A 650 credit score in Canada can often feel like a double-edged sword—sufficient to secure some loans yet might not be high enough to provide confidence to some lenders. In this article, we’ll explore what a 650 credit score means, your financing options, and actionable steps to improve your credit score.
650 credit score: Is it good or bad?
So, is a 650 credit score good or bad?
Depending on the credit rating agency, a 650 credit score in Canada may mean “fair” or “poor.” This is why it’s essential to know which credit bureaus you’re getting your credit scores from, as each institution may use a slightly different model to calculate credit scores.
What are credit scores in Canada?
In Canada, a credit score is a three-digit number from 300 to 900 used by financial institutions like banks and credit unions to assess your creditworthiness or your ability to manage your financial obligations. Credit scores are calculated based on your credit report, which is provided by the two main credit bureaus in the country: Equifax and TransUnion.
A credit report generally includes personal, financial, and credit history information. In general, consent is required for a business or individual to use your credit report.
Credit history
Your credit history records your past financial transactions, including loans, credit card payments, and any collections or bankruptcies. A positive credit history can mean consistent, on-time payments to your financial obligations. In contrast, a poor credit history can mean late payments and exceeding your credit limits.
In general, a good credit history can significantly improve your credit score.
Debt-to-credit ratio
Your debt-to-credit ratio, also known as the credit utilization rate (CUR), represents your total outstanding debt or balance divided by the total amount of credit available to you. This is different from debt-to-income ratio, which focuses on the amount of income that goes toward your debt payments.
According to Equifax, the recommended debt-to-credit ratio is 30 percent or lower. If you have two credit cards with a combined credit limit of $10,000, your total outstanding balance should be at most $3,000 to keep a healthy credit utilization ratio.
Although a 30 percent or lower CUR can positively impact your credit score, experts say a 0% CUR can actually do the opposite. The important thing is to make your CUR as low as possible without hitting 0%.
What is the average credit score in Canada?
Understanding the average Canadian credit score can help you gauge your standing compared to others.
According to Fair Isaac Corporation (FICO), the company that developed the credit scoring system in 1989, the average Canadian credit score in 2023 is 762. This means that a 650 credit score is well below average than most Canadians. Still, a score of 650 can be suitable for a number of financing needs.
What are my financing options with a 650 credit score?
In Canada, having a good credit score is crucial for securing not only better loan terms and interest loans but also more comprehensive financing options. While a 650 credit score can be sufficient to qualify for most financing options, a higher credit score can spell the difference between a $300 monthly saving or an additional $300 expense.
Credits cards
Most credit card providers may require at least 660, with premium cards (those with lower interest rates and attractive perks) needing even higher credit scores. With a credit score of 650, you can still apply for credit cards, but your options or perks may be limited.
Personal loans
Personal loans are financial obligations that require you to pay back a fixed amount of money over a period of time. Lenders usually see those with credit scores of 660 and above as lower risk, which means the loan terms, including the interest rates, may be better than those with credit scores below 660.
Mortgages
According to the Canada Mortgage and Housing Corporation (CMHC), borrowers must have a credit score of at least 600. Financial institutions like banks and credit unions may require a higher credit score minimum of 680.
With a credit score of 650, it is recommended to work on your credit score and try to improve it before applying for a mortgage.
Line of credit
Like credit cards and mortgages, most lenders also require a credit score of at least 660 or higher and higher debt-to-income ratios. A credit score of 650 may be feasible but may be subject to higher interest rates.
Home equity loans
Unlike revolving credit like credit cards, home equity loans are considered installment loans. This means a lender will provide you with a lump sum amount, and you agree to repay it with interest over a set period.
The loan amount will depend on the equity available in your home rather than solely on your income or credit history. This means that the greater the equity, the higher the funding potential.
How to improve a 650 credit score
The Financial Consumer Agency of Canada lists some tips to improve your credit score:
- Pay bills on time
Payment history is one of the most crucial factors in building up a good credit score. Late or missed payments can negatively impact your score, so monitor your payment schedule and history to see when your bills are due. Even better, set up reminders or automatic payments to stay on track.
- Use credit wisely
High revolving credit balances relative to your credit limit can hurt your credit score. As mentioned, you’ll want to keep your CUR below 30%. Aim to pay down high existing balances and avoid maxing out your cards.
You may improve your credit score over time by keeping a higher credit limit while lowering your debt levels.
- Diversify credit mix
Having more than one type of credit product beyond credit cards may positively impact your credit score. However, only take credit products you know you’ll need and manage to avoid further hurting your credit score.
- Improve your credit history
Consider keeping your old credit accounts open and active. The longer your credit history, the better it is for your credit score.
- Limit new credit applications/ credit checks
Successive credit applications may result in multiple hard inquiries on your account each time. “Hard inquiries” are credit checks that appear on your credit report and directly impact your credit score. Only apply for credit when necessary and consider spacing out your applications.
Alpine Credits: More on equity, less on credit score
If you need a flexible financing option that focuses more on your equity rather than your credit score, Alpine Credits may be for you.
Whether you’ve made additional mortgage payments or increased the value of your home through renovations, we know you’ve continuously built equity in your home over time. With Alpine Credits’ home equity financing, you can accomplish the goals you have planned, regardless of your credit score.
Apply for a home equity loan in three simple steps:
- Apply online— the application with Alpine Credits is simple, allowing you to finish it within minutes.
- Get approved— if you own at least 25% of your home, you are eligible for a home equity loan from Alpine Credits. Get approved as quickly as 24 hours.
- Receive funding— Alpine Credits will directly deposit the money in your bank account within a few days of your approval.
If you have more questions, you can ask a Financial Solutions Specialist at Alpine Credits. Contact one of our Financial Solutions Specialists for a free, no-obligation quote today.
Frequently Asked Questions (FAQs)
What is the average credit score in Canada?
While credit scores range from 300 to 900 in Canada, average credit scores hover around 650 or higher.
What can a 650 credit score get you?
A 650 credit score can get you approved for basic credit cards, loans, and with your home equity, a home equity loan. However, you may need a higher credit score coupled with a good debt-to-income ratio to qualify for better terms and interest rates.
Can you recover from a 650 credit score?
Yes, you can still recover and improve a 650 credit score. Credit scores of 650 or less can be improved by paying bills on time, using credit wisely, diversifying credit mix, and minimizing successive credit applications.