What Does a 680 Credit Score Mean in Canada?

680 Credit Scor

Hooray! A 680 credit score puts you square in the good-credit category. Credit score ranges are between 300 and 900, and are classified from poor to excellent depending on the range. Your credit file is a track record of managing debt so financial institutions can quickly asses how trustworthy you are.

Your credit score is based on the information in your credit file from the credit reporting agencies in Canada. A score above 800 is considered excellent, while most lenders consider scores below 620 to be risky. If you need help to figure out where you’re at, you can register with ClearScore to find out your credit score and get tips on how to improve it.

Just like your body, your credit score needs continuous care to grow strong and healthy. So, it is necessary to feed it positive information from your borrowing behaviour, like on-time payments and low balances, to name a few.

Here’s what a 680 credit score means in Canada and how you can achieve it. But first, let’s get to know what a credit report is.

What is a Credit Report? 

A credit report is a statement that provides data and other information about how you handle credit. It shows lenders things like your account status and payment history. Canada has two major credit reporting agencies, Equifax and Transunion

These companies, also known as credit bureaus, collect and keep financial data submitted to them by credit card companies, lenders, and other financial companies.

Credit reports help lenders decide whether or not they will loan money to you, and it influences the interest rates they will offer you. Lenders also use it to check if you are fulfilling the conditions of an existing credit account.

Some businesses can also use your credit report to know if they should give you insurance, rent a house, and provide you with utility services such as internet, cable TV, or cell phone service.

Information contained on a credit report includes:

  • Personal information: This includes your name, birth date, social insurance number, phone number, current and former addresses, current and former employers, etc.

  • Credit Account Information: This includes the type of account (installment, mortgage, revolving, etc.), credit limit, account balance, payment history, etc.

  • Public records: This involves reports on public information such as foreclosures, liens, civic suits, and judgment or bankruptcies.

  • Inquiries: These contain companies that have accessed your credit report.

What Kind of Credit Score is 680: Good or Bad? 

A credit score of 680 falls within the category of 670 – 739, which is considered “good” by Equifax. Therefore, individuals with credit scores in this range are desirable borrowers and don’t have to worry about accessing credit.

Many Canadian lenders consider people with good credit scores acceptable borrowers because their score shows they have a track record of keeping up with their payment obligations and don’t take on more debt than they can handle.

Factors That Determine Your Credit Score 

Five different factors affect your credit score.

#1. Payment History 

Your payment history is the most vital factor determining your credit score, making up 35% of your score. Creditors and lenders use your payment history to know if they can trust you to repay a loan as agreed.

They use your past behaviour to predict your future behaviour. Creditors report your payments to the credit bureaus, indicate if the payment was late or on time, and as well as the updated balance of your loan. A good history of keeping up with payments on time is best for your credit score. 

In the same vein, skipping a payment altogether will negatively affect your score too. The longer your payment goes unpaid, the greater the effect it will have on your credit score. This means a 60-day late payment will have a worse impact than a 30-day late payment, so on and so forth.

A late payment’s impact on your credit score also depends on your current debt. But if you start becoming active and making payments on time, it will reduce your debt owing and increase your score positively.

Public records such as a bill sent to collections, a tax lien, foreclosure, or bankruptcy could also significantly impact your score for the worse.

#2. Amount Owed

The amount of debt you have is also a significant element affecting your credit score, making up 30% of your credit score.  This debt can be your mortgage, auto loan, student loan, or personal loan and can affect your creditworthiness when measured against your income.

The credit utilization rate is the ratio between your total credit limit and current total debt owing on all your revolving accounts, which are lines of credit and credit cards specifically. High balances owing can affect your credit score negatively by increasing your utilization rate.

A lower utilization rate is good for your credit score because lenders need to know if you have financial stability before allowing you to borrow more.  A high ratio tells lenders you are dependent on credit to supplement your income or lack financial discipline.

#3. The Length of Your Credit History

The length of your credit history tells lenders how long you have been using credit and managing debt. Shorter histories are riskier because there isn’t as much information to determine how consistent your borrowing habits are. Some factors associated with the length of your credit history can impact your credit. These factors are:

  • The age of your newest account
  • The age of your oldest account
  • The average age of your accounts
  • Whether you recently used an account

Opening new accounts could decrease the average age of all your accounts, which may weaken your credit score. Closing an old account also reduces the average age of your credit accounts and can hurt your score too.

#4. Recent Credit 

When you apply for credit, like a loan or credit card, the lender will request your credit file from a credit bureau, and that request gets recorded. This type of record is known as a credit inquiry, or a hard credit check, and can stay on your credit file, visible to other creditors, for up to two years.

There are two types of credit inquiries: a soft inquiry and a hard one. An example of a soft inquiry is checking your own score and determining if you qualify for a particular loan or credit card, and such an inquiry doesn’t harm your score or appear to other creditors.

However, when you apply for a credit product, the creditor makes a hard inquiry before making a lending decision. Such inquiry can reduce your score, whether or not you get approved for the loan or credit card.

But a single hard inquiry will have little effect. In the absence of other issues with your credit, your score should rebound quickly.

The effect of a hard inquiry may be higher if you are new to credit or if you have many hard inquiries within a short period of time.

#5. Credit Mix

The final element of a credit score is the credit mix, which accounts for 10% of your score. What determines the credit mix is the number of different kinds of loans you have, like:

  • Installment Loans
  • Revolving Credit, like credit cards and lines of credit
  • Mortgages

Maintaining a combination of different kinds of credit shows you can deal with multiple kinds of loans with different obligations. Like the other factors above, improving your credit mix can help give you a strong credit score.

Tips to Improve Your Credit Score

If you integrate these tips into your credit routine, you will be on the road to bettering your credit score and gaining more financial freedom.

#1. Make Payments On Time 

Paying your bills on time is the most important thing you can do to improve your score because payment history has the biggest impact on the scoring model.

For lenders, a person’s ability to keep up with their credit card payments indicates that they can take out a loan and pay it back. You can get a credit card to rebuild your credit if you have a low credit score.

#2. Set up Autopay or Calendar Reminders

If you have a lot of due dates and are struggling to remember them all, most major providers offer an auto withdrawal option. This option means that your bills will be withdrawn from your account automatically on the due date.

If you don’t like using autopay, another simple option is to set up a payment reminder. Many card issuers will permit you to set reminders via their websites.

You can also set payment reminders in such a way that it appears in the form of an email or push notification. Alternatively, you can also note the due date on a physical calendar, or by setting alarms on your phone.

#3. Request a Credit Report and Dispute Errors

Errors made in your credit report can affect your score. You should check your credit report often on both Equifax and TransUnion to monitor your credit and see if there are any errors.

Credit file errors are common. According to a study by the US Federal Trade Commission (FTC), as many as 1 in 4 people have at least one error on their report that hurts their creditworthiness in the eyes of lenders.

If you detect a mistake on your credit report, ensure that you are quick to gather supporting evidence and dispute the error either by phone or online with the credit bureau.

#4. Use a Secured Credit Card

A secured credit card requires you to submit a cash deposit as collateral in case you default on your payments. The credit card issuer can keep your deposit to recover any loss if you can’t honour your repayment obligation.

Unlike a secured card, an unsecured credit card is a regular credit card. It does not require any initial deposit before you can use it.

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There’s a lot of information to know when it comes to understanding your credit. Comprehending your credit report and credit score is the primary step in taking your credit to the next level.

Arthur Dubois is a personal finance writer at Hardbacon. Since relocating to Canada, he has successfully built his credit score from scratch and begun investing in the stock market. In addition to his work at Hardbacon, Arthur has contributed to Metro newspaper and several other publications