What is a good credit score?

11 September 2023 by National Bank
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Your credit score is a key consideration for your future financial plans. A good credit score could give you access to a future mortgage, a car loan or a loan for your children’s education, for example. In that respect, a number of factors can affect your credit score. Learn more about its role.

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How do you get a credit score?

First you’ll need to understand the basics. A credit score is assigned by a credit bureau. Credit bureaus collect data to assess your ability to meet your financial commitments. Your credit score changes over time based on how you manage credit. For example, your credit score could take a hit if you have late payments as well as credit cards and loans that are almost maxed out. Conversely, making payments at any time (online or in person) can help improve your credit score.

Tip: You don’t have to wait for your statement or due date to pay your credit card bill.

Wondering what's included in your credit report? Consult the Government of Canada’s website:
Credit report and score basics

How do you increase your credit score?

Different factors can affect your credit score. Each one shows your ability to manage credit. Here they are in order of importance (%):

  • Your payment habits (35%)
    The more often you pay before your due dates, the better your score will be. Conversely, late payments and defaults penalize your score.

  • Your use of available credit (30%)
    Ideally, you should use less than 30% of your available credit to maintain a good credit score.

  • When you opened your account (15%)
    The age of your account can have a positive impact on your score. An account that has been open for a long time gives lenders more information about your repayment habits. An account that has been paid on time for a long time is a sign of good credit management.

  • The number and type of debt (10%)
    Having a variety of accounts, such as a mortgage, a credit card and a line of credit, can have a positive impact on your score. Be careful with debt—make sure you have a good debt-to-income ratio.

  • The number of new credit applications (10%)
    Making multiple credit applications in a short time is not advisable, as it could affect your credit score.

What is your credit score used for?

Lenders use your credit score to assess your risk level. Telecommunications companies, insurers, building owners and government agencies also use your credit score to assess risk. In other words, if you have a bad credit score, you may not get credit or access to certain services.

What is a good credit score?

Good to know: You can activate alerts to notify you before your card balance payment is due and when a transaction exceeds the per-transaction limit you have set. See how: Manage my credit card notifications | Manage my credit card notifications demo (bnc.ca)

Credit scores typically range from 300 to 900. A good credit score is 670 or higher. A score of 800 or higher is excellent, indicating that the risk of not making your payments is low. It’s one of the indicators companies use to determine whether your application will be accepted and under what conditions, if any.

What affects your credit score?

  • My credit score will be penalized if I check my credit report
    False. On the contrary, to take control of your financial situation and spot fraud, it’s a good idea to check your credit report regularly.

  • You can’t dispute a credit report sent by creditors to credit agencies 
    False. You always have the right to report any inaccuracies in your file to credit agencies.

  • Changing my spending habits won’t change my credit score 
    False. Your credit score takes into account the balance on your credit cards and other borrowing, so reducing that balance is always helpful.
    You can keep the same spending habits, but paying off your credit card quickly or often is good for your credit score.

  • As an entrepreneur, my business debt doesn’t affect my personal credit report 
    False. In practice, even if your accounts are kept separate, lenders will often ask you for a personal guarantee for money lent to your business. If your business gets into trouble, your personal credit report may end up reflecting that.

  • Using my debit card responsibly improves my credit score 
    False. A debit card is not considered a credit card. With a debit card, there’s no notion of credit. You’re simply using money you already have.

How do you find out your credit score?

In Canada, you can find out your credit score online for free with Equifax or TransUnion. You can also make a written request to receive a copy of your credit report a certain number of times in a year. Such requests are recorded in your credit report and have no impact on your credit score. You can also check your credit score with your financial institution or via apps for free, but you can’t request corrections.

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