Do you ever wonder why someone gets approved for a personal loan and someone else doesn’t? It depends on many factors, one of which is your credit score.
Equifax, one of the major credit bureaus in Canada, categorizes credit scores into five ranges or risk profiles. While anyone might have a genuine need for emergency money loans in Canada, people in the top ranges may have easier access to these loans than others.
Below, you can find out what those ranges are, and what each one means.
300 to 599 | Poor
As the lowest range, poor credit affects roughly 20% of Canadians. It happens if you don’t know how credit works, and you make uninformed decisions with money.
Bad credit can also occur in emergencies. If you experience a few financial setbacks that make you rely on personal loans or lines of credit more often, you might struggle to maintain a good score. If your streak of bad financial luck continues, this can impact how easily you pay back bills, which further harms your score.
While people with poor credit face the greatest hardship when applying for loans, emergency options exist. However, they may come with a few caveats:
- Limits on borrowed funds
- Requiring deposits
- High interest rates.
It’s a good idea to focus on building your score if you fall in this category. Raising your score reduces the chances you are denied credit and improves the terms for which you qualify.
600 to 659 | Fair
At halfway through the ranges, fair is better than poor, but it’s still far from excellent. Most of the scores that fall within fair are considered subprime, meaning they’re lower than most conventional banks want.
Some conventional banks and credit unions may still work with people who have fair credit. As a step above those with poor ratings, fair borrowers may qualify for better rates and terms but will likely still face barriers.
660 to 724 | Good
As the name suggests, good credit is a respectable place to be. You are officially a prime borrower, which means you qualify for a greater number of personal loans and lines of credit. You still might have to pay additional fees, but you may qualify for average interest rates.
725 to 759 | Very Good
As you climb to the next level, financial doors start to open. A very good credit score helps increase your opportunities and decreases your rates. However, with a range that tops out at 900, even these borrowers have room for improvement.
760 to 900 | Excellent
According to FICO, the average credit score in Canada is 762. If you don’t already have excellent credit, you should aim to break through this range. It comes with the most financial opportunities out of this entire range; banks, online lenders, and credit unions consider excellent credit the most desirable trait a borrower may have. They may reserve their best rates and largest limits for these borrowers. Some may even offer you a pre-approved line of credit or credit card when your score is high enough. Where do you fall on this range? If you have anything but excellent credit, you should learn what you can do to improve your three-digit score. Each rung on the ladder comes with more benefits, so it’s best to be on the top.