What Is a Good Credit Score? How Do I Get a Good Credit Score?
What makes a good Credit Score? What is a good credit score? It depends on the lender, but generally speaking, 660-724 is good, 725-759 is very good, 760+ is excellent. In Fromask.com we will talk about What is a good credit score. Your Credit score is an important financial tool that can have a large impact on your life. Financial institutions use them to help decide whether to give you a mortgage or loan and what rate of interest to charge you. Landlords may use your credit score to decide if they should rent you an apartment.
Even potential employers will look up your credit score to get a sense of how responsible you are! Considering your credit score’s importance, it’s a good idea to understand what makes a good credit score.
What is a credit score?
A credit score is a number that falls somewhere between 300 and 900. The higher your three-digit digit number, the better your credit score is. Potential lenders are more likely to view you as a responsible borrower who pays their bills on time.
What is a good FICO score?
The average FICO score for consumers in 2021 was 716 according to Fair Isaac Corp. of Minneapolis, Minn., one of the country’s primary credit bureaus renowned for developing a universal scoring system used by all financial organizations. A good score is classified as 669 – 739 on the FICO rating and it falls under the category of “good.” Fair Isaac and Company are also commonly referred to as simply FAiC, or “F-A-i-C.” If you have an exceptional FICO score above 800 than you might want to consider traveling the world – a lot!
Credit score ranges
The national credit score range for Canada is between 300 and 900, though each potential lender will have its standards as to what scores are acceptable. The following is a guide from Equifax:
Read more: Innocent Spouse Rule
- Scores from 760 to 900 are considered excellent
- Scores from 725 to 759 are very good
- Scores from 660 to 724 are good
- Scores from 560 to 659 are fair
- Scores from 300-559 are poor
The higher your credit score, the more you have to gain from it. Above all else, your credit score will determine whether or not you are approved for a loan or a credit card, and if so, which of these two options you’ll be able to choose. Ideally, as an ambitious consumer, you want to achieve the highest possible credit score within your reach. A credit score above 660 makes it possible to apply for many kinds of loans and credit cards.
What Factors Impact Your Credit Score?
If you’re looking for some habits to remember as you start or continue establishing responsible credit behaviors, we have a few suggestions that have worked well for us:
Pay your bills on time, every time
Pay your bills on time, every time. This doesn’t just include credit cards – late or missed payments on other accounts, such as cell phones, may be reported to the credit bureaus and this may impact your credit scores. If you’re having trouble paying a bill, contact the lender immediately to see how you can work things out, and don’t skip payments, even if you have kept in contact with them and they are aware of what is going on.
They need to start seeing that you are proactive because many times people think that banks (or whoever their creditors might be) will work with them and wait until they get caught up but sometimes that’s not the case because it’s against their policy or unethical.
- Pay off your debts as quickly as you can
- Keep your credit card balance well below the limit
- Apply for credit sparingly
- Check your credit reports regularly
How to calculate credit score
In Canada, credit scores are based on how you spend your money and how you’re managing your finances. The system works like this: two major credit bureaus keep track of your activity (TransUnion and Equifax), and then they create a credit score based on the five factors outlined below. Since the exact formula is proprietary to each bureau, there is no way to know exactly what goes into the calculation except for what we describe here.
Credit scores range from 300 to 900, with 900 being an exceptional score. A bad credit score could hurt your ability to get approved for a loan or even be denied entirely. The following criteria are considered to calculate the credit score.
- Payment history
- Credit utilization
- Public records and/or credit mix
- Credit inquiries
Your payment history is the most crucial element, accounting for 30% of your credit score. Payment history shows all your current and recent debts (including credit cards, installment loans, and lines of credit) in addition to whether you’ve made payments on time. If not, it shows how late you were, if you missed payments entirely or if an account went to collections. Negative data such as these generally stay on your payment history for years so it’s important to always make payments on time and in full to have a good payment history record (What is a good credit score).
Read more: Child Tax Credit
Credit utilization is considered one of the most important factors when it comes to calculating your credit score. Your credit utilization represents how well you manage debt. If your borrowing amounts total up to a total of $50,000 with a $25,000 outstanding balance on that credit line, that is equal to 50% of your available credit limit which is very high and risky and could potentially lower your score. As such, experts recommend keeping your percentage of credit utilization below 35% (What is a good credit score).
Public records and/or credit mix
About 10% of your FICO Score is determined by information found in public records. This can include whether you have any history of bankruptcy or overdue accounts that have been referred to collection agencies. Equifax, on the other hand, (What is a good credit score) appears to focus more on your mix of credit they want to be sure you have a good mix between revolving accounts (such as credit cards and lines of credit) and installment loans (vehicles, student, or mortgage debt).
When you inquire about a loan or apply for a new credit card, it causes what’s known as a hard inquiry to be made on your account. Too many hard inquiries can negatively affect your score because they may show potential creditors that you could have issues with financial overextension. Soft pulls- like when you look up your record- do not affect your score at all (What is a good credit score).
Average credit score by age group
According to Equifax, the younger generations are faring somewhat better than older generations when it comes to credit scores in Canada (What is a good credit score). Take a look below at this breakdown from Equifax of average credit scores by age group:
- Age 18 to 25: 692
- Age 26 to 35: 697
- Age 36 to 45: 710
- Age 46 to 55: 718
- Age 56 to 65: 737
- Age 65+: 750
How to keep on track with a good credit score
|Balance||Spending limit||Utilization rate (%)|