What Credit Score is Needed for a Line of Credit?

Because of their low interest rates and ease of use, lines of credit are popular credit products in Canada. However, because they are generally available mostly from banks rather than alternative lenders (though some alternative lenders do offer them), lines of credit often have strict requirements and can be more difficult to access than personal loans. Not only will you be expected to have a solid credit report and good credit history, you’ll also need to have a good credit score to qualify — especially if you want the lowest interest rates. 

While all lenders have their own requirements as to what credit scores they want their applicants to have for a line of credit, it’s a good bet that some lenders will approve applicants with scores that hover around 660 to 712, which qualifies as a Fair score. However, applicants with credit scores that range from 713 (i.e. those that fall into the “Good” range) and above have the best chance of getting approved. 

No matter what lender you go to, one thing is certainly true: the higher your credit score, the better chance there is that you’ll get approved for a line of credit or home equity line of credit.

What is a Good Credit Score?

To understand what credit score is needed for a line of credit, it’s essential to have a clear idea of what constitutes a good credit score. In Canada, credit scores range between 300 and 900, with the average score being 672. But what exactly do those three-digit numbers mean? Though standards can differ slightly among lenders and credit bureaus, in general, credit scores are ranked as follows:

• 760 or more: Excellent credit

• 725 - 759: Very good credit

• 660 - 724: Average credit

• 575 - 659: Below average credit

• 300 - 574: Poor credit

If you recently turned 18 and have not had a lot of time to build up your credit history or are new to Canada, it's also possible to have a zero credit score. If you’ve been responsibly using credit products like credit cards and loans for many years, paying your bills on time and otherwise following financial best practices, you’re probably one of the lucky Canadians with a good credit score.

What Credit Score Is Needed for a Personal Line of Credit?

A line of credit is a common kind of loan where a lender like a bank or alternative financial institution allows a client to borrow money up to a pre-determined limit. You can use the funds any way you want to and you’ll usually have to pay a variable rate of interest that is tied to the bank’s prime rate. Additionally, you only have to pay interest on the money you borrow. You can take out what you want (up to your credit limit) and then repay the money on your own schedule. The only requirement is that you make minimum monthly payments that cover the interest you owe. Aside from that requirement, you’re free to use the funds how and when you want.

Even though a personal line of credit doesn’t work exactly like a personal loan (in which you’re just paid a lump sum and must follow a set payment schedule), it is nonetheless a credit product and, as such, lenders will want to see the credit score of potential borrowers. 

Lenders view credit scores as good indications of how creditworthy a person is and thus, they rely on them to help gauge how likely a person is to repay a loan on time and in full. Most lenders will be hesitant to give a line of credit to those with bad credit or those who have a history of not repaying loans on their credit file.

Getting a Personal Line of Credit with a Poor Credit Score (300 to 574) and a Below Average Credit Score (580 to 659)

It will be very difficult to get a line of credit with a poor or below average credit score, as most lenders will see you as a credit risk and believe that you are likely to default on your repayment obligations. Your only option in this situation will likely be to seek out an alternative lender who will approve you, but be aware that you'll have to pay high interest rates.

Getting a Personal Line of Credit with a Fair Credit Score (670 to 724)

With a fair credit score, you’re likely to be considered for a personal line of credit, though you may be offered a higher interest rate than if you had a very good or excellent credit score. 

Getting a Personal Line of Credit with a Very Good Credit Score (725 to 759) and an Excellent Credit Score (760 to 900)

If you have a very good or excellent credit score, lenders won’t see you as a credit risk and you should have no problem getting a line of credit with the best possible interest rate.

What Credit Score Do You Need for a Home Equity Line of Credit?

A home equity line of credit (known more commonly as a HELOC) is a type of secured line of credit (aka a line of credit where you use an asset as collateral) that you secure with your house. The lender uses the value of your home as collateral against non-payment. A HELOC is a very serious obligation that should not be entered into lightly, because if you default on your payments, the lender would have a legal right to seize your home.  

Much like any line of credit, home equity lines of credit are a kind of revolving credit. You can borrow as much as you want up to your pre-determined limit and pay it back and then borrow it again, and continue to do so as long as your HELOC account is in good standing.

Getting a Home Equity Line of Credit with a Poor Credit Score (300 to 574) and a Below Average Credit Score (575 to 659)

Because you’re putting your house at risk, most lenders won’t extend people a HELOC to people with poor and below average credit scores, making a HELOC potentially harder to get than a line of credit.

Getting a Home Equity Line of Credit with a Fair Credit Score (660 to 724)

With a fair credit score, you won’t usually have a problem getting a HELOC, but you won’t qualify for the lowest interest rates on the market.

Getting a Home Equity Line of Credit with a Very Good Credit Score (725 to 759) and an Excellent Credit Score (760 to 900)

Banks won’t be hesitant to offer those with very good and excellent credit scores a HELOC and you’ll also get the best possible interest rates, which will help save you significant money over time.

Can You Get Declined for a Line of Credit?

You can certainly get declined for a line of credit, especially if you have a low credit score and a history of defaulting on payments. The best way to prevent getting declined is to improve your credit score by doing things like always paying your bills on time and increasing your credit history.

The Bottom Line

Securing a personal line of credit can provide valuable financial flexibility. While lenders have varying credit score requirements, aiming for a score of 660 or higher increases your chances of approval. For the best interest rates and terms, a very good or excellent credit score (i.e. 725 - 900) is ideal.

Ready to explore your options? Check your free credit score with Borrowell today and discover how close you are to achieving your financial goals. Understanding your credit score is an important first step towards accessing the credit you need.