What Does a 650 Credit Score Mean in Canada?

A 650 credit Score in Canada is considered below average, but it’s easy to move up the ranks! A credit score is an important financial tool that measures how likely you are to repay your loans as agreed. In Canada, credit scores range from 300 which is very poor, to 900 which is the best.

According to Equifax, one of the major credit bureaus in Canada, a 650 credit score is classified as “fair,” on a scale from “poor” to “excellent.” This is because having a 650 credit score qualifies you for most financial products but at a higher interest rate than people with a better credit score would get. Many financial institutions use your score to evaluate your credit risk as a borrower and decide what financial product to offer you and at what interest rate. 

Of course, you won’t get a premium credit card, but you can still access competitive products. It’s important to understand how to calculate your credit score, the factors involved, and how to improve your 650 credit score to a good or excellent one. Stay put as we x-ray the innards of a 650 credit score.

What Does a 650 Credit Score Mean?

Having a 650 credit score basically means you are within the acceptable boundaries of risk for lenders. As a result, you will qualify for some financial products like mortgages, but likely at a higher interest rate than someone with better credit. According to Equifax, the range of credit scores from 300 to 900 is divided into five categories:

• Poor
• Fair
• Good
• Very good
• Excellent

Let’s examine the ins and outs of each category, starting with the lowest.

Poor Credit: 300-579

Most lenders will not work with people who have credit scores in this range. They are considered very high-risk borrowers who are financially irresponsible in repaying their bills. They may have many many missed payments, items in collections, or owe too much debt.

Fair Credit: 580-669

A fair credit score of 650 falls within this range, which is below the Canadian average credit score. Lenders will be cautious to work with you, making it more difficult to get approved for loans. You will likely pay a higher interest rate and may not get the best products with premium rewards.

Good or Average Credit: 670-739

The average Canadian credit score is around 672, but it changes all the time and varies from province to province. If your credit score ranges from 670-739, lenders will be more open to working with you compared to someone with fair or poor credit. You will likely get better financial products at lower interest rates.

Very Good Credit: 740-799

Scores that range from 740 to 799 are considered very good. If you have a credit score within this range, you have proven to be a responsible, low-risk borrower who consistently pays your debts on time. Consequently, lenders will offer you better credit products at competitive interest rates.

Excellent Credit: 800-900

This is the top tier in the range of credit scores from 800 to 900. Customers with this kind of credit score have secured the trust of lenders, as they are faithful in repaying their loans, aren’t carrying a lot of debt, and don’t apply for new credit often. Lenders are more committed to working with them, offering the best credit products at the lowest rates.

Is a 650 credit score and below a bad credit score?

While a 650 credit score is below the average Canadian score, it doesn’t mean all hope is lost. You might find it more difficult to get approved for better loans and credit products, but it doesn’t mean you won’t be approved at all.

Having a 650 credit score is not terrible. Many factors could have influenced it, such as a recent move into Canada, a past bankruptcy record, or you simply haven’t had enough time to build a higher credit score. Instead of feeling bad about it, rise up and take bold steps to improve your fair credit score to an excellent one.

5 Tips to Improve Your 650 Credit Score from Fair to Excellent

If your credit score is below average, here are a few tips to improve your 650 credit score to an excellent one.

1. Pay Your Bills on Time

Unpaid bills or late payments will negatively affect your credit score. It reflects on your payment history, which accounts for 35% of your score, thereby showing lenders how financially irresponsible you are. Therefore, making on-time payments can help you improve your payment history, which builds your credit score. If you regularly struggle with on-time payments, you can set phone reminders to help you manage your payments, or set up automatic payments on your bank account.

2. Pay Your Balance in Full

Paying your credit card bills in full will help improve your credit score. However, If you can’t pay in full, make sure you pay the minimum required amount shown on your credit card statement. As such, it shows lenders that you’re creditworthy and honour your payment obligations.

3. Always Check Your Credit Report 

Get into the habit of checking your credit report often to ensure there is no inaccurate information. Sometimes, errors can occur when lenders report information to the credit bureaus. Other times, there can be system errors that might show another person’s debt or an outdated debt.

A frequent review of your report helps you rectify potential errors, if any, that can hurt your credit score and rectify it. You can check your credit report for free as many times as you want without hurting your score with a popular app like Borrowell.

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4. Secured Credit Card

A secured credit card is a good option for customers who want to improve their credit scores, but have difficulty accessing a regular credit card. You can nearly always get a secured credit card, even with bad credit, by making a cash deposit. Once you begin to use your card wisely, your payment behaviour will be sent to the credit bureaus, which will help build your credit score. 

Secured credit cards are great ways to create a good payment history. You can use a secured card to improve your credit score by using a small percentage of your available credit and paying the balance off in full as soon as your statement arrives.

One of our favourite secured credit cards is the Neo Secured Card. It has the best cash back rewards program, guaranteed approval, and the lowest security deposit requirement we’ve come across.

5. Keep Your Credit Utilization Ratio Low

Your credit utilization ratio is a number that compares the credit card debt you owe to the amount of available credit you have access to; ie. your balance owing divided by your credit card limit. This is the second biggest factor in calculating your credit, which accounts for 30% of your score.

Aim at keeping your ratio low because the lower your ratio, the better flexibility you have if something goes wrong. Experts advise that you maintain less than a 30% ratio, as a higher ratio can mean that you’re dependent on credit. For example, if your credit card limit is $1,500, don’t carry a balance of more than $500. Ideally, don’t carry a balance at all!

What Can You Get With a 650 Credit Score?

While a 650 credit score is considered fair, you can still access most financial products with it.

1. Getting a Credit Card With a 650 Credit Score

With a 650 credit score, you’ll qualify for many credit cards. Though, maybe not the best cards like premium cards with rewards, like points and cash back. For the best rewards cards, you need a good credit score.

Many credit card providers prefer to work with customers with at least 660 credit scores. Therefore, to help you choose a credit card to improve your credit, you can check out some credit card comparison tools that compile some credit cards to improve your credit score in Canada.

2. Getting a Personal Loan With a 650 Credit Score

Your credit score is a major factor that financial institutions, like banks, consider before approving you for a loan. Your credit score determines your credit limit and the interest rates offered to you because the lower your credit score, the lower the credit limit and the higher the interest rate will be. 

Therefore, with a 650 credit score, you’ll likely qualify for a loan at banks but not at a lower interest rate. But if you don’t want to go to the bank, you can consider other options like bad credit or private lenders. They offer you more competitive loans but are subject to higher interest rates.

3. Getting a Mortgage With a 650 Credit Score

Most traditional banks will require customers to have a credit score of around 680 to qualify for a mortgage. If your credit score is 650, you might qualify for a mortgage but at a higher interest rate. Similarly, alternative lenders will offer you a mortgage at a higher interest rate and may even require collateral or a co-signer.

4. Renting a Home With a 650 Credit Score

Your credit score is a major factor some landlords consider before they will rent to you. They use it to evaluate your creditworthiness and determine if you qualify for the rent payment. In a competitive market, renters with high credit scores may have an advantage over those with low credit scores. 

5. Landing a Job With a 650 Credit Score 

If you apply for a civil service job or a position in the financial service industry, potential employers may check your credit score. They use it to evaluate your sense of financial responsibility and risk of misconduct to determine whether or not to hire you. Employers may consider applicants with fair credit scores, but those with higher credit scores stand a better chance of securing the job over those with bad or fair scores.

6. Getting a Car Loan With a 650 Credit Score

In Canada, the minimum credit score required for a car loan is between 630 to 650. So, with a 650 credit score, you can easily qualify for a car loan because the car itself serves as collateral for the lender. If renting a car with a debit card instead of a credit card, the rental company might request your credit history to evaluate and determine your credit rating.

7. Getting a Mobile Phone With a 650 Credit Score

Mobile phone companies check your credit score too because it tells them whether or not you can handle monthly payments. Usually, a score of 600 or less is seen as poor, while a score of 650 or above is preferred by most service providers. If your score is lower, don’t fret. You may just need to put down a larger deposit or choose a prepaid plan, which might mean paying a bit more upfront but you’ll still be able to secure your new phone.

Putting it all together 

A 650 credit score is not the worst score in Canada. It falls within the fair range of credit which is below the average score. Therefore, having a 650 credit score isn’t the end of the world for you. You can still qualify for many credit opportunities, though likely not the best ones. To qualify for better lending options at lower rates, focus on improving your credit score.