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Many of us take being able to swipe our credit card for granted. Although most people use credit cards as their main form of payment, not everyone has or is eligible for one.
There is a rigorous process to getting approved for a credit card. These lenders evaluate a number of criteria, including your crucial credit score, before deciding whether to approve you to carry their product in your wallet.
Thus, you’ll need to understand the procedure and your current situation if you believe that you’re losing out on rewards or cash back on your regular purchases, or if you simply want a credit card to establish credit or cover unexpected costs. We dissect it and examine your credit score, how it influences your eligibility for credit cards, what you can do to raise it, and why you shouldn’t worry too much about it.
The first company in Canada to provide a credit score and report for free. More than 1. 5 million Canadians have used Borrowell to access their credit information.
Global credit score provider with over 21 million users worldwide. 200K users have signed up since Clearscore launched in Canada in 2022.
Credit scores are updated weekly and provided by TransUnion, one of Canada’s top credit reporting agencies. The credit score and report can be accessed at any time at no cost to the user.
Getting a credit card in Canada is a great way to build your credit history and earn rewards on your everyday spending But what credit score do you need to qualify for a credit card?
The answer is: it depends,
There is no one-size-fits-all answer to this question, as the minimum credit score required for a credit card in Canada will vary depending on the card issuer and the specific card you are applying for. However, in general, you will need a credit score of at least 660 to be approved for a credit card in Canada.
Factors That Affect Your Credit Score
Several factors can affect your credit score, including:
- Payment history: This is the most important factor, accounting for 35% of your credit score. It includes whether you have made your payments on time for all your bills, including credit cards, loans, and utilities.
- Credit utilization: This is the amount of credit you are using compared to your available credit limit. It accounts for 30% of your credit score. Ideally, you should keep your credit utilization below 30%.
- Length of credit history: This is the length of time you have had credit accounts open. It accounts for 15% of your credit score. The longer your credit history, the better.
- New credit: This is the number of new credit accounts you have opened recently. It accounts for 10% of your credit score. Opening too many new credit accounts in a short period can hurt your credit score.
- Types of credit: This is the mix of credit accounts you have, such as credit cards, loans, and lines of credit. It accounts for 10% of your credit score. Having a mix of credit accounts can help your credit score.
How to Improve Your Credit Score
If your credit score is not where you want it to be, there are a few things you can do to improve it:
- Make your payments on time: This is the most important thing you can do to improve your credit score. Even one late payment can hurt your score.
- Keep your credit utilization low: Aim to keep your credit utilization below 30%. This means paying off your credit card balance in full each month.
- Don’t open too many new credit accounts: Opening too many new credit accounts in a short period can hurt your credit score.
- Become an authorized user on someone else’s credit card: This can help you build your credit history without having to open a new credit card yourself.
- Dispute any errors on your credit report: Check your credit report regularly for errors and dispute any that you find.
The minimum credit score you need for a credit card in Canada will vary depending on the card issuer and the specific card you are applying for. However, in general, you will need a credit score of at least 660 to be approved for a credit card in Canada.
If your credit score is not where you want it to be, there are a few things you can do to improve it. By following the tips above, you can increase your chances of getting approved for a credit card and start enjoying the benefits of using credit responsibly.
Why Does a Credit Score Matter?
A credit score is a three-digit number between 300 and 900. Lenders use this number to assess your creditworthiness, or more simply, your ability to make timely loan repayments. The higher your number, the better your creditworthiness. This indicates that creditors are more likely to approve you for a credit card because they view you as a lower risk applicant.
Doug Hoyes, co-founder of Hoyes, Michalos & Associates Inc. , acknowledges that credit scores play a role in many transactions. But Hayes argues that Canadians should reconsider the purpose of credit scores, emphasizing that they aren’t meant to serve an individual’s interests. Your credit score is actually what makes you “the product” that lenders consider when determining your creditworthiness.
Credit card companies in Canada look at a few things when you apply for a credit card. You must be the legal age of majority in your province or territory, a citizen or resident, in possession of the required documentation, and have a source of income. After you submit the application, the credit card company will investigate your creditworthiness through a background check known as a “hard inquiry.” This includes checking your credit score.
A higher credit score increases your chances of being approved for a credit card and may give you access to more options. These can include credit cards with reduced interest rates, increased point and cash back earn rates, and benefits like trip interruption, mobile device insurance, and itinerary upgrades.
From here, the company will decide whether to approve or deny your application.
What Goes Into a Credit Score?
Credit scores fluctuate. In fact, your credit score may differ from one week to the next. Even if you check your credit score at the two major credit bureaus, Equifax and TransUnion, the amount may differ slightly.
That’s because a credit score isn’t a static number and there are several factors that go into calculating it. The credit bureaus, who have access to your information from financial institutions, use their own proprietary algorithms and weigh accounts and loans differently. They use their own scores, too. Equifax uses the Equifax Risk Score, while TransUnion uses the CreditVision Scoring Model.
Whereas TransUnion’s CreditVision Scoring Model uses data from the previous 24 months, Equifax’s Risk Score uses data from the previous 81 months.
Those algorithms explain why your credit score is different when you compare a report from each bureau.
Equifax says the main factors used are weighted as follows:
- 35% – Your payment history.
- 30% – Your used credit vs. your available credit or credit utilization.
- 15% – The length of your credit history. Because they haven’t lived in Canada long enough to establish a credit history and can’t import their history from their home country, new immigrants have low credit scores. ).
- 10% – Public records such as bankruptcy.
- 10% – Number of inquiries into your credit file.
TransUnion’s main factors are:
- Your payment history.
- Your balances or how much you owe.
- Age of your credit history.
- New credit or inquiries.
- The different types of credit you have.
TransUnion doesn’t publish the percentage breakdown of the main factors, but it’s likely similar to Equifax’s breakdown.
Plus, not all lenders are subscribed to all the credit bureaus. Hoyes says, “Lenders don’t necessarily use either Equifax or TransUnion. They can calculate their own as well. ”.
Then there’s the upsell product, where if you already have a mortgage or another product from that financial institution, you might be eligible for a credit card.
How to build a good credit score in Canada (especially as newcomer)
FAQ
Can I get a credit card with a 600 credit score Canada?
What is an acceptable credit score Canada?
What credit score is needed for a line of credit in Canada?
What credit score is needed for a credit card in Canada?
Generally, you need a good score (660+) to apply for most cards with rewards and benefits, but there are options for bad and fair credit applicants. Find out what credit score is needed for a credit card in Canada, and review cards for bad, fair, good and excellent scores.
Does Canada have a credit score?
Canada’s two national credit bureaus, Equifax and TransUnion, create credit scores and credit reports based on the information they receive about each borrower from their lenders. What is the credit score range Canada uses? Canada operates with a credit score range between 300 and 900.
What is a good credit score?
The short answer: A good credit score is the one that gets you whatever loan or credit card you need. However, there are general ranges interpreted by Equifax and TransUnion. Equifax says that a score between 660 to 724 is considered good, 725 to 759 is very good and 760 and up is considered excellent.
What credit score do I need to get a credit card?
We’ll walk you through the ins and outs of credit scores and credit cards to help you understand what you’ll need to qualify. There’s no universal minimum credit score requirement needed to get a credit card that applies to all credit card issuers. However, you’d probably want to have a credit score above 660 to apply for a credit card.