In Canada, just like many other countries in the world, your credit score plays an integral role in getting you the required credit amount for your home or the mortgage loan. The credit score is a measure of your creditworthiness. It shows how you have managed your credit payments and debts in the past and whether you will be able to pay the loans on time shortly or not.
The credit scores can range from a minimum level of 300 to the highest possible credit score of 850. A higher score typically shows higher creditworthiness and therefore, the banks and the lending institutions are more willing to lend you with a high credit score.
However, the credit score is not the only thing that is considered to apply for a home loan or a mortgage. In fact, it might be taken as just a reference to assess your loan request. You need to have a good credit payment history if you have a credit score of 700 but you haven't made payments on time in the past, there is little chance that you will be given the loan at low interest rates or easy to manage terms and conditions.
What is a credit score in Canada
If you are one of the many people who is asking about what is a credit score Canada, then you definitely should read the information below.
It is always important to monitor your credit score for you to know where you stand when it comes to lending companies. Fortunately, you can now check your credit score for free with the use of Borrowell because they have partnered with Equifax Canada. Get to know more about these two companies by reading the information below.
Borrowell
Borrowell is a fintech lender company in Canada which offers fast, friendly, and fair loans to people who need it the most. They have fix interest rates that are affordable.
Equifax Canada
Equifax gathers credit reports, which include your payment history, your debts, and the length of the credit that you already have. They have grown from a credit consumer company to a leading provider of credit score around the globe.
Explanation of credit score ranges in Canada
Knowing the explanation of credit score ranges in Canada is essential for you to understand them fully well.
Getting your loan or credit card approved will depend highly on your credit score. Not everyone is familiar with the ranges of credit score in Canada, which is why familiarizing yourself with them is important. Below are the credit score ranges that you need to know.
Poor
Poor credit score ranges from 300 to 559. According to a study, almost 4% of the population in Canada has this score. This can cause difficulties when applying for loans and credit cards.
Good
Good credit score ranges from 660 to 724. 15% of the population has this score. This credit score can help you to obtain a loan or a credit card but with added requirements.
Excellent
An excellent score ranges from 750 and above. 57% of the population has this score. They can quickly obtain every loan or credit card that they need without providing requirements.
How are credit scores calculated in Canada?
In Canada, credit scores are calculated to show your creditworthiness which is useful for the lending institutions to identify the level of risk involved in lending you loans such as mortgage or home loans. The credit score ranges from 300 to 850. Higher the score, better are chances of you repaying your loans and hence, lower the risk for the lenders.
The credit score is determined by giving your payment history the 35 % weight. Followed by, the amount you already owe as 30%. The weight of 15% is given to the length of your credit history. The new credit applications that you have made and the type of credit that you have used in the past account for 10 % each.
Mortgage options Canada based on credit score
The credit score is a measure of your creditworthiness. The credit score of the FICO credit scoring model can range from 300 to 850. The credit score of 850 is the highest and 300 is the lowest that you can get. Higher credit score shows high credit creditworthiness and lower credit score show low creditworthiness.
If you have a high credit score such as over 700, you will get your loan request approved unless there is a major issue with the credit payments or credit related information in your reports for the last 12 months. With a high credit score, you will get better interest rates and easy to manage terms and conditions.
How to improve your credit score in Canada
In Canada, you can start by paying your credit payments and other bills on time. It helps your cause and shows up in your credit history as a good sign. If you cannot pay the full amount before the due date, you should look to pay the required minimum payment. Therefore, it does not reflect negatively on your credit report and history.
Have a close look at your credit card limits. Never cross these boundaries to keep up with your credit scores. Higher credit affects your credit score negatively.
You also need to make sure that you have a credit history. Lenders are very skeptical of people that have little or no credit history.