What Does a 720 Credit Score Mean in Canada?

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.

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.

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.

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.

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.

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.

This article is the shortened version of an article originally published on Hardbacon.ca by Arthur Dubois under the title "What Does a 720 Credit Score Mean in Canada?".