Your credit score is one way to understand your credit health. But have you ever wondered what actually makes a credit score good?
Credit Karma Canada’s TransUnion-based credit score ranges from 300 to 900. While a higher score is generally better, there’s no single number that guarantees you’ll qualify for a loan or credit card.
Here’s what different credit score ranges mean and what to keep in mind when reviewing your score.
What is a credit score?
A credit score is a three-digit number that helps lenders assess how you’ve managed credit.
It’s calculated using information from your credit report, which includes details about your credit accounts, payment history and borrowing activity.
In Canada, the two main credit bureaus are TransUnion Canada and Equifax Canada.
Credit Karma Canada provides a credit score calculated using information from TransUnion. If you also access a score through Equifax or another provider, you may notice a different number.
That’s because credit bureaus and lenders may use different information and scoring models.
What is considered a good credit score in Canada?
Credit Karma Canada provides a TransUnion-based credit score that ranges from 300 to 900. Scores from other providers or lenders may be calculated differently and may describe score levels differently.
A higher score typically suggests a stronger credit history, but the ranges used to describe scores can vary depending on the scoring model.
Credit Karma Canada uses the following ranges to describe scores:
- 800-900: Excellent: Generally reflects a strong credit profile.
- 720-799: Very good: May provide access to a wider range of credit options.
- 650-719: Good: Generally reflects a positive credit history.
- 600-649: Fair: Some credit options may be available, depending on the lender.
- 300-599: Below fair: Some lenders may have stricter approval requirements.
These categories are general guidelines, not universal lending standards.
A lender may use different score ranges or additional information when reviewing an application.
Does a good credit score guarantee approval?
Not necessarily.
Your credit score is only one part of the information a lender may consider when deciding whether to approve an application.
Other factors can include:
- Your income
- Your existing debt
- Your payment history
- The amount of credit you’re requesting
- The lender’s own approval requirements
For example, two people with similar credit scores may receive different lending decisions because their financial circumstances are different.
Having a good credit score may help, but it doesn’t guarantee approval or a particular interest rate.
What factors can affect your credit score?
Several factors can influence your credit score.
Payment history
Your payment history is an important part of your credit profile. Making payments on time can help demonstrate that you’re managing credit responsibly. Late or missed payments may affect your score.
Credit utilization
Credit utilization refers to how much of your available revolving credit you’re using. For example, if you have a credit card with a $2,000 limit and a $500 balance, you’re using 25% of your available credit on that card. Keeping balances manageable relative to your credit limits may help support your credit health.
Length of credit history
How long you’ve been using credit can also influence your score. A longer history of managing credit responsibly may help lenders better understand your borrowing habits.
Credit applications
When you apply for certain credit products, a lender may perform a hard inquiry on your credit report. Several applications within a short period may affect your score. Checking your own credit score through Credit Karma is a soft inquiry and does not lower your score.
Types of credit accounts
Your credit profile may include different types of accounts, such as credit cards, loans and lines of credit. How you manage these accounts can contribute to your overall credit history. You don’t need to take on unnecessary debt simply to have different types of credit.
Why might your credit score be different elsewhere?
You may notice that the credit score you see through Credit Karma differs from a score provided by another service or lender. This doesn’t necessarily mean either score is incorrect.
Different scores can result from:
- Different credit bureaus holding different information
- Different scoring models being used
- Credit information being updated at different times
- Lenders using scores designed for specific lending decisions
Credit Karma Canada uses TransUnion credit information to provide your score. If you also access your score through Equifax, the number may be different. The score a lender uses when reviewing your application may also differ from the one you see through Credit Karma.
Pro Tip: To see how each bureau explains credit scores, visit TransUnion Canada and Equifax Canada.
How can you maintain a healthy credit score?
There’s no single action that guarantees a particular score. However, consistent financial habits can help support your credit health over time. Consider these steps:
- Pay on time: Try to make at least the minimum payment on your credit accounts by the due date.
- Keep balances manageable: Be mindful of how much of your available credit you’re using.
- Apply for credit thoughtfully: Consider whether you need additional credit before submitting an application.
- Review your credit information: Check your credit report regularly to stay familiar with your accounts and payment history.
- Focus on long-term habits: Building and maintaining credit generally takes time.
Remember that credit scores can change as new information is reported. A small change doesn’t necessarily mean your overall credit health has changed significantly.
Be cautious of any company that promises to raise your score quickly. Building credit takes time.
Why is it helpful to know your credit score?
Understanding your credit score can help you make more informed financial decisions. Your score offers a snapshot of your credit profile at a particular point in time. Reviewing it regularly can help you:
- Understand where your score falls within a general range
- Learn more about factors that may influence your score
- Follow your credit health over time
- Feel more prepared when considering future credit applications
With Credit Karma Canada, you can check your TransUnion-based credit score for free without affecting your score.
Bottom line
A good credit score can mean different things depending on the lender and scoring model. While higher scores are generally viewed more favourably, no single number guarantees credit approval.
Understanding your score and the factors that influence it can help you make informed decisions about your credit.
By reviewing your credit information regularly and focusing on consistent financial habits, you can take an active role in managing your credit health.