What Does a 720 Credit Score Mean in Canada?

720 Credit Score

Do you have a 720 credit score? That’s great! Well, actually it’s good. A credit score is a three-digit number somewhere between 300 to 900 that summarizes your creditworthiness. A higher credit score increases your chance of getting a loan from a lender, while a low credit score makes it a lot harder.

Your credit history, debt load, number of accounts, and other variables all play a role in determining your credit score. Lenders or creditors use your credit score to predict how likely you are to pay back your debts as agreed. The higher your credit score, the more likely you are to manage credit properly and make your payments on time, and lenders like that.

In this article, we’ll look at what a 720 credit score means it means in Canada. You’ll also learn how to move from a 720 credit score to a higher one, and why you should.

What is a good credit score in Canada and why is it important? 

A good credit score depends on who is judging it and what the criteria are. A good credit score in Canada might differ from scores in the United States.

Luckily, there are some general benchmarks you can use to see how you measure up and estimate your chances of accessing credit when you need it. According to Equifax, a major credit reporting agency in Canada, a good credit score falls between 670 and 739.

Credit scores within this range can easily get approval for loans. However, there might be higher interest rates and perhaps lower lending amounts, depending on the creditor. Even if you aren’t subject to higher rates and stricter lending, you likely don’t have access to competitively lower rates or better perks, not yet at least. So, while a 720 credit score is definitely good, there is still room for improvement. Here’s what a 720 credit score means in Canada and why you should try to improve it.

Why you should improve a 720 credit score

Because, if your credit score falls within the credit score range of 800-900, lenders can easily trust you with loans, believing you can pay them back on time. They reward your trustworthiness with lower rates, better terms, and other perks that other people don’t get. But lenders may subject you to a deeper review if your credit score is average, while a poor score could almost eliminate your chances of receiving loans from traditional lenders.

On top of that, good credit makes it easier to rent an apartment, get a cell phone plan, and even land your dream job. Even some insurance companies look at credit scores to assess risk and calculate premiums. The importance of a good credit score cannot be stressed enough, but a really high one makes your life even better.

How are credit scores calculated? 

Equifax and TransUnion are the two major credit reporting agencies in Canada, also referred to as credit bureaus. They collect information about you and your borrowing behaviour from your creditors and other companies and use that data to calculate your score.

Each credit bureau uses its own unique math formula to determine your score, but they both use the same core benchmarks and weight them similarly. There are five benchmarks, but here are the three most important ones that together makeup 80% of your credit score:

#1. Payment history: 35%

Your payment history is responsible for 35% of your total credit score, which makes it the most important part of how you handle credit. To build or maintain a good credit score, you need to make every single payment on time, without fail. If a payment is late or you skip it altogether, it will have a significant negative impact on your credit score.

#2. Balances owing: 30%

Your debt load accounts for 30% of your total credit score. We are specifically talking about the balances you owe on revolving credit, which are credit cards and lines of credit. Your credit utilization ratio is a number that reflects how much available credit you have used by measuring what you owe against your credit limit, like checking to see how much pie you have eaten. Lower is better because it shows you are not carrying a lot of consumer debt.

#3. Length of credit history: 15%

The age of your credit file and credit accounts makes up 15% of your credit score. The length of your credit history includes both when your file was first originated and the average age of your individual credit accounts.

A long credit history will inform creditors how customers have been using their credit, and establish a track record of what normal borrowing behaviour looks like for that person. If you are new to credit or have a higher number of new accounts open, creditors find it hard to know how responsible you are with credit over the long term.

Benefits of a good 720 credit score in Canada 

The advantages of good credit can range from lower interest rates on loans, better rewards credit cards and even lower car insurance premiums. A higher credit score is a sign of good financial habits, and it qualifies you to enjoy these benefits:

#1. Better rates on insurance

When you apply for insurance coverage, some companies in certain provinces may check your credit score as part of their risk assessment. They can use your credit report to help determine how much they will charge for premiums by offering a discount or not.

The logic is that people with better credit scores are more likely to drive safely, take care of their health, and maintain their homes and cars. Therefore, that makes them less risky and eligible for a better rate.

#2. Better credit cards, lower rates

When applying for a credit card, providers check your credit score to assess how well you manage credit and debt. If your credit score is good, you may be eligible for a lower interest rate, or qualify for certain premium low-rate cards, and prestigious cards with exclusive perks.

Therefore, to help you choose a credit card to improve your credit, you can use a credit card comparison tool that compiles credit cards such as secured credit cards and prepaid credit cards too; two kinds of cards you can qualify for even if your credit score is lower than 720.

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#3. Higher credit limits, bigger loans

You’ve seen that good credit may qualify you for a lower interest rate on credit cards, but it can also qualify you for a higher credit card limit too. Since a good credit score tells lenders you handle money with care, they are more likely to approve large loan amounts. It can give you better access to funds for things like renovations and other big tick items.

#4. Utility accounts

Utility companies, specifically phone and internet providers, may also check your credit. A good credit score will make it faster and easier to set up these types of accounts. A bad credit score might prompt the company to ask for a deposit, co-signor, or deny service. Essential utilities like heat, hydro, and water, for example, do not require a credit check.

#5. Lower mortgage interest rate

Some landlords might require a credit check before renting an apartment to you, and good credit can help you qualify for a better mortgage interest rate. The possibility of receiving a lower interest rate on your mortgage depends on how good your credit history is.

#6. Get a better job

Some companies use credit reports as part of a background check. A bad credit score may be a red flag if employers see late payments, bills in collections, judgments against you, or bankruptcies on your report. Your chances of landing a good job are higher if you have a good credit score.

Credit checks are more common for jobs where you handle money, handle people’s personal and private information, and other sensitive data. So, check your credit report for any errors before you start to look for a job. If there are any errors, quickly dispute the error with the credit bureau that issued the report in question, like Equifax or TransUnion.

Factors that hurt your 720 credit score

Different factors affect the growth of your credit score, both positively and negatively. Some of these factors are;

#1. Late or missed payments

Payments affect your score by 35%, which is the most significant factor affecting credit scores. So, your credit score will suffer a major blow if you have a history of late payments.

Also, it will affect your chances of receiving loans from lenders. Because lenders generally prefer borrowers who pay their bills on time.

#2. Utilization rate

Utilization is the second major factor that influences your credit score, contributing 30% of your score. It describes how close you are to reaching the limit of your credit card accounts and lines of credit (LOC). The closer you get to the limit of any of your cards or LOCs, the more negative effect it will have on your credit score. 

You can calculate your utilization rate by dividing your total balance by your credit limit. Then, multiply the outcome by 100 to find the percentage. Utilization rates above 30% will reduce your credit score. For example, if you have a credit card limit of $1,500, don’t owe a balance of more than $500.

#3. Credit history

The length of your credit history can also affect your credit score, which accounts for 15%. The length of your credit history will affect your credit score too because older accounts show creditors how consistently you manage debt over time. You’ve had more time to build a good score with positive behaviour. But you can still ruin a long history with missed payments, max out credit cards, and bills sent to collections.

You also don’t have a lot of options if you’re a new borrower. A short history will naturally give you a lower credit score, even if you manage credit perfectly. But if you carefully manage your credit and make payments on time, your credit score will improve.

#4. Credit checks

Hard credit checks, called inquiries, account for 10% of your credit score. Whenever you apply for new credit, the creditor will request your full credit report from the credit bureau to assess the risk you pose as a borrower. The credit bureau will record that request on your file as an “inquiry” to document that you applied for credit and the creditor accessed your report.

Inquiries, aka hard credit checks, can cause a temporary decrease in your score. But your score will pick up again in a few months, or even the very next month, on the condition you keep up with your bills.

However, a lot of credit inquiries in a short period of time can really damage your score because it indicates you may be in a financial crisis and desperate for credit. It’s best to take about a six-month gap between applications for new credit and only apply when you actually need it. Also, avoid opening new accounts in the months before you apply for a major loan such as an auto loan or mortgage.

How to improve your 720 credit score

A 720 credit score is good, but it is not the ultimate score that you can get. So, if you’re thinking of how to boost your credit score, this article is for you. These tips right here will help you level up:

#1. Pay your bills on time

The best method to improve your credit score is by paying your bills on time. As we’ve already established, your payment history accounts for 35% of your credit score. On-time payments can increase your score over time.

#2. Pay attention to credit utilization

Credit utilization is the most underrated method of improving credit scores, but it is crucial because it accounts for 30%. If you want to boost your credit score quickly, work on paying off your credit card balances as soon as possible. Then, be careful not to allow your utilization ratio to go beyond 30%. So, if your credit limit is $1,000, be sure not to owe more than $300.

#3. Pay Attention To Your Credit History

Beware that the age of your credit history is important, and it’s better when it’s longer. This includes the age of each individual credit account in your credit report. So the easy trick is that you should not close your old and unused credit card or line of credit account. However, if you must close an account, close the newer ones, if possible.

#4. Diversify your accounts

Your credit mix, such as auto loans, mortgage, student loans, credit cards and lines of credit account for 10% of your credit score. Diversifying your credit mix among installment loans and revolving credit can increase your score too, as long as you make your payments on time and practice other good borrowing habits.


The health of your credit score depends completely on you. That means you have the power to improve it by carefully managing your credit accounts. Over time, responsible use of your credit cards and loans can grow your credit score and make you eligible for bigger loans, like a mortgage, with lower rates and credit cards with better perks.

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