The average credit score in Canada is around 753, but what exactly constitutes a good score or a bad score? Having a bad credit score, of course, is not a good thing, because you’ll end up struggling to accomplish various financial tasks. Those with very bad scores will have a hard time getting an apartment, getting loans, mortgages, opening bank accounts, and so on.
On the other hand, those with good credit scores would be able to open credit cards, bank accounts, apply for huge loans and mortgages, and so on. But what exactly is a bad credit score and what can you do to improve yours? Keep reading and learn more about it below.
What Is a Bad Credit Score Exactly?
A “bad” credit score is a general term for a credit score that is below average. There are actually several levels of credit scores that you should be aware of. A truly bad credit score is one that falls between the 300 to 629 range.
300 is the lowest credit score you can possibly have. This score is actually so bad that it is very difficult to get stuck with this score. You would have to miss every single payment, use far too much of your credit, and have far too much debt to ever get your credit score anywhere near this number.
Many people with bad credit scores have their scores in the 500s or low 600s. Whatever the case, having your score in this range is not a good thing. The finance industry will not want to have anything to do with you if you have this kind of credit score.
This is because having such a bad credit score shows that you are not responsible when it comes to paying off your debts. Besides your debts, other things may cause your credit score to drop so low such as filing for bankruptcy. Whatever the case, you’ll never be able to get approved for loans, credit cards, or anything else if your credit score is so low.
Above this range is what is known as a fair credit score. Fair credit scores range from 630 to 689. While this credit score range is certainly better than the previous one, it still isn’t great.
You will have a better chance of getting approved for some basic credit cards and perhaps some small loans, but many financial aspects will still be limited for you. You certainly won’t be able to get any premium credit cards or loans for expensive cards or mortgages for big houses.
But you will have a much easier time getting apartments, opening bank accounts, and doing other basic financial duties. Many people fall into the fair credit score range, especially young people. This is because young people don’t have a lot of credit history, so, when they’re just starting out, it would only make sense that their credit scores wouldn’t be spectacular.
But what exactly is considered a good credit score, you might ask?
What Exactly Is a Good Credit Score?
Anything over 689 would be a very good credit score to have. Specifically, the range between 690 and 719 is considered good credit. Many people have their credit scores in this range and it is certainly a comfortable range to be in.
It isn’t difficult to get into this range either. All you have to do is fix bad credit and make sure you take control of your finances. Having a credit score in this range is good for a variety of reasons.
To start, you will have much more financial freedom because all sorts of lenders and banks will see that you are responsible when it comes to your finances. For that reason, it will be easier for you to apply to and get approved for larger loans and lines of credit. It will also be easier for you to apply for better credit cards and loans.
However, even with a good credit score, you still may have trouble getting approved for more prestigious credit cards such as Visa Infinite cards and similar options. You may also still find it difficult to get approved for very large loans for expensive cars or houses.
Even so, you should still be able to do most of whatever you feel like with a credit score in this range. The range above this one is known as an excellent credit score. This is defined as a score that is 720 or above.
Of course, it is a bit harder to get this kind of credit score, but certainly not impossible. Once you get a credit score in this range, you will virtually be free of financial limitations. You shouldn’t have any trouble getting luxury credit cards or big loans or mortgages.
What You Need to Know
Keep in mind that the best credit score you can get is 900. This, of course, is very difficult to get since you would need to build your credit for many years and make sure that you don’t make any mistakes that might affect your credit report. Once your credit score gets into the 800s, you should be able to buy anything you want without any trouble.
If your credit score isn’t currently doing that great, the idea of getting such a bad credit score may seem impossible to you. However, getting a good or excellent credit score certainly isn’t impossible, but you will need to take a few important factors into consideration. But where should you start?
Fortunately, there are many ways you can improve your credit. Some methods are better than others, but whatever the case, you should choose a few main methods and stick with them until you start to see your credit score beginning to improve. Also, remember that it takes plenty of time and patience for your credit score to change.
It certainly won’t jump a hundred points overnight. For that reason, you should try to avoid being impatient as you work on your credit score.
How to Improve Your Credit Score
One of the main ways you can improve your credit score is by paying off your debt on time. If you have a lot of debt and are always late when paying it off, your credit score will only get worse and worse. This, of course, is not an efficient way to improve your credit score.
On the other hand, if you start paying off all of your debt in a timely manner, you will find that your credit score will begin to increase in no time. This is not to mention that paying off your debt on time will show that you are responsible when it comes to managing your debt. Besides paying off your debt, your credit utilization is also very important.
As the name suggests, credit utilization has to do with how much of your available credit you use. Many people don’t know that they’re only supposed to use a small portion of their available credit. Preferably, you shouldn’t use more than 30% of your available credit.
However, it is even better if you only use 20% or even 10% of your available credit. This also shows that you are responsible when it comes to handling your finances. Another way to improve your score is to get a small loan.
Loans and Credit Cards
While it may seem somewhat counterintuitive, getting a small loan and then paying it off can actually boost your credit score in a short amount of time. This is because paying off a loan in a timely manner will show that you know how to handle your debt and how to pay it off. Of course, when doing this, you shouldn’t try to get a huge loan.
Instead, try to get a small and manageable loan that you know you can pay off in a certain period of time. If you don’t want to get a loan, getting a credit card can help with this as well. Buying things with your credit card and then paying off the debt will improve your credit score in a similar way.
Whatever the case, as long as you manage your debt and pay everything off on time, your credit score should start to increase in no time.
How to Fix Your Bad Credit Score
If you have a bad credit score, don’t worry, because you can certainly improve it. A bad credit score is often defined as anything below 629. If you’re worried about your credit score, you can easily improve it by paying off your debt on time, using only a small portion of your available credit, and even getting a small loan or credit card.
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