Credit Score Ranges

To a bank or potential lender, it’s not your sparkling personality or how you earn a living that’s the most interesting thing about you — it’s your credit score. Where you fit on the credit score range (which starts at 300 and goes all the way up to 900) tells a potential creditor one key fact: your creditworthiness. Creditworthiness means how likely you are to pay back money you borrow and manage debt.

Your three-digit credit score is one number you can’t afford to ignore. If you fall too low on the credit score range — such as 560 or below — your chances for getting a loan, renting an apartment and even getting a job could be negatively affected. However, if you land anywhere at 660 or above, your financial prospects can significantly improve. Get even higher — 760 or more — and you’re likely on the path to a very healthy financial future.

To ensure long-term financial health, it’s vital to understand credit score ranges and know where you fall within the range. Knowing credit score ranges can help you understand how lenders view your creditworthiness and it’s an essential part of managing your credit and achieving your financial goals.

What are the different Credit Score Ranges

There are generally five main credit score ranges. The range, which starts at 300, goes from poor up to excellent — with fair, good and very good falling in between.

In Canada, credit scores range from 300 to 900 and the qualitative value of each range is usually presented numerically as follows:

• Excellent: 760 and above

• Very good: 725 to 759

• Good: 660 to 724

• Fair: 560 to 659

• Poor: 300 to 559

Those on the lower end of the credit score range are considered by potential lenders to have bad credit and are viewed as credit risks. Those on the higher end of the range are considered very creditworthy and lenders would assume they are more likely to pay back any funds they borrow on time and in full.

To put it succinctly: the higher your credit score, the better chance you have of attaining your financial goals. Though lenders may have their own criteria and scoring models for determining creditworthiness, credit score is still king and is often a key consideration in not only whether or not you’ll get a loan, but what interest rate you’ll be offered as well.

What Your Credit Score Range Really Means

A majority of lenders, including banks and credit card providers, use credit scores to determine the risk of lending to an individual. The higher your credit score, the lower your perceived risk of default, and the more likely you are to be approved for credit and to receive much more favorable interest rates. On the other hand, a lower credit score can result in significantly higher interest rates, and may make it more difficult (if not impossible) to get approved for credit.

Here’s what that all-powerful three-digit number can really mean for you in real-world terms.

A Poor To Fair Credit Score

A credit score in this range is considered high risk by lenders.

Here are some specific implications:

1. A hard time getting credit: Banks, loan companies and credit card providers may be reluctant to extend credit to someone with a low credit score because they won’t be confident that a person with a low score will make payments promptly.

2. Limited access to credit: Even if credit is offered, it may only be offered as secured credit, which requires collateral or a deposit to secure the loan.

3. Higher interest rates: Borrowers with poor credit scores are not considered creditworthy, and as a result, lenders may charge higher interest rates to compensate for the risk they assume by lending you money.

4. Difficulty renting an apartment: Some property managers and landlords may also check credit scores before renting an apartment so a low credit score could make it harder to land a rental.

5. Harder to find a job: Employers may check credit scores as part of the hiring process, and a low credit score could impact your employability because you may not be viewed as reliable.

A Good Credit Score

Having a good credit score can have several positive implications for your personal finances, including:

1. Easier access to credit: People with good credit scores have a much better chance of being approved for credit, such as loans or credit cards.

2. Lower interest rates: Lenders view borrowers with good credit scores as lower risk and therefore offer lower interest rates and better borrowing terms.

3. Higher credit limits: You may be able to get higher credit limits on credit cards and lines of credit.

4. Improved chances of getting a good apartment: Landlords are more likely to give a rental property to someone with a good score.

5. Higher chances of landing a job: Some employers check credit scores as part of the hiring process, and a good credit score can makes you a more attractive candidate because you’ll be perceived as more trustworthy.

A Very Good To Excellent Credit Score

Having a very good or exceptional score marks you as a creditworthy Canadians and will have numerous implications for your financial well-being, including:

1. Access to the best interest rates: With a top credit score, you will be offered the best rates for loans and lines of credit, which could result in huge savings over time.

2. Higher credit limits: Credit card companies and other creditors are more likely to give higher limits to low-risk borrowers.

3. Improved loan approval chances: A top credit score will increase your chances of being approved for loans, like mortgages.

4. More negotiating power: You’ll have more negotiating power when it comes to securing favourable terms on loans and credit products, such as getting the best rates or waived fees, which can result in significant savings.

5. Better rental and employment opportunities: Some property managers and employers check credit scores. A strong score means you’ll be perceived as responsible and dependable by rental agencies and potential employers.

Credit score ranges – what is a good range?

As previously noted, though each individual credit bureau may have their own scoring models, generally a good credit score ranges from 660 to 724. A very good score would likely fall into the 725 to 759 and an excellent score is 760 and higher. The higher your score, the better chance you’ll have of getting loans, favourable rates on your mortgage and premium credit cards.

What factors impact your credit scores?

Canada has two credit bureaus, TransUnion and Equifax, and each one has their own proprietary algorithm to calculate your credit score (though both also rely in part on the FICO scoring model). That being said, there are five key factors that make up the bulk of your credit score:

1. Payment history: Your payment history makes up 35% of your overall score, making it the single most critical factor that affects your credit score. Late or missed payments can have a significant negative impact on your score.

2. Credit utilization: Credit utilization (which makes up 30% of your score) refers to the amount of credit you are using relative to your overall available credit limits. Try to keep your ratio under 30%.

3. Length of credit history: This factor is 15% of your overall score. Generally, the longer your credit history the better because credit bureaus like to see how you manage money over time.

4. Inquiries: Each time a potential creditor checks into your credit report, your score takes a slight hit. Inquires count for 10% of your score.

5. Public records: Accounting for approximately 10% of your score, negative public records, such as bankruptcy or a credit account that went to collections, can decrease your score because you may be perceived as a high-risk borrower.

It's important to note that different credit scoring models may weigh these factors differently (for example, some scores may weight credit mix when calculating your score). However, understanding these factors can help you take steps to improve your credit score over the long term.

While it takes time and patience to improve a credit score, the good news is that there are proactive steps you can take to improve your score faster. One example is KOHO's Credit Building tool. KOHO's Credit Building tool is a secure and straightforward way to establish or improve your credit history. By providing some information, KOHO conducts a soft credit check (so it won’t negatively affect your score). Then, every month, a portion of the funds is deducted, and the activity is reported to the credit bureaus as a repayment, which helps build your credit history. You can easily monitor changes to your credit score using the KOHO app.

Signing up is easy: there is no application or approval process and no deposit required. You can grow your credit history safely and conveniently with KOHO for a low monthly subscription fee of $10.