A strong credit score can help you get approved for a new loan, credit card, or mortgage at a more favorable interest rate. This can save you hundreds to hundreds of thousands of dollars in interest over the lifetime of your loan. Understanding how your credit score impacts other areas of your financial life is key to improving your current and future standing. Checking your credit report, monitoring your credit scores, and tracking your credit history can help you prepare for what your score range means and what impact it has on your life.
In Canada, credit scores range from 300 to 900. The lowest credit score in Canada is in the 300 range while the highest tends to be in the 800 range. Here’s how to know where you fall and how to boost your credit score and use your fluctuating credit scores to improve your credit history and increase credit limit and reports.
What is the lowest credit score in Canada?
Credit scores can change from time to time depending on your debt to credit ratio, what purchases you have made, how much credit card debt you have, your income and expenses, and other factors that are listed on your credit report and that make up your credit history. Here is the typical breakdown of what a good credit score and a bad credit score look like in Canada when you pull your free credit report:
Credit score range
Score type
Below 560- Poor or bad credit scores
560 to 659- Fair credit scores
660 to 724- Good credit scores
725 to 759- Very good credit scores
760 and up- Excellent credit scores
A score below 560 is generally considered to be a bad credit score in Canada, according to credit bureau Equifax. A score between 560 and 659 is often considered fair, while scores between 660 and 724 are considered to be an acceptable or good credit score. If your score is between 725 and 759 on your credit report, it’s considered very good, while scores 760 and higher are viewed as excellent. If your score is at 560, lower, or hovering close to this range, your credit score is considered poor and it is generally seen as a bad credit score.
How a bad credit score affects your finances
Having a bad credit score makes it harder for you to qualify for new credit products. The scores generated by your credit report are what lenders use to determine your creditworthiness and whether or not they will approve you for loans or lines of credit with them. That credit score can hurt your finances for a number of reasons.
First, if you need to make a large purchase, like a car or some other big expesnse, you’ll be less likely to secure financing. They will consider your credit report and how you have handled loans and payments in the past to see if they want to offer you a loan and take the risk that you won't repay it back. And, if you do get approved for a loan, you’ll likely receive a higher interest rate, which means you’ll pay more for the loan than you might have with a higher credit score. It will be much harder to get approved for a loan or credit card if your credit scores are low with the credit bureaus.
Additionally, since the best way to build credit and improve a bad credit score is by using credit correctly, you may find it harder to grow your credit score. It is easy to see why a bad credit score is something to avoid and why you need to take steps to protect your credit score as much as possible- it truly can have a huge impact on many areas of your life.
How to improve your score to get above the lowest credit scores in Canada
It is not the end of the world though if you have a bad credit score. you can still take steps to improve your credit reports and boost bad credit to a better range. It will take time but it can be done. Here’s how you can boost your bad credit rating and poor credit history by using a credit card responsibly:
Pay your credit card bill on-time. Always pay your credit card bill on time and in full each month. On-time payments account for 35% of your credit score, so staying on top of this will help your score improve. Enrolling in autopay can help you keep your account in good standing. This will go a long way in improving your payment history.
Pay more than the minimum due. If possible, pay off your entire balance, but if you can’t, try to pay more than the minimum amount due to help keep your account in good standing and to decrease interest charges.Positive payments are good for your credit reports and will help improve your bad credit standing over time.
Don’t overspend. Only charge purchases you can afford to pay back in full. Not only will this prevent you from accumulating credit card debt and interest, but it will help your credit score grow by keeping your balance low. Show you are responsible with your payment history and manage your money well to price to a lender, bank or credit union you are low risk when it comes to paying back a loan.
Charge less than 30% of your credit limit. Your credit utilization — how much you use in credit versus how much is available to you — accounts for 30% of your credit score. Try to limit credit card purchases to 30% or less than your total credit limit. One of the biggest mistakes people make that lead to bad credit ratings is they fail to manage their debt and have a high income-to-debt ratio.
Treat your credit card like a debit card. To avoid missing a payment, pay off purchases as you charge them.Many bad credit scores come from allowing cards to get maxed out and high interest rates to boost balances beyond what can easily be paid off. You can avoid this problem from the start with smart use of your credit card accounts.
Minimum credit score for credit card approval
Every credit card credit score requirements vary by issuer and card type. Many of the best rewards and travel cards come with steeper credit requirements, and may be reserved for borrowers with good to excellent credit scores. There is no magic number used by a credit scoring model to determine who can and cannot get approved. However, the higher your credit scores range the more likely you are to be approved. Protecting your credit is vital to having an easier time down the line.
If you have bad credit and want to start building your score and improving your credit rating, credit building credit cards generally have more flexible credit requirements. If you have issues on your credit report that keep you from being approved for other lines of credit, you may get approved for a credit building card. There are different types of credit building cards, ranging from secured cards which require a security deposit to fund your credit line, to student credit cards, and secured credit cards that aim to help you build your credit score.
Qualify for a KOHO credit card today
KOHO offers a credit building credit card to borrowers with poor credit scores. You can use this card to start establishing a positive credit card payment history, and even earn cash-back rewards.
Good credit is key to financial security. But if you need help overcoming missed payments, and poor debt management and credit card use in the past, KOHO is here to help with a secured credit card and other credit-building services. If you’re ready to boost your poor credit score, you can apply for the KOHO credit card at https://www.koho.ca/.
Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!
Courtney Johnston
Courtney is a professional writer, editor and financial literacy enthusiast. You can find her writing on CNET, Investopedia, The Motley Fool, Yahoo Finance, MSN and The Balance. She spends her free time exploring different cities across the globe or enjoy some downtime with her two cats and one dog.
