Your credit score is important. We all know this. Most of us also know why – it indicates the level of risk you present to lenders when applying for various credit products, including mortgages, car loans, personal lines of credit, credit cards, even insurance. What many people are not as sure about when it comes to credit reports is the credit score range and what the items on your report mean.

Simply speaking, a credit score range is the range of numbers that makes up credit. The credit score range is from 300-900 – 300 representing the worst credit and 900 the best.

Lenders say Beacon score, Equifax tells consumers FICO score – both of these mean credit score. Within your credit report there are ratings that make up your credit score.

Here are some of the basics:

• Each credit product will have a letter:
  • I = Installment credit like a loan
  • R = Revolving credit like a credit card
  • O = credit like cell phones
• When you have a 1 rating, e.g. R1, this means that your account is up to date and paid as agreed
• If your rating is 2-5 you are 30-150 days in arrears
• If your rating is 7 you are in credit counselling
• If your rating is 8 you have had a vehicle repossession
• If your rating is a 9 you have gone 6 months in arrears and are considered a bad debt write-off

These ratings will contribute, along with other things such as credit amounts and balances, to your credit score. They help lenders determine your credit behaviours and what your behaviour will likely look like if they extend credit to you.

Now where does your credit score fall in the credit score range:

• Under 500 – really bad credit
• Under 550 – bad credit
• Under 600 – not good credit
• 620 and up – you may be approved for a CMHC insured mortgage
• 680+ the bank will likely give you unsecured credit

680 is what you should set as an initial goal. Anything above this usually indicates that you have positive credit history and good credit behaviour, and thus present less risk. Lower risk usually means a higher chance of obtaining credit and often a lower rate of interest.

Ok, so you’ve determined that your number is in the 500 – lower 600 range. How can you get that score up? Rebuilding credit takes time, but it is possible.
Here are some tips.

• Get rid of some of your debt. Credit balances at or just below maximum are going to bring that score down, so work on paying off those debts.
• Make sure that you are making at least the minimum payment, on time, every month, for every product. Keep in mind that just paying the minimum balance, while it will help rebuild credit history, will not really help you pay off debt as these minimums are usually little more than monthly interest.
• Stop applying for new credit. Any time a lender pulls your credit report, a request for a new credit card will show on your report. Too many and you look like a credit seeker, someone who is living beyond their financial means.

Credit reports and the credit score range can be confusing, but once you’ve figured out where you sit on the scale, you can work on rebuilding credit if it isn’t up to par.

DebtCare can help. Call us today at 1-888-890-0888.