In Canada and the United States the credit score range is anywhere between 300 and 900 points. The higher it is the better. The credit score is used to determine how likely are you to pay back debt payments on time and within what period of time.
What’s A Good Credit Score?
Less than 500 – Terrible Credit Score
500-579 – Bad Credit Score
580- 619 – Poor Credit Score
620 – 679 – Average Credit Score
680- 719 – Good Credit Score
720 and Up – Excellent Credit Score
What Does Your Credit Score Consist Of?
Banks and other credit companies use your credit score to determine whether to extend credit. Your credit score speaks of the following:
- On time payments
- Capacity used
- Length of credit history
- Types of credit used
- Recent searches for credit
On Time Payments – Late payments on bills such as mortgage, loans, and credit cards will cause the score to drop. On time payments will improve the score.
Capacity Used – Ratio of total revolving debt (total balances used) vs current balance available. It is not good to consistently have a high credit balance, for example if your credit card limit is $1000 and the balance owing is consistently $900 this may drive your score down as it looks like you are dependent on the credit. However, if the balance is paid off to $0 on a monthly basis then this may drive your score up, because the balance is always brought down to nil. Having a high utilization (using the credit card too often) ratio may also drive your score down.
Length of Credit History – The longer the history the better. When applying for credit the bank usually looks for a minimum of 2 years of credit history with a minimum of two credit products.
Types Of Credit Used – Consumers may benefit by having different types of credit products such as mortgage, revolving (ex credit card, line of credit), loan, etc. This shows you can manage different types of credit facilities.
Recent Searches/Applications for Credit – Applications for credit (such as credit card, loan) are referred to as hard applications can hurt the credit score especially if done numerous times. It is not recommended to have more than 2 hard applications per every 6 months. Credit inquires that were created for personal used such as for an employer, rental application etc are considered to be soft applications and are not counted towards the credit score.
Where Do I Request My Credit Report?
In Canada, everyone can request their credit score report free of charge unlimited amount of times as long as your request is in writing and it is to be delivered by mail. Check www.equifax.com for instructions.
In America, one may only request their credit report free of charge once a year, any additional requests contain a charge. Check www.annualcreditreport.com