If you’re interested in getting a loan, such as a mortgage, car loan, or line of credit, it’s important to know what your credit score is. After all, it’s your credit score that lenders use to determine who to loan their money to – and what rates to offer them. Generally speaking, the higher your credit score, the more likely you’ll be to qualify for a good loan.
If you’ve got a 747 credit score, you might be wondering if that’s a good score or a bad score. According to Equifax Canada, one of the country’s two major credit bureaus (organizations that issue credit scores), a 747 credit score falls within the range generally called “very good.”
So, what does that mean? Let’s break it all down.
Credit scores in Canada
Your credit score is a numeric representation, typically ranging from 300 to 900, that encompasses a broad spectrum of financial information. This score is influenced by several factors. In a nutshell, the higher your score, the more favorable you appear to credit bureaus and, consequently, to potential lenders. A lofty credit score opens the door to numerous financial benefits, including eligibility for lower-cost loans, improved job prospects (especially in fields like financial services where employers may assess credit scores during background checks), and an enhanced likelihood of securing a rental property.
Here’s how Equifax rates its credit scores:
Scores between 300 and 579 are considered poor
Scores between 580 and 669 are considered fair
Scores between 670 and 739 are considered good
Scores between 740 and 799 are considered very good
Scores between 800 and 900 are considered excellent
The average credit score in Canada, according to TransUnion, is 650. If you’ve got a credit score of 747, that means you are within the range of what is considered to be a very good credit score in Canada. A score of 747 is considered a wonderful score that many people shoot for when trying to improve their credit. And even at this high score level, there are still things you can do to improve your score and to help keep it at that night high level. More on that in a bit.
First, though, let’s take a closer look at the average credit scores in some of Canada's major cities.
City Average credit score Vancouver 705 Victoria 694 Calgary 667 Edmonton 649 Saskatchewan 659 Saskatoon 656 Winnipeg 661 Toronto 696 Ottawa 688 Montreal 687 Quebec City 683 Halifax 664 Fredericton 658
As you can see, a 747 credit score is well above the average score in each of these cities. There are several reasons why your score can rise and fall even as you try to maintain a high score, like many of these scores.
Factors that negatively impact your credit score
There are several factors that decrease your credit score over time. The credit bureaus collect information on each Canadian to help them determine credit scores, and some of the things an individual does can cause a score to decrease. This includes:
Late or missed payments
This is a big one. Failing to make a loan payment, be it for a credit card or any other financial obligation, can have a significant negative impact on your credit rating. A substantial 35% of your credit score hinges on your capacity to consistently meet your loan obligations. Therefore, it's crucial to scrutinize your credit history for any past instances of missed payments. By recognizing these lapses and committing to punctuality in all future payments, you can gradually boost your credit score.
A high utilization ratio
This is an elegant means of expressing that you're nearing the upper limit of the credit available to you. For instance, if you possess a credit card with a generous limit of $10,000 and you maintain a balance of $8,000 on it, your utilization ratio stands at 80%, which is considerably elevated. To enhance your credit score effectively, it's advisable to adhere to the practice of maintaining your utilization ratio below 30%. In the given scenario, this means keeping your balance below $3,000. It's worth noting that your utilization ratio holds responsibility for impacting 30% of your credit score.
Age of credit
The age of your credit accounts holds significant weight as a key factor. This underscores the importance of reviewing your credit history thoroughly before considering account closures. A well-balanced combination of both newer and well-established credit accounts serves as evidence that you possess a lengthy track record of responsible credit management. In simpler terms, the more extensive your borrowing history, the more positively it affects your credit score, as it signifies a solid credit history. The age of your credit accounts can influence up to 15% of your overall credit score.
Past negative credit events
Having experienced prior credit challenges, such as bankruptcy, collection problems, or other adverse notations on your credit report, will lead to a detrimental impact on your credit score. Although it is feasible to rehabilitate your credit following such events, these entries on your credit record contribute to a 10% reduction in your overall credit score.
Credit inquiries
Two categories of credit inquiries exist: soft and hard inquiries. Each instance of accessing your credit file is documented as an inquiry. A hard inquiry can result in a reduction in your credit score, while a soft inquiry has no impact. Hard inquiries occur exclusively when you seek to acquire a new line of credit. While applying for credit is pivotal for enhancing your credit standing, it's advisable to restrict the number of credit products you apply for to minimize the quantity of hard inquiries recorded on your credit file. Inquiries account for 10% of your overall credit score.
How to improve your 747 credit score
Now that you have a better understanding of credit scores in Canada and their functioning, let's explore how you can enhance your own score, even if it's currently at 747 or at a similar level.
Timely Bill Payments: The punctuality of your payments has a significant impact on your credit score. Ensure that you promptly pay all your bills, including credit cards, loans, and utilities. Late or missed payments can harm your credit, so consider setting up reminders or automatic payments to maintain a solid financial track record. Consistently monitoring and sticking to your payment schedule each month is a prudent strategy to proactively manage your financial obligations.
Reduce Credit Card Balances: High credit card balances relative to your credit limit can negatively affect your credit score. As mentioned earlier, it's advisable to aim for a credit utilization ratio below 30%. Dedicate efforts to pay down existing balances and avoid maxing out your credit cards. While this might require some adjustments to your budget, allocating more of your income to reduce your credit card balances will be invaluable in your credit repair journey.
Diversify Your Credit Portfolio: Develop a well-rounded mix of credit types, including credit cards, loans, and a mortgage, to have a positive impact on your credit score. However, exercise caution when taking on new credit, ensuring that you can manage it responsibly. Avoid applying for multiple new credit accounts in quick succession, as this can temporarily lower your credit score. Instead, take a gradual approach and acquire only the necessary credit products that you can handle.
Maintain a Long Credit History: Understand that building credit is a long-term effort. The length of your credit history is a significant factor. Keep older accounts open, even if they are not actively used, as they contribute to the average age of your accounts. Closing older accounts can shorten your credit history, potentially resulting in a lower credit score.
Regularly Monitor Your Credit Report: Obtain a free copy of your credit report from major credit bureaus like Equifax or TransUnion at least once a year. Review it for inaccuracies, such as incorrect account details or late payment records, and promptly report any discrepancies for correction. Various services, such as KOHO's Credit Building, can help you monitor your credit.
Limit New Credit Card Applications: Remember that each new credit application results in a hard inquiry on your credit report, which can temporarily lower your credit score. Apply for credit only when necessary and consider spacing out applications to minimize their impact on your score.
Establish a Positive Payment History: If you have limited credit or a thin credit file, consider alternative methods for building credit, such as getting a secured credit card or becoming an authorized user on someone else's credit card. Make small purchases and consistently pay off your balances to establish a positive payment history.
Seek Professional Guidance: If you're facing financial challenges or credit issues and need personalized assistance, it's a wise idea to seek help from a reputable credit counseling agency. They can provide valuable insights, assist with budgeting, and offer strategies to improve your credit score.
Build credit using a credit building tool: There are certain financial products that are designed to help you build credit over time. One of those is KOHO’s Credit Building. For as little as $7 a month, you can use this service to help establish positive credit history, which has been proven to increase scores over time, assuming on-time subscription payments. It’s a secure and easy way to build your credit history and requires no approval or hard credit checks.
KOHO offers three different ways to build your credit, so you’ve got options. All three options come with access to a Financial Coach and your credit score, on demand.