The credit score is the measure of your creditworthiness. It is used by the banks and other financial lending institutions that analyze your ability to pay back loans and obligations in the near future. Your credit score is calculated using 5 components that have their respective weight in your credit score.
The credit score can range between the credit scores of 300 to 850. If you want to improve your credit score, you need to understand what affects your credit score. Your payments history accounts for almost 35 % of the credit rating, the utilizations that explain how close you are to your credit score weighs 30 %; your credit history accounts for 15 % , and the remaining 20 % is divided equally between the number of inquiries and credit product type.
If you pay your credit payments on time, without any delay, your credit score can improve a lot. Moreover, your credit limit holds a significant value while calculating your credit score. If you are very close to your credit limit, your credit score will be affected negatively. Also, the number of inquiries you make for the loan negatively affects your overall credit score, therefore, try not to make any extra, irrelevant inquiries.
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.
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.
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.
Things you can do to improve your credit score
Having a bad credit score is similar to having poor health. Therefore, you need to take measures that ensure you are continually improving on it. The most efficient way of repairing bad credit is good management over time. Improving your credit score is necessary for you to be eligible for better terms and rates for loans in the future.
Regular credit report checks
You are advised to monitor your credit report regularly to see if it has any errors. A credit report brings you up to speed on your status as a debtor. Ensure that the payments are reported correctly and the amount owed to each creditor is correct. Errors must be disputed to your credit bureau promptly.
Reduce your debt
Most people usually take loans just because they are eligible for them without considering the potential damage to their credit score. For a start, you can reduce your reliance on credit cards. Design a plan that ensures you give priority to your debts that have the highest interest rates.
Payment reminders
If your monthly premium is not automatically debited from your account, you need to set up a payment reminder. Timely credit repayment improves your credit score over time. Some financiers usually send emails or texts to their clients to make payments.