One of the most significant statistics in your life is your credit score. Your creditworthiness, or how likely it is that you will repay the money you borrow, is shown by this three-digit figure.
What Is A Credit Score?
A credit score is a number ranging from 300-850 that is used to measure a person’s financial responsibility, indicating the likelihood that the person will default on credit payments.
A higher credit score generally means the individual is less likely to default and more financially stable which in turn makes them more attractive to creditors when applying for loans, lines of credit, or other forms of debt.
According to springfinancial, the average credit score in Canada is 660. This means that a credit score of 800 is significantly higher than the national average and provides easier access to financing.
However, an 800 score is not the best possible in Canada. You must raise your credit score to 900 to accomplish this.
To benefit from the advantages of having a good credit rating, however, this might not be required. Your credit score Is deemed “good” if it is above 760.
How Are Credit Ratings Determined?
The following are various ways by which your credit score is calculated.
1. How much you owe
30% of your score is based on how much debt you have from loans and credit cards. This is determined by the total amount you owe, the variety and quantity of accounts you have, and the ratio of your debt to your available credit.
Smaller amounts will boost your credit score if you make on-time payments, but larger balances and maxed-out credit cards can lower it.
Your credit score may temporarily decline if you take out new loans with limited payment history, but it may rise if you take out loans that will soon be paid off because they have a successful payment history.
2. Your Payment History
35% of your score is determined by your payment history. This displays your ability to pay your bills on time, how frequently you miss payments, how many days past the due date you pay your bills, and the frequency of late payments.
Usually, your lender will disclose payments that are over 30 days overdue, which lowers your credit scores. Factors include how far behind you are on payments, how many accounts display late payments, and if you have made the accounts current. Your score will increase as your percentage of on-time payments rises. Your credit score suffers each time you miss a payment.
3. Types of Accounts you have
10% of your score is determined by the types of accounts you have. Having a variety of accounts, such as credit cards, installment loans, house loans, and retail loans, may help you raise your credit score.
4. Length of Your Credit History
15% of your score is determined by the duration of your credit history. The longer you have made payments on time, the better your credit rating will be. When considering credit history, credit scoring models often consider the average age of your credit.
For this reason, you ought to think about maintaining open and active accounts. Avoiding credit applications and debt can sound prudent, but if lenders cannot evaluate your credit history, it could potentially lower your score.
5. Recent Credit Activity
The remaining 10% is made up of recent credit activity. Recent account openings or applications for new accounts may be signs of prospective financial difficulty and could affect your score.
Credit scoring algorithms, however, are also created to take into account the fact that consumers who are looking for a loan aren’t always riskier.
How Your Credit Scores Can Be Affected
As was already said, your credit score is greatly influenced by a few key elements of your credit file, either favorably or unfavorably. You can lower your credit score by avoiding the following frequent mistakes:
1. Omitted payments
One of the most crucial components of your FICO® Score is your payment history, and even one missed or 30-day late payment might hurt your score.
2. Using an excessive amount of credit
High credit utilization may indicate to lenders that you are overly reliant on credit. The amount of revolving credit you are currently utilizing is divided by the sum of all of your credit limits to determine your credit utilization.
Credit usage under 30% is preferred by lenders; under 10% is even better. Your FICO Score is 30% based on this ratio.
3. Submitting numerous credit applications quickly.
A hard inquiry is noted in your credit file each time a lender requests your credit reports to make a loan decision. These queries can temporarily lower your score because they remain on record in your file for two years.
To determine how much new credit you are requesting, lenders consider the number of hard inquiries. An excessive number of queries in a short period may indicate that you are being turned down for new credit or that your financial condition is dire.
4. Accounts going into default
Negative account information, such as foreclosure, bankruptcy, repossession, charge-offs, and settled accounts, may appear on your credit report. Each one of these can seriously damage your credit for several years, possibly even a decade.
How To Check Your Credit Score
Credit scores can be checked in various ways. Some of them are obtainable only from financial institutions or trade associations or from major credit bureaus.
In Canada, credit scores are evaluated by banks, credit agencies, and other information providers. Other ways you can check your credit scores include:
1. Consult the lender or issuer of your credit cards
You may check your free credit scores from several credit cards and auto loan providers by logging into your account online or by looking at your monthly bill. Normally, receiving the number requires your consent.
2. Visit a website that offers free credit scoring
Many websites provide free credit scores; just be sure to read the rules before committing. To help you understand how you’re doing with your credit, some free websites offer educational scores. Your free FICO Score is available from Experian.
3. Visit a nonprofit credit counselor
Credit counselors can frequently obtain your scores without charge and discuss the specifics with you. Contact the National Foundation for Credit Counseling for assistance in locating one.
What Is An 800 Credit Score?
A credit score of at least 800 is not only desirable. It is exceptional in terms of FICO credit scoring. You don’t actually need to reach 850 to enjoy the same advantages as individuals with perfect credit, even though both the FICO and VantageScore credit scoring systems go all the way up to 850.
What Does It Mean To Have A Credit Score Of 800?
If your credit score is 800, you most likely have a lengthy credit history, have been paying your bills on time, and have a low credit use ratio. All of this evidence demonstrates to lenders your propensity to repay loans.
According to a LendingTree survey from 2021, almost everyone with credit scores of 800 or higher made their payments on time and in full. They also tended to have old active accounts, with an average age of at least 27 years, and a low average credit utilization ratio of 5.7%.
However, since only a very small number of people have perfect credit, you don’t necessarily need to have a flawless credit score to get good loan terms or low credit card APRs. It’s not usually required to aim for a credit score above 800, as a recent FICO report revealed that in April 2019, only 1.6% of the U.S. population who could receive a score had a FICO score of 850.
For the best rates on loans and/or mortgages, the general rule of thumb is that you need a credit score of at least 760. In other words, if your credit score is 800 or above, you fall into the top credit score category and will be more likely to be approved for loans with the finest terms, whether they be for a home or personal use.
Benefits Of 800 Credit Score
The benefits of having an 800 Credit Score are numerous. Some of them include:
Reduced interest rates: Obtaining credit approval is one thing. Another is being eligible for the best interest rates. You may be eligible for better rates and terms if your credit score is at least 800.
Acceptance of your credit application: You’ll have an easier time getting accepted whether you apply for credit cards, loans, lines of credit, or a mortgage.
Eligibility for premium credit cards: Are you considering applying for a premium credit card? A better credit rating may be helpful. Benefits offered by premium credit cards can include access to airport lounges, hotel upgrades, balance transfers at low-interest rates, sizeable welcome bonuses, high reward earning rates, and more.
Increased credit limit: You could increase your credit card’s credit limit without damaging your credit.
Easier to Rent: Renting an apartment is simpler if you have a credit score of at least 800.
Cheaper insurance: You might be eligible for lower insurance prices on homeowners, auto, and other policies.
How To Build An 800 Credit Score?
Nobody with a high income or unique access to the credit bureaus is eligible for the illusive 800 credit score. A credit score of 800 is achievable and maintainable for everyone who uses credit wisely. Here are some pointers:
One of the most crucial actions you can take to raise your credit score is to pay your obligations on time.
Keep your credit balance at 30% or less of your credit limit to maintain a low credit utilization rate. For illustration, if your overall credit limit is $10,000, you should have no more than $3,000 in debt.
Limit credit inquiries to prevent having an excessive number of hard inquiries on your report. A lender might suspect you are having financial problems if you submit many credit applications at once.
Run a credit report check. At the very least once a year, review your credit report. You can dispute erroneous information with the lender or credit bureau if you uncover it. You can keep an eye out for substantial changes in your credit score.
Increase your credit mix. Having a range of credit available will help you raise your credit score. For instance, a combination of mortgages, personal loans, vehicle loans, lines of credit, and credit cards.
Best Credit Cards For 800 Credit Score
When your credit score is 800 or higher, you have a wide range of credit card possibilities. However, you can be eligible for the greatest credit cards available in Canada, such as:
1. The Platinum Card from American Express
Rewards: Earn 3 points for eating and food delivery, 2 points for travel, and 1 point for every dollar spent otherwise.
Welcome offer: Obtain a bonus of up to 110,000 points throughout the first year.
Interest rates: 21.99% for cash advances and 20.99% for purchases.
Yearly cost: $699
Rewards: Earn 5x Scene+ points for every $1 spent on groceries, restaurants, and food delivery; 3x points for every $1 spent on gas and travel; and 1x points for every $1 spent on anything else.
Welcome offer: Obtain up to 40,000 points, worth $400.
Interest rates: 19.99% for purchases and 22.99% for cash advances
Yearly cost: $120
3. Scotiabank Momentum Visa Infinite Card
Rewards: Earn 4% cash back on groceries and recurring bills, 2% cash back on gas and daily transit, and 1% cash back on all other purchases with the Scotiabank Momentum Visa Infinite Card.
Welcome offer: Earn 10% cash back on up to $2,000 in purchases in the first three months (a $200 value).
Interest rates: 20.99% for purchases and 22.99% for cash advances.
Yearly cost: $120
An 800-credit score will help you in almost every way you can think of. With the best credit outlined cards, you can best ensure that you have the protection you require if a bill is late or something goes wrong with your credit score.
If you accumulate more debt that you are unable to pay off, a bill or the negative impact on your credit score will make your debt even more burdensome than it is. It is preferable to work toward better credit that is within your bounds. Also, do not exceed your credit limit, as this can harm your credit score.
Thanks for reading! Please let me know your thoughts and comments below.
Top 10 Popular Posts Of All Time
- Top 30 Canadian Blue Chip Stocks You Should Own
- How To Use A My Service Canada Account
- How To Watch Free TV Shows In Canada – List of 10 Best Sites
- VGRO Review – Vanguard’s Best Growth ETF Portfolio
- Top 7 Canadian ETFs You Should Own
- Top 150+ Dividend Stocks In Canada – Complete List
- Credit Karma Canada Review – Free Credit Score And Report
- CPP Payment Dates – How Much CPP Will You Get?
- Top 5 High-Interest Savings Accounts In Canada
- How To Open A CRA My Account?
Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.