Having a good credit score in Canada is a good thing!
When I got approved for my first ever credit card while I was in university, I was excited to build my credit score by paying off my credit card on a consistent basis. I had already been building my credit score with my Telus mobility cell phone payments (and pager monthly payments, haha I am dating myself). That credit card didn’t even have any points program attached to it, just a nice picture of a beach (it was the BMO university credit card called Mosaik) and yet I still enjoyed using it (and paying it off).
It’s been a long time since I started with that credit card (and probably dozens and dozens of credit card applications later in the attempt to travel hack), I’m still making sure my credit is okay.
I don’t check my credit score very often, just a few times a year out of curiosity or before (and after) I apply for a credit card in an attempt to travel hack. You know, I am curious and have to see the damage I’ve done on my credit score.
Here’s a post on how to interpret whether you have a what is considered a good credit score in Canada, so that you can apply for credit with confidence.
Table of Contents
Why Credit Score Matters
To be honest, I don’t think credit score matters much unless you need to borrow money for a mortgage, for a car loan, for being approved for credit cards, or other loans. It’s more like a vanity metric to be honest if you don’t need to borrow money. It feels good to say you have an 800+ credit score.
However, if you are planning on applying for a mortgage or applying for a car loan, you best make sure your credit score is in pristine shape because according to The Balance, having a good credit score can affect how much you pay for your mortgage and how much your car loan interest is (for example, financing). It can even affect an application for a business loan, if you are an entrepreneur. You’ll get a better rate if your credit score is considered good.
The people (credit issuing agency) loaning you money trust that you will pay it off and therefore they will give you a more favourable rate in exchange for this increased trust. A higher score for you means lower credit risk for the credit issuing agency.
Is 800 a Good Credit Score?
Wanting to join the 800 club? Yes, 800 is considered not only a good credit score, but an excellent credit score. The absolute highest possible credit score in Canada is 900.
When you have a good or excellent credit score, you will get better borrowing rates, you will likely not be declined when you apply for multiple credit cards, and the world will be your oyster, in other words, the possibilities are endless, haha.
Here are the credit score categories that range from “Needs Work” to “Excellent” according to Credit Karma.
- Excellent: 800-900
- Very Good: 720-799
- Good: 650-719
- Fair: 600-649
- Needs Work: 300-599
I would say that it is optimal if you can get a credit score in Canada that is 720 and above.
The credit scores can differ between the two credit bureaus though in Canada, these credit bureaus are Equifax and Transunion.
Equifax Credit Score
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As mentioned, there are two credit bureaus in Canada, one is Equifax and one is Transunion. Credit agencies (for example, credit card companies, banks etc.) have a different credit bureau of choice.
Not every credit issuing agency uses Equifax and not everyone uses Transunion. For example, American Express uses Transunion and CIBC (Canadian Imperial Bank of Commerce) uses Equifax.
To access your Equifax credit score for free, you can check your credit score with Borrowell.
Here is my review of Borrowell, a financial technology (fintech) company that helps you access your Equifax credit score for free.
Transunion Credit Score
The other credit bureau in Canada is Transunion and you can access your credit score from Transunion with Credit Karma.
Here is my review of Credit Karma Canada, a fintech company that helps you access your Transunion credit score for free.
If you’re curious like me and end up checking both your Equifax and Transunion scores, don’t be alarmed if you see that there is a difference between the two. There is often a difference between the Equifax and Transunion scores (again because different credit reporting agencies use different credit bureaus). In my situation, it was an almost 100 point difference between my two scores.
This post explains the difference in scores: Equifax vs Transunion: Why is there a Difference Between the Scores?
How to Increase Your credit Score in Canada?
Now that you know what is considered a good credit score in Canada, you might be wondering how you can increase your credit score in Canada (and you might be wondering how to increase your credit score fast, especially if you are planning to borrow in the near future).
There are a number of ways to increase your credit score in Canada, and it doesn’t depend on you actually being debt free, either. You could be in a lot of student loan debt but if you are regular with your payments, you could still have a good credit score.
Even though I don’t really care about my credit score (not applying for a mortgage any time soon, and we finished financing our car), it still hurt a bit (you know, it was just my big ego) when I found out I got rejected for a recent credit card application. I called up the bank and asked what’s up (because I was just applying for a card with a $5000 credit limit).
They told me it was because I had high credit utilization at the time. I pay off all my bills on time but we just hadn’t paid that bill yet because we hadn’t received the statement yet. So we paid off the bill and then I applied again, and this time got instantly approved! I was a happy PF blogger again.
Long live credit card churning and travel hacking!!
Here are some ways to increase your credit score in Canada, like how to increase your credit score to join the 800 club. Following these tips, you should be able to boost your credit score in a few months.
- Pay your bills on time (According to Fool.ca, payment punctuality is paramount! Remember the 3 P’s- Payment Punctuality is Paramount)
- Don’t apply for too many credit card applications (or give it a break, the credit score will increase back up). A credit card application is considered a hard inquiry and will indeed lower your credit score. For example, I recently applied for a new credit card and my credit score dipped by 34 points because of the hard inquiry and credit card application.
- Keep the credit utilization low (Fool.ca recommends not using more than 35% of your total available credit at one time)
- Don’t close out credit cards that have a long history with you (for example, the credit bureaus like old accounts because it shows a good track record and good tenure and history)
- Checking your credit score does not lower your credit score and is in fact a soft pull not a hard pull
Hopefully this post answers your burning questions of what is a good credit score in Canada.
To summarize, a good credit score is considered to be 720 and above. You’ll get good rates and not be denied credit applications, it’s a good spot to be at.
To check your Equifax credit score and credit report, you can check it for free using Borrowell. Here’s my Borrowell Review. You can see your recent hard inquiries under the credit report section and can see the current credit that you have open (e.g. the credit cards you have open, the mortgage that you have open etc.).
You might be wondering what the catch is, and how come these companies allow you to check your credit score for free? I was wondering the same thing when I first started checking my credit score for free. The reason why credit scores are provided for free now, is because these credit score agencies like Borrowell and Credit Karma provide some recommendations to you in the form of financial products. That is how these companies make money. I personally don’t find these ‘suggestions’ annoying and just check my score as needed on an occasional basis (instead of monthly like sometimes they encourage you to do).
Do you check your credit score regularly?
Have you noticed what level it goes down to and what affects it? (For example, applying for a new credit card?)
GYM is a 30 something millennial interested in achieving financial freedom through disciplined saving, dividend and ETF investing, and living a minimalist lifestyle. Before you go, check out my recommendations page of financial tools I use to save and invest money. Don’t forget to subscribe for blog updates, a free dividend yield spreadsheet, and the free Young Money Bootcamp eCourse.