Understanding Credit Scores: What They Mean & How to Improve

But wait, there’s a longer semantic discussion to be had!

What even is a “credit score”? It's a number between 300-900 that reflects how much credit you’ve had for how long, and how well you’ve done paying it off. Those who are assessing if and how much to let you borrow for, say, a house or a car will determine how likely you are to pay the loan off; the more likely you are to default, the lower your score will be, so if you do get a loan, this risk will be reflected in a higher interest rate. The guardians of the credit scores are the twin titans of Canadian credit monitoring: TransUnion and Equifax. Using this form, Equifax will sell you a gander at your score for $11.95, and they’ll also provide a free credit report.

Now what do we mean we say a credit score is “good”? The agencies tend be a little cagy about committing to what scores mean exactly; TransUnion says that it’s up to a creditor to make designations like good and bad. Elsewhere, you might read that any score from 600-750 is considered “good,” while the highest scores, 750-900 are considered “excellent.” However, scores from 600-650 put you perilously close to the “fair” credit category, and therefore likely to be considered a higher loan risk by lenders. If you’re even able to get credit, you’ll likely pay a higher interest rate than someone with a score that’s just 20 or 30 points above yours. So strive for at least 700, which is an objectively good score.

How do you get a good credit score, or improve a lousy one? Having a long established credit history is key to building a good credit score, and since Equifax discloses that credit history accounts for 15% of what determines a score, older people on average tend to have higher scores than youngsters. But the biggest, and most obvious factor is paying bills on time. Staying considerably below your credit limit on each card also makes a difference, as does spreading out balances between more than one card. As for improving a not-so-great score, there’s no quick fix, but checking credit reports for any damaging inaccuracies is a common recommendation.