Your 600 credit score is your ticket to a lot of good things. Is it perfect? No. Is it permanent? No! You can improve your score using some of the proven tips we are going to cover. This is the deep dive into your 600 credit score: what you can and cannot do with it.


Credit score crash course

Unless you majored in finance in school, you probably never studied credit scoring, at least not in-depth. As a result, most of your information on credit scores is what you can find online. A quick rule about online searches about credit scores: there are only three names you need to know: FICO, TransUnion, and Equifax.

Where do you get a credit report?

Did you know that you can check your credit score yourself? Major banks like Royal Bank of Canada and credit unions like Desjardins now let you check your credit score. There are free credit checking sites like Borrowell and Credit Karma. However, your true report only comes from one of two places: TransUnion or Equifax.

What goes into calculating a credit score?

Credit scoring has three primary elements that influence how the score is calculated. Don’t worry; we are not going to make you break out your calculator to do some complex calculations. This is just for general knowledge.

The first and most important variable that goes into the calculation of a credit score is your payment history. Credit scores use past behaviour when trying to evaluate potential future outcomes. The premise behind this approach is that if you paid your debts as agreed in the past, you should be able to keep those commitments. We need to place special emphasis on the word “should,” at best, these credit scores are an opinion because no one can predict the future, but these scores help creditors make better-informed decisions.

After payment history, the next item that impacts your score is your credit type. There are two types of unsecured credit facilities available. Unsecured means there is no collateral pledged against the loan. A mortgage is a secured loan because the house is promised as collateral.

Revolving credit products are credit cards and lines of credit. With these facilities, you have a predetermined available balance; when you use the facility, your balance decreases, and you can use it again when you repay the balance. This is where the revolving concept comes into play.

The other type of credit falls under installment, which, as the name implies, is whenever you buy something and make installments over time. An example is a car loan. It would be listed on your credit report as an installment loan.

Are you still with us? I know we covered a lot of technical stuff but don’t give up. This information will help you have a better quality of life and save money in the process.

The last variable that goes into calculating your credit score is the total amount of debt you are carrying compared to the total amount of credit you have available. This is referred to as your Credit Utilization Rate. It has a moderate impact on your overall score.

According to research and personal experience, having a utilization rate of around 30% or higher, it is going to impact your credit score negatively. For example, if your total credit available was $10,000 and your total debt owed was $4,000, that would be a credit utilization rate of 40%, which is over the recommended limit. This will have a moderate impact on your credit score, but in general, it is not wise to carry too much debt.

Now that you know what goes into calculating a credit score, you should get them if you don’t already have access to your credit scores. You can access your actual credit score with TransUnion and Equifax. You need to sign up with both of these credit-reporting agencies because they each use their scoring system.

This means that you could have a 600 credit score with TransUnion and a 580 with Equifax. And you may say what’s the big deal, it is only 20 points, but as you will see in a bit, the difference between 600 and 580 is day and night. Another, more important reason that you should monitor your credit is identity theft. We will do an in-depth review on how to protect yourself from this in the future, and without credit, your options are limited, as we will review in a few moments.


What you cannot do with a 600 credit score


Remember that your credit score is not set in stone. You can improve it and later on we give you tips on just how to do that. But right now, you have to know the truth about what you cannot do with your 600 score.

A 600 credit score is considered subprime; the median credit score in Canada, as we are writing this, is 660. So anything below that is subprime. You want to level up to the prime category because of the options it gives you.

You will have a tough time qualifying for most bank credit cards. You can easily apply and be accepted for secured and guaranteed approval credit cards. In fact, these cards can help you get your credit score higher.

Another drawback of having a 600 credit score is not being able to buy a new car. With a 600 score, you would qualify at best for a used car loan which comes with a higher interest rate than most new cars. You need a credit score of 680 to get prime rate car loans which are at historic lows.

If you are applying for specific jobs in the Royal Canadian Mounted Police (RCMP) and other high-profile positions, a credit score of 600 will not be enough. These positions come with a lot of responsibility, and you cannot be vulnerable to financial exploitation. A 600 credit score conveys the message that you are not on a solid financial footing and could be exploited financially by criminals to bend the law.


Things you can do with a 600 credit score


You should be able to qualify for most apartment applications. Prospective landlords want to make sure the tenant they select will pay the rent on time as agreed. The landlord will do a soft credit check and look at your income to make sure you are making enough money and your credit score. If your score is under 600, it would be a significant cause of concern for the landlord, but with a 600, you should be fine.

Since we are on the topic of housing, you will be happy to know that you can get a Canadian Mortgage and Housing Corporation (CMHC) insured mortgage with a 600 credit score. This change happened back in the middle of 2021. Prior to that, you would need a 680 credit score to get a CMHC mortgage. This mortgage insurance allows you to purchase a new home with just a 5% downpayment instead of the 20% required for a conventional mortgage. Of course, you still need to meet the debt-to-income ratios set out by the CMHC, but for most Canadians with a 600 credit score, you can now buy a home.

You can also get personal loans from lenders such as Easy Financial and Fairstone Financial. Still, these products come with high-interest rates. Generally speaking, you are going to pay higher interest rates until your credit score exceeds 660.


How to get your credit score into prime territory


We touched on what you can and cannot do with a 600 credit score. Now we can spend a few moments and look at how you can boost your credit score. It doesn’t require anything complex.

If you recall, we talked about payment history having the greatest impact on your credit score. Unless you are new to Canada and just starting to build your credit score, the reason your score is 600 or below is most likely due to missed payments. Missing even one payment can have a profoundly detrimental impact on your credit score even if there was a legitimate reason you could not make the payment, like losing your job due to the pandemic.

The credit scoring system doesn’t ask why the payment wasn’t made; it only asks whether the payment was made as agreed or not. While it may not seem fair, there are dispute options available to deal with this, but that is a technical conversation for another day. In the future, you need to make a firm commitment to yourself that you will pay at least the minimum amount due before the due date. You must allow sufficient time for the payment to post to your account.


Setting yourself up for success by increasing your credit score


While making your payments on time helps improve your score, reduce the amount of debt you currently have to a more manageable level. It may take some time before your score starts to improve, but you are on the road to enjoying the benefits of having a prime credit score. Once you reach that level, resist the temptation to open numerous new accounts. Hard credit checks happen when you ask to borrow money whether as a credit card or loan. Too many of these on your credit report in a short amount of time will negatively impact your credit score over the short term.

The fact you made it all the way to the end shows you are committed to improving your credit and living your best life. Stick with the tips we provided, and you are destined for financial success. You’ve got this.

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