Credit Score Percentiles: Do You Know Where You Fall?

Having a good credit score can unlock better opportunities for you — from getting approved for a new credit card to scoring lower rates on a home loan. But how do you know if you have a good credit score? Where your number falls on Canada’s credit score percentile range can help you determine how lenders view you. The higher your credit score, the more likely a lender is to view you as creditworthy.

Understanding credit scores is pivotal in managing finances. A credit score, depicted in a credit report, reflects one's credit history. A good credit score hinges on a positive payment history. Credit scores work via diverse scoring models used by credit bureaus. These scores influence credit card issuers determining credit limits. An average credit score indicates one's standing compared to others. Factors like timely payments and credit limits impact these scores. Monitoring your credit report aids in maintaining a healthy score. It's crucial to comprehend how credit scores function within the broader financial landscape to navigate credit wisely and secure favorable terms.

Here’s what you need to know about credit score percentile averages, how to find out where your number falls, and how to track your progress as you work towards improving your credit.

Credit score percentile ranges – what are they?

Yourcredit score lets lenders know how you’re likely to handle future credit accounts. If you always pay your bills on time and keep your credit usage low, you might have a higher credit score. If you miss payments or carry a balance from month to month, your score may be lower.

Credit reports detail credit history, influencing average credit scores. Calculated through various factors, credit score ranges vary, often assessed by FICO score tiers. A good credit score range signifies responsible financial behavior, crucial for loans and favorable terms. Understanding these ranges aids in managing and improving credit health. Based on how well you manage your credit accounts, you’ll receive a three digit number ranging from 300 to 900. Credit score percentile ranges in Canada are then bucketed into five groups:

Credit score range

Category

Below 560-Poor or Bad credit scores

560 to 659-Fair credit scores

660 to 724-Good credit scores

725 to 759-Very good credit scores

760 and up-Excellent credit scores

What is a good credit score percentile?

If your score is good to excellent, you have a higher chance of getting approved for a new credit account or rental apartment. A higher credit score can also help you lock in lower rates and better terms on new credit accounts to help you avoid or save on interest.

Higher credit scores give you more options to choose from, lenders and credit cards to compare, and an easier time applying for financing. But if your score falls in the lower credit score percentile ranges, between fair and poor, you’re likely to find it harder to get approved for a credit account. And, if you do, you’re likely to get approved with a higher interest rate.

How are credit scores calculated?

There are five different factors thatmake up your credit score, according to Canadian credit bureau,Equifax. They include your:

• Payment history - 35%. Lenders look for a strong pattern of on-time payments. Late or missed payments can hurt your credit scores.

• Credit utilization - 30%. How much credit you use versus how much you have access to is another key factor. It’s recommended to keep your utilization low, ideally under 30%. For example, if you have a $5,000 credit line, you won’t want to charge more than $1,500 before paying down your balance.

• Credit history length - 15%. This takes into account your oldest and newest credit account, as well as your average age of credit. A longer history will help your score grow. That’s why experts don’t recommend closing your oldest credit account unless you absolutely must.

• Public records - 10%. This could include any bankruptcies or credit accounts that went to collections. If either pops up on your report, your credit scores will likely drop.

• Credit inquiries - 10%. When a lender looks at your credit report, it’s considered an inquiry. Too many inquiries in a short period of time can look like you’re in need of credit and more of a risk of repaying a lender.

Since your payment history and credit utilization ratio are the biggest factors that determine your credit score, they’re the two most important areas to focus on whenbuilding your credit.

How can I improve my credit scores?

If your credit score isn’t as high as you’d like, you can move up to the next credit score percentile — and potentially higher — with a little bit of effort and patience.

First, you’ll want to take a look at your credit profile to make sure there are no errors with your payment history or accounts. If there is any incorrect information, you can dispute it online with the credit agency. If they also determine it’s incorrect, it will be removed from your credit report.

Next, focus on getting current on any credit accounts you have, like credit cards or loans. This means paying at least the minimum amount due on time, every month. Once you’re in the habit of doing this, work on lowering your balances by putting more money to your debts until your balance is paid off. It is the best thing you can do to boost your credit scores and improve your credit history.

From there, you can consider adding a new credit card to your wallet and put your newly learned financial habits to good use. Never spend beyond your means, keep your credit usage low, and use autopay to set up recurring payments so you never accidentally miss a bill.

You may also consider adding your rent payments to your credit report to help elevate your score. You have two options. It can take months to years to push your credit score up to the credit percentile you’re aiming for, so be sure to track your progress and celebrate small goals along the way.

Discover the KOHO Difference

A good credit score is built on a positive credit history, essential for favorable terms with credit card issuers. Credit limits, determined by credit bureaus, hinge on various factors. Monitoring credit reports reveals average credit scores, crucial in understanding financial standing. Credit scores, calculated using diverse parameters, fall within specific ranges. Navigating these ranges is key to securing loans and managing credit responsibly. A strong credit history, reflected in credit reports, contributes to achieving and maintaining a good credit score, opening doors to better financial opportunities and demonstrating reliability to lenders. Contact KOHO today to get started on your own credit building journey!