Picture this. You’re planning on purchasing your first home. You’ve done the research on all the best neighborhoods, have chosen the perfect property type, and know the recent sold prices of the comparable homes in the area. But, have you pre-qualified for a mortgage? Do you know your credit score? And do you understand how your credit score might affect your ability to purchase your home?
Is a 680 credit score good or bad?
Whether you’re purchasing a home, applying for a rental, planning on purchasing a home, or even searching for a new job, your credit score can have a serious impact on your future. Even if you know your score, do you understand what it means? If not, we’ve got you. Say you’ve got a 680 credit score – what does that mean for you and your ability to borrow money in the future?
According to Equifax, a 680 credit score falls within the “good” range – meaning you’ve developed some good credit habits but still have some room to make improvements. We’ll show you how. But first, a little more about how credits scores in Canada work.
Credit score ranges in Canada
There are two major credit bureaus in Canada, which assign and track credit scores for all adult Canadians who have a credit history. You can build credit history by opening credit accounts, such as credit cards, lines of credit, car loans, or mortgages. The bureaus assign three digit numbers to determine a person’s “credit worthiness” – which is a way of predicting how well an individual will manage any credit that’s given to them.
Lenders rely on credit scores when determining who to lend to and what terms to offer. Generally speaking, the better your credit score, the more likely you are to qualify for loans – and the better chances you’ll have of qualifying for more affordable loans, since the best interest rates are saved for those with the best credit scores. Makes sense, right?
Here’s how Equifax, one of Canada’s main credit bureaus, evaluates credit scores:
800 to 900: Excellent
Congratulations if your credit score falls within this range! Lenders see you as a low-risk borrower, making it easier for you to secure loans and other forms of credit. You're on the right track to financial success!
740 to 799: Very Good
Great job! With a credit score in this range, you've demonstrated a history of positive credit behaviour. Lenders recognize your reliability and may readily approve you for additional credit when you need it. Keep up the good work!
670 to 739: Good
You're doing well! Credit scores of 670 and up are viewed as acceptable or lower-risk by lenders. Your good credit behaviour makes it easier for you to qualify for loans and credit cards. Keep managing your credit responsibly, and your financial opportunities will continue to grow.
580 to 669: Fair
Don't worry if your credit score falls within this range. It's considered fair, and while you may face some challenges, there are still options available to you. Lenders may view you as a higher-risk borrower, but with some effort, you can work towards improving your credit and qualifying for new credit opportunities.
300 to 579: Poor
If your credit score falls into this range, it's important to not lose hope. Many people face challenges with credit at some point. While it may be difficult to get approved for new credit right now, remember that you have the power to turn things around. Focus on improving your credit score, and with time and effort, you'll build it up and open new financial opportunities.
So, as you see, a 680 credit score falls within the range of good. You’ll be happy to know that your score is also higher than the average Canadians which, according to TransUnion, is 650. Way to go. You have a high likelihood of qualifying for loans, from credit cards to mortgages and everything in between. However, there might be some products that are just out of reach for you; products that might be reserved for those with very good and excellent scores. Don’t worry, though, there are ways you can improve your 680 credit score.
Ways to improve your 680 credit score
Improving your credit score will open up a world of financial opportunities. While it requires patience and discipline, there are several strategies you can use to boost your creditworthiness in the eyes of Canadians lenders. Here are some key ways to improve your credit score:
Pay on time: Consistently make payments on all your credit accounts by their due dates. Late payments can significantly impact your score, so set up reminders or automatic payments to ensure you don't miss any deadlines.
Reduce credit utilization: Aim to keep your credit card balances low relative to your credit limits. High credit utilization can negatively affect your score. Paying down existing balances and using credit cards sparingly can help improve your credit utilization ratio. Visit your budget regularly to make sure you’ve got all your bills covered and make a plan to pay down debt to reduce your utilization.
Build positive payment history: Establish a track record of timely payments and responsible credit usage. This includes paying not just credit cards, but also loans, mortgages, and utility bills on time. Over time, a positive payment history will boost your credit score.
Minimize new credit applications: Each time you apply for new credit, a hard inquiry is recorded on your credit report, which can temporarily lower your score. Limit unnecessary credit applications and only apply when necessary.
Maintain a mix of credit: Having a healthy mix of credit accounts, such as credit cards, loans, and a mortgage, can positively impact your credit score. However, be cautious and only take on credit that you can manage responsibly.
Keep older accounts open: The length of your credit history matters. Avoid closing older credit accounts, as they contribute to the average age of your accounts. Keeping them open, even if unused, can help maintain a longer credit history.
Regularly check your credit report: Obtain free copies of your credit report from the major credit bureaus (Equifax and TransUnion) and review them for errors or discrepancies. Report any inaccuracies to have them corrected promptly.
Manage debt responsibly: Reduce your overall debt burden by paying off outstanding balances. Focus on high-interest debts first and consider debt consolidation options if it makes financial sense for you.
Use a credit building tool: If you’ve got a low or no credit score, credit building services can help you build your credit history. KOHO offers three ways to build your credit with its Credit Building. For just $10 a month (or as low as $7, depending on the account plan you choose), there are no credit checks, no approvals, and no interest. It also comes with access to a financial coach and your credit score on demand.
Remember that improving your credit score is a gradual process. Stay committed to responsible credit behaviour, and over time, you'll see positive changes to your creditworthiness.
Know the benefits of having a good credit score
Now that you know how credit scores work and how to improve yours, it’s time to understand why having a solid credit score is advantageous.
Here are the top reasons you might want to improve your credit score:
Access to lower interest rates: Lenders, such as banks and credit card companies, typically offer lower interest rates to people with good credit scores. This means that you can get loans, mortgages, or credit cards at more affordable rates, saving you a potentially significant amount of money over time.
Easier loan approval: When you have a good credit score, you’re viewed as a reliable borrower to lenders. This increases your chances of loan approval for larger purchases, such as a home or a car.
Higher credit limits: A good credit score demonstrates your ability to manage credit responsibly. Lenders are more likely to extend higher credit limits to individuals with good credit, which can be particularly useful during emergencies or when you need to make significant purchases. Keep in mind, though, that high credit limits are a big responsibility. Just because you have access to credit, doesn’t mean you should use it. Spending more credit than you can afford to pay back can have a disastrous effect on your credit score if you miss payments.
Better rental opportunities: Landlords perform credit checks on people who apply to become tenants. With a good credit score, you’re more likely to pass these checks, making it easier for you to secure rental properties. A good credit score also gives you an advantage over other applicants, who may have lower credit scores.
Negotiating power: When you have a good credit score, you have the advantage of being seen as a reliable borrower. This can give you an edge when applying for credit by enabling you to negotiate lower interest rates, fees, or repayment terms on loans and credit cards.
Access to the best credit cards: Good credit scores make you eligible for premium credit cards with attractive benefits, such as cash back rewards, travel rewards, or exclusive perks. These cards often come with higher credit limits and better terms, opening up even more financial benefits.
So, there you have it. Everything you need to know about your 680 credit score. Remember: having credit is a privilege and not a right; it’s your responsibility to take care of your score by practicing healthy financial habits. Do that, and you can watch your credit score grow.