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What Your Credit Score Actually Means

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As you go through life, you’ll likely hear more and more about a little term called a credit score. Whether you’re applying for a new job, buying a vehicle, or putting a down payment on a home, your credit score will be checked and affected by how you choose to handle your debt. 

But what is a credit score? How does a credit score affect your financial goals? Today we’re going to walk you through what your credit score means so you can make tangible steps towards building great credit and a sturdy financial foundation.

What Are Credit Scores & Credit Reports?

Credit scores and credit reports are just two different ways to look at your credit history. In simple terms, credit scores give you (or someone else checking your credit history) an overview of your credit history, scored between 300 and 900. If you have a poor credit history, the lower your credit score will be, and vice versa.

Credit reports are much more detailed, providing information like your:

  • Name 
  • Birthday 
  • Current and past addresses
  • Current and past phone numbers
  • Social insurance number
  • Passport number
  • Current and past employers
  • Current and past job titles

Various people can see your credit report and credit score, including banks, the government, landlords, potential employers, retailers, and even your cellular provider. Your credit information will help these groups determine if they want to hire you, lend you money, or even consider you as a potential renter.

Businessman pulling credit score scale changing credit information from average to good.

Breaking Down Credit Scores

Now that we have a general sense of what a credit score and report are, it’s time to dive into the nitty-gritty of credit scores and understand how your credit score will affect your life and financial wellbeing. 

What are “Good” Credit Scores (680-900)?

Having a credit score between 680 and 900 is where you financially want to be. Having a good credit score will make it much easier for you to get loans, qualify for a mortgage, and obtain approvals for a new car and phone.

High credit scores help groups like banks and car companies get a sense of who you are and how you spend your money. If your credit score is too low, lenders might see you as too much of a risk and will not grant you credit. Lenders might also increase the lending rate should they decide for you receive credit.

Healthy credit scores break into these groups:

  • Excellent (780 and up)
  • Very good (720 – 779) 
  • Good (680 – 719) 
  • Average (620 – 679)

What Are “Poor” Credit Scores (300-619)?

Poor credit scores happen when you don’t make payments according to the lender credit terms or you incur too much credit by keeping all your lines of credit and credit cards at the absolute limit. Missing payments, not paying your minimum credit bill, non-sufficient fund payments, large outstanding debts, being close to your credit limits, and being sent to collections will all negatively impact your credit score.

Poor credit scores break into these groups:

  • Poor (580 – 619) 
  • Very poor (Scores 500 – 579) 
  • Terrible (less than 500)

What Affects Your Credit Score?

We’ve already outlined a little about what could affect your credit score, but now it’s time to look at these factors a little bit closer.

We all understand that not maintaining your debt will lower your credit score. But according to Loans Canada, there are several other factors you should be aware of, including:

Payment History

Payment history is relatively easy to explain, but it has the most effect on your credit score. Your payment history is simply how often you make payments on your debts and if they’re on time or not.

Debt Utilization

Debt utilization is how much debt you’re carrying, and it’s responsible for about 30% of your credit score. If you have a lot of debt or have been holding close to your maximum credit amount, you’ll have a lower credit score.

Credit Length

Credit length is how long you’ve been carrying your debts, which could actually improve your credit score. If you successfully manage your credit for a long time, your credit score can improve.

New Inquiries

New inquiries are probably one of the more confusing aspects of your credit score. New inquiries into your credit report could make a small negative impact on your score, but this is only temporary. You may not notice any changes unless you apply for a lot of new credit in a short period of time.  People trying to get car loan approval by going from car dealer to car dealer will inadvertently run into this problem.


Having a lot of different creditors, and handling them responsibly, will also have an impact on your credit score. 

Can You Still Have a Credit Score Even if You Have No Credit Card?

You can absolutely have a credit score even if you don’t have a credit card. Any form of debt, including mortgages, student loans, car loans, alimony payments, or even a cell phone payment, you will have a credit score.

There are several ways for you to check your credit score online, like the free credit report tool Credit Karma. This app can help you keep track of your ongoing payments, including how much you have to pay on your loans before they are paid off.

Our licensed insolvency members and administrators can also provide you with reliable strategies for managing and paying off your debts, even if you’re struggling to keep up with your minimum payments. If you need help, be sure to contact our office today.

Written by Arthur Waring

Arthur earned his Bachelor of Arts from the University of Western Ontario before earning a Bachelor of Commerce from the University of Windsor. During university, he also participated in a French immersion program in Trois Pistol, Quebec, and has been employed for several national firms over the years.

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