You may not know it, but your credit score impacts many financial decisions you make. From relatively small choices (like opening a new credit card) to big decisions (like buying a new home), your credit score plays a noteworthy role in helping you reach your financial goals. When shopping for certain financial products, a good credit score helps you unlock four key things:
- Higher approval chances: Your credit score is a main factor lenders look at before approving you for financial products; with a good credit score, you’ll have much higher chances to qualify for premium credit cards and other top-tier financial products.
- Better credit terms: Higher approval chances for credit means you can make financial decisions about your future with confidence, whether you need additional funds for a new car or a new home.
- Lower interest rates: A good credit score helps you qualify for lower interest rates on loans and mortgages; this can help lower your monthly payments, freeing more space in your budget for saving and spending.
- Higher credit limits: A good credit score also helps you qualify for higher credit limits on credit cards and lines of credit; this helps you lower your credit utilization, offers you more financial flexibility, and gives you funds you can safely access in an emergency
If you have a specific financial goal or life milestone you’re trying to reach, it’s a good idea to know what your credit score is and how it could impact your success. Read on below to learn how your credit score can help you reach specific financial goals.
What Credit Score Do I Need To Qualify For Financial Products?
Want a travel rewards card? Need a car loan for a new set of wheels? Looking for an affordable mortgage to buy your first home? These are all areas where your credit score comes into play. Below, we’ll break down the general credit score requirements you need for credit cards, car loans, and mortgages. Credit scores range between 300 and 900 and fall into one of five main categories:
- Excellent credit: 741-900
- Good credit: 713-740
- Fair credit: 660-712
- Below average credit: 575 -659
- Poor credit: 300-574
What Credit Score Do I Need For A Credit Card?
If you’re looking to add a new credit card to your wallet, you should know what credit score you need for credit cards. In Canada, a fair credit score of 660 or higher is required for most credit card providers. Higher credit scores often mean better credit card perks, higher credit limits, and a greater selection of credit card lenders to choose from.
If you’re searching for a premium credit card, like a travel rewards card or cashback card, you’ll need a higher credit score than if you were just looking for a standard credit card.
If your credit score is above 660, you’ll likely qualify for most credit cards, including premium cards. If you have a good or excellent credit above 712, you may also qualify for sign-up bonuses and lower interest rates, depending on the lender. If your credit score is below 660, you may have trouble qualifying for premium cards and may only qualify for a limited selection of cards with low credit limits.
If you’re not sure what you qualify for, you can use a platform like Borrowell to check your credit score for free and see what cards, perks, and credit limits you qualify for based on your credit score.
What Credit Score Do I Need For A Car Loan?
If you’re looking for a new ride, be prepared to ride into the dealership with a decent credit score. When it comes to car loans, Canadian lenders and dealers tend to approve consumers with a credit score of 630 or above. Your credit score for car loans will impact your approval chances, as well as the interest rate you’ll pay.
With a fair credit score between 660 and 712, you’ll be approved for many car loan offers from dealers. With a good or excellent credit score of 713 or above, your approval chances will be higher, you’ll get approvals quicker, and you’ll qualify for more attractive offers from dealers.
With below average credit between 575 and 659, your car loan options may be more limited, especially if your credit score is below 630. With bad credit below 575, you’ll have trouble getting approved for regular car loans and will need to find a specialty lender.
Your credit score doesn’t just impact your approval chances. It also impacts the interest rate you’ll qualify for. With a good or excellent credit score, you’l; qualify for lower interest rates than other consumers. For example, a consumer with an excellent credit score rating may qualify for a 5% interest rate on their new car payments, while a consumer with below average credit might only qualify for an interest rate around 12% for the exact same vehicle. The interest you qualify for is extremely important, as these costs can accumulate quickly over time.
What Credit Score Do I Need For A Mortgage?
House hunting can be exciting but stressful. This is especially true if you’re not sure what credit score you need for a mortgage. To qualify for the best mortgage rates in Canada, you should aim to have a credit score of 680 or above. Your credit score will impact your approval chances, your interest rate offers, and your ability to qualify for mortgage default insurance.
If your credit score is above 640, you’ll likely be approved for mortgages from banks and other traditional lenders. Canadians with credit scores above 680 will qualify for the best mortgage rates available in the market. If your credit score is between 640 and 680, you’ll still have plenty of mortgage options available with very good interest rates.
Lenders generally adjust their offer rates for every 20 points that your credit score moves up or down. For every 20-point increment that your credit score drops, you’ll likely see small changes in the interest rate you’re offered.
If your credit score is below 640, you may have trouble qualifying for a conventional mortgage from a bank or other traditional lenders. You may be able to qualify with non-traditional lenders, but the interest rates that you’ll be offered by these lenders may be very high. Because of this, it’s worth improving your credit score to access better mortgage rates in the future.
The minimum credit score required by the Canadian Mortgage and Housing Corporation (CMHC) for mortgage default insurance is 600. Mortgage default insurance protects your lender if you default on your mortgage, and it’s required if your down payment is less than 20%.
Ever wonder what happens to your home and mortgage if you pass away? Read more about estate planning for homeowners.
Where Can I Track And Monitor My Credit Score?
If you’re looking to get a credit card, a car, a new home, or reach any other financial goal, it’s important to know what your credit score is. You can request a credit report from one of Canada’s credit bureaus, Equifax or TransUnion. If you’re looking to check, track, and monitor your credit score for free, you can use a platform like Borrowell.
With Borrowell, you receive weekly updates and personalized tips on how to improve your credit score. You’ll also get matched for financial products you’re likely to qualify for, based on your credit score. See what lenders and rates you can qualify for to help you reach your financial goals!