The Average Credit Score in Canada is Lower Than You Think

When you walk into a dealership in Canada to buy a car, one of the first things the salesperson might talk to you about is your credit score. This number can influence the interest rate you get on a loan and even determine whether you can get financing at all.

 

So, what exactly is a credit score, and what does the average credit score look like for Canadians? Let’s break it down in simple terms.

 

 

What is a Credit Score?

A credit score is a three-digit number that represents your creditworthiness. It’s a measure used by lenders, such as banks and car dealerships, to gauge how likely you are to repay borrowed money. In Canada, credit scores range from 300 to 900. The higher your score, the better your credit rating.

 

Your credit score is calculated based on various factors, including your payment history, the amount of debt you have, the length of your credit history, the types of credit you use, and any recent credit inquiries. These factors are compiled into your credit report, which is then used to generate your credit score.

 

The Average Credit Score in Canada

As of recent data, the average credit score in Canada is around 650. This number can vary depending on age, location, and financial habits. A score of 650 is generally considered fair. Here’s a simple breakdown of credit score ranges:

 

• 300-559: Poor
• 560-659: Fair
• 660-724: Good
• 725-759: Very Good
• 760-900: Excellent

 

Understanding where you fall on this scale can help you know what to expect when you’re at a dealership.

 

Why is the Average Credit Score Important?

Knowing the average credit score helps you understand what lenders typically expect. If your credit score is above the average, you might qualify for better interest rates and loan terms. If it’s below the average, you might face higher interest rates or need to look for alternative financing options.

 

For instance, if you have a credit score of 700, you’re considered to have good credit. This means you’re likely to get a car loan with a lower interest rate compared to someone with a score of 600. Lower interest rates mean you’ll pay less over the life of the loan.

 

How to Check Your Credit Score

In Canada, you can check your credit score through two main credit bureaus: Equifax and TransUnion.

 

Many financial institutions also offer free credit score checks as part of their services. Checking your credit score regularly can help you stay informed about your financial health and address any discrepancies in your credit report.

 

Improving Your Credit Score

If your credit score is below the average, don’t worry. There are several steps you can take to improve it:

 

• Pay Your Bills on Time: Your payment history is a significant factor in your credit score. Make sure to pay all your bills, including credit card payments, on time.

 

• Reduce Debt: Try to pay down any outstanding debt. Lowering your debt-to-income ratio can have a positive impact on your score.

 

• Avoid Opening Too Many New Accounts: Each time you apply for new credit, it results in a hard inquiry on your credit report, which can lower your score. Be selective about opening new accounts.

 

• Keep Old Accounts Open: The length of your credit history matters. Keeping older accounts open can help improve your score.

 

• Monitor Your Credit Report: Regularly check your credit report for errors and dispute any inaccuracies with the credit bureaus.

 

Why Dealerships Care About Credit Scores

Dealerships care about your credit score because it helps them assess the risk of lending money to you. A higher credit score suggests that you are a responsible borrower, making you a safer bet for lenders.

 

This, in turn, allows dealerships to offer you better financing options, which can make purchasing a car more affordable.

 

Final Thoughts

Understanding your credit score and how it compares to the average credit score in Canada is crucial when buying a car. Knowing where you stand can help you negotiate better loan terms and prepare you for the financing process at a dealership. By taking steps to improve your credit score, you can enhance your financial health and make future car purchases smoother and more cost-effective.

 

Remember, your credit score is a snapshot of your financial behavior. Regularly monitoring and managing it can open doors to better financial opportunities and save you money in the long run. So, next time you visit a dealership, you'll be better equipped to understand how your credit score influences your car-buying experience.

 

In this article, we’ve talked about the average credit score for Canadians and why it’s important when buying a car. By keeping track of your credit score and working to improve it, you can ensure you get the best possible deal at the dealership.