Your credit score ranges between 300 and 900, but most scores fall between 600 and 750. In Canada, a credit score between 713 and 740 is considered good, and a score between 741 and 900 is considered excellent.
Your credit score can make your financial world go round, and the higher your score, the better your chances of qualifying for the best rates. Lenders use your credit score to determine whether or not to offer you credit. Your credit score will impact what rates you qualify for on mortgages, personal loans, car loans, and credit cards. Your credit can also help or hinder your job search, as some employers check your credit report for red flags during the final steps of their interviews. Your credit can even affect your apartment search, as landlords might check your credit before approving your rental application. As you can see, your credit score can impact many aspects of your life, so it's crucial to prioritize growing this score.
What are the different credit score categories?
Your credit score can fall into five different categories, ranging from poor to excellent. Here's a more detailed breakdown of what each category means:
300 to 574: Poor
If you have a credit score in this range, you have most likely had some financial problems in your past. You won’t qualify for most credit products and will need to start rebuilding your credit score. There are secured cards and other tools designed for Canadians to help them repair their bad credit scores.
575 to 659: Below Average
If your credit score is in this range, you won’t qualify for the best rates from Canada’s major lenders. That said, there are still alternative and online lenders that will work with you to provide the funds you need. The interest rates offered on these loans will be higher than average, so you may want to take some time to improve your credit score before applying for loans.
660 to 712: Fair
According to 2021 data, the average credit score in Canada is 660. With a fair credit score, you'll have access to loan products from most prominent Canadian lenders, but you won't have access to the lowest rates. Some top-tier rewards credit cards will be available to you, but improving your credit score can help you unlock access to the best credit cards.
If your credit score falls in this range, you have a good credit score. This is the level where you’ll start receiving preferential rates on mortgages, car loans, and personal loans. Lenders know that Canadians with a credit score this high have a history of responsible borrowing, and so you will have access to the top lenders in Canada.
If your credit score is 741 or higher, you are in the top tier of borrowers in Canada. This tier affords you access to Canada's lowest possible interest rates and the opportunity to work with the biggest lenders. 25% of Borrowell members fall into this category.
Why does having a good credit score matter?
It may not seem like your credit score impacts your daily life, but your credit score influences almost every financial move you make. A good credit score helps you access four major things:
Lower interest rates: Lower mortgage rates, car loans, and personal loan interest rates make your monthly payments lower, freeing more space in your budget for saving and spending.
Better credit terms: Higher approval chances for credit means you can make financial decisions about your future with confidence, whether you need additional funds for school, home renovations, or a new car.
Higher credit limits: You'll automatically qualify for higher credit limits, which gives you more financial flexibility in an emergency and makes it easier to maintain a reasonable credit utilization rate.
Top-tier financial products: You’ll have much higher chances to qualify for premium credit cards, such as rewards cards and cashback cards, along with other top-tier financial products.
How good should my Credit score be to buy a house?
Buying a house in Canada is one of the most significant financial commitments you will ever make. You need a minimum credit score of 680 or above to qualify for the best mortgage rates with traditional lenders. A score of 750 will put you in excellent territory. If your credit score is below 680, you may still qualify for a mortgage, but you'll likely need to choose an alternative mortgage lender and pay a higher interest rate.
How good should my credit score be to get a loan?
To qualify for the top loan rates with traditional lenders, you should have a 650 or above credit score. That said, if your credit score is lower, you can still qualify for a personal loan. You can get a loan with bad credit, but it may be with an alternative lender, and your interest rates may be higher. If your credit score is extremely low and you don't qualify for a personal loan, you can use a co-signer who will guarantee the loan on your behalf.
How good should my credit be to get a credit card?
Most credit card providers in Canada require a credit score of at least 660 to qualify. When it comes to credit cards, the interest rates are set, so you will not secure a better interest rate with a better credit score, but you will secure a higher credit limit. If your credit score is too low to qualify for a credit card, you can apply for a secured card available to Canadians with very low credit scores.
What influences my credit score?
Your credit score is determined by various factors, each with its own weighted importance in the credit scoring formula. Here's a breakdown of the factors credit bureaus use to determine your credit score, along with how much weight they carry towards your credit score:
Payment history (35%): Your payment history is the most important factor that impacts your credit score. Your payment history is a clear indicator for lenders that you have a track record of making your monthly payments on time, every time. Your credit report will show your payment histories for credit accounts, like credit cards and loans, along with utilities, cell phone bills and other bills. If you miss any of your payments, they will be tracked in your credit report and can negatively impact your credit score. In general, negative payment information can stay on your file for seven years.
Credit utilization rate (30%): Your credit utilization rate is the amount of credit you’ve used up compared to the total amount of credit available to you. For example, if you have a credit card with a balance of $50 and a total credit limit of $100, your credit card utilization would be 50%. You should aim to keep your total credit utilization rate under 30%. Carrying a high balance that’s close to your credit limit could signal to potential lenders that you are in financial distress or spending beyond your means.
Credit history (15%): Your credit history includes how long your credit has been established, the age of your oldest credit account, and the average age of all of your credit accounts. Your credit history shows lenders that you are a reliable and responsible borrower.
Types of credit (10%): Having a varied mix of credit products, including revolving credit and installment credit, shows lenders you can handle these different credit accounts successfully. A variety of credit on your credit report includes credit cards and personal lines of credit, fixed payments like student loans or car loans, and utility accounts. Having many types of credit is only helpful if you pay your bills on time.
Credit inquiries (10%): Having many recent inquiries for new credit products (known as "hard credit inquiries") can negatively impact your credit score. It can signal that you are in financial trouble if you apply for many new types of credit at once.
What can I do to improve my credit score?
If you've checked your credit score and found it is lower than you'd like, you can take steps to improve your credit score. The following steps have the two-fold benefit of improving your credit score and your finances at the same time.
Faithfully make your monthly payments: If you make late payments, your credit score will drop. Avoid this common pitfall by tracking your bills and automating your monthly payments. Set up auto-pay with your credit card or an automatic transfer to and from your chequing account.
Increase your credit limit: If you regularly carry a credit card balance higher than 30% of your total credit limit, you should pay down that debt below that threshold. In the meantime, you can ask for a temporary increase on your credit limit to drop your balance below the 30% threshold quickly.
Keep old cards open: Don't close that student credit card, even if there is a zero balance. A long credit history positively impacts your credit score, so if you have a credit card that you no longer use, set it aside to maintain the credit history.
Avoid applying for new credit that you don't need: New credit inquiries will cause a temporary drop in your credit score, so avoid applying for new credit unless you need it.
The Bottom Line
Your credit score is an integral part of your financial toolkit, but there's remarkably little information out there about what is considered a good credit score. If your credit score is 713 or above, you have a good credit score in Canada. With a good credit score, you’ll have access to lower interest rates, better credit terms, and higher credit limits from Canada's top lenders. If your credit score is below this threshold, there’s always room for improvement. With the steps and resources outlined above, you’ll be on the right track to building a good credit score.