Scores

Credit scores in Canada range from 300 to 900. Think of it like a report card for your financial health. This score is used by lenders to determine how risky it might be to lend you money.

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In Canada, credit scores range from 300 to 900. Higher scores indicate better credit health. Here’s a quick breakdown according to equifax:

  • 300-559: Poor
  • 560-659: Fair
  • 660-724: Good
  • 725-759: Very Good
  • 760-900: Excellent

Factors Influencing Your Credit Score

Several factors impact your score, including your payment history, the amount you owe, the length of your credit history, new credit applications, and the types of credit you use.

Here’s some of the top factors that determine what builds a good credit score in Canada.

  1. Payment History (35%): Timeliness of your bill payments.
  2. Credit Utilization (30%): The amount of credit you use versus your total credit limit.
  3. Credit History Length (15%): The duration of your credit accounts.
  4. Credit Mix (10%): Types of credit (e.g., credit cards, loans).
  5. New Credit Inquiries (10%): Frequency of credit applications.

Why Having A Good Credit Score Matters

Your credit score isn’t just a number; it’s a key that can unlock or lock doors to financial opportunities. It affects your ability to get loans, credit cards, and even impacts interest rates and insurance premiums. Some Canadians have been able to save thousands of dollars a year on their mortgage and car loans by just having a better credit score.

Your credit score impacts:

  • Loan and credit card approvals.
  • Interest rates on loans and mortgages.
  • Insurance premiums.
  • Rental and employment opportunities.

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What Constitutes a Good Credit Score in Canada?

Understanding the Good Score Range A score above 660 is generally considered good. Here’s a detailed look at what each range means for you:

Achieving an Excellent Credit Score

Reaching a score above 760 requires consistent habits done over a long period of time. This includes timely payments, low credit utilization, and a diverse mix of credit.

Strategies to Boost Your Credit Score

  1. Pay your entire amounts due, on time. Always pay your bills on time. Late payments can significantly harm your score.
  2. Use <30% of the total credit available to you. For example, if you have a $10,000 limit, try not to exceed $3,000.
  3. Maintain a mix of credit products( e.g. credit card, line of credit, mortgage, other loans) and avoid closing old accounts as they contribute to your credit history.

What Is A Good Credit Score In Canada FAQ’s

What is considered a good credit score in Canada?

Equifax states that a “good” credit score is between 660-724 and above. However FICO scores are more accurate to use. This is because many lenders will use FICO scores to grade you. In that case a credit score of 704 and up would be considered a good score in Canada. However if you’re going for a mortgage – which are at all time unaffordable rates in Canada, you’re going to need as good of a score as possible, preferably over 760.

How often should I check my credit score?

I recommend checking your credit score 2x a year at least. To stay more informed you can signup for credit score monitoring from FICO or Transunion.

How can I improve my credit score?

There are 2 simple steps you can take to improve your credit score. 1. Get a credit report and resolve any outstanding payments due. 2. Build your credit history with a product like KOHO credit building.

There you have it, folks – a detailed look into what a good credit score is in Canada. Remember, your credit score is more than a number; it’s a reflection of your financial habits. For more financial insights and tips, don’t forget to check out Auto Growth Academy, Money With Mark, and Make Your Mark Today.

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Money With Mark is a personal finance speaker, influencer, author and content creator on YouTube, Tik Tok, and Instagram.