The most widely used credit score model FICO, ranges from 300 to 850. Consumers who fall between 720 and 850 typically qualify for the lowest interest rates or best credit cards. However, it’s important to understand there are a large number of different models used by lenders. Many of these use different scales, so a credit score of 650 can differ depending on the context.

Credit Score Ranges

There exist tens, if not hundreds, of different credit score models. Most consumers tend to focus on FICO 8, because it is most widely used by today’s lenders. However, not all credit-scoring models are equal. Some are better than others at predicting the creditworthiness of a particular individual, given a specific purpose. Large institutions will often purchase multiple models and use one when they deem it most appropriate.

Credit Score	Range/Scale
Generic FICO Score	300 – 850
Equifax	280 – 850
TransRisk	300 – 850
VantageScore 1.0 & 2.0	501 – 990
VantageScore 3.0	300 – 850
PLUS Score	330 – 830
Experian National Equivalency Score	360 – 840

One fact remains true in all the consumer scores listed above: higher scores are better than lower ones. Generally, people with a solid financial standing will have a score above 700 across all of these models. Most of the time, you will not have to do anything special for one credit scale versus another. Though certain factors are weighed differently from one model versus another, the same behavior will result in a good score. Make sure all of your payments are on time and that you maintain good standing across all of your loan/credit accounts. Over time, this type of behavior will ensure you fall into the best credit score ranges, no matter the model.

How Do Lenders Decide Which Credit Score Scale to Use?

A lender will opt to use a particular credit score model based on their preference and type of transaction being considered. Consider the example of a mortgage lender. Some may use VantageScore 3.0 because it penalizes late mortgage payments more than any other tardy bill. FICO, on the other hand, treats all late payments equally. The underwriters in the sample mortgage company may think this distinction is important enough to use one model versus another. You should also never assume a lender will always use the newest version of a score. Large financial institutions with a lot of legacy systems in place may use an older version of FICO for years due to legacy systems in place.

FICO tends to be the most forthcoming about the different industries that rely on its many models. For example, mortgage companies will typically use FICO® Score 2, 4 and 5 in evaluating their decisions. You can read more about the different FICO model versions on the company’s website.

How Do the Different Credit Score Ranges Compare to Each Other?

Fortunately, the Consumer Financial Protection Bureau (CFPB) found the different models were pretty similar in assessing credit worthiness. If you have an excellent FICO 8 score, chances are your VantageScore, TransUnion Risk score and others are fine as well. Therefore, it’s not necessary to seek out your personal rating across a wide array of credit score ranges.

Correlation	Vantage vs. FICO Scale
Overall	0.90
Correlation for Customers Below Median	0.77
Correlation For Customers Above Median	0.52
Source: 2012 Consumer Financial Protection Bureau Study

Correlation is expressed on a scale of -1.0 to +1.0. A negative correlation would imply two factors are inversely related. That is, while one is high the other is low. Statistically, a correlations above 0.5 implies a strong relationship between the two.

Consumers can use the CFPB’s approach to approximate the range they fall into based on knowing just one of their scores. The Bureau reduced consumer scores down to a relative one, based on their percentile. If you fall into the 70th percentile of FICO 8 users, you can estimate your range on another model by looking at where the 70th percentile lies on that scale. The table below shows the distribution of FICO 8 in the United States.

FICO Score Range	Percent of Population
300 – 499	4.9
500 – 549	7.6
550 – 599	9.4
600 – 649	10.3
650 – 699	14.0
700 – 749	16.6
750 – 799	18.2
800 – 850	19.9

Those who don’t want to guess can always take advantage of the multitude of services that provide credit scores to users. Many of these companies will generically refer to the number they show you as a ‘credit score’. You may have to call up the company or do a little bit of research to figure out what exact model they use. We expand more on this point in the following section.

They may be used to determine some of the most important financial factors in your life, such as whether or not you’ll be able to lease a vehicle, qualify for a mortgage or even land that cool new job.

And considering 71 percent of Canadian families carry debt in some form (think mortgages, car loans, lines of credit, personal loans or student debt), good credit health should be a part of your current and future plans.

High, low, positive, negative – there’s more to your scores than you might think. And depending on where your numbers fall, your lending and credit options will vary. So what is a good credit score? What about a great one? Let’s take a look at the numbers.

How your credit scores are set

Canadian credit scores are officially calculated by two major credit bureaus: Equifax and TransUnion.

They use the information in your credit file to calculate your scores. Factors that are used to calculate your scores include your payment history, how much debt you have and how long you’ve been using credit.

Pro Tip: You can view sample credit scores summaries from each bureau (see Equifax here and TransUnion here) to get a sense of what to expect.

What’s in a number?

In Canada, your credit scores generally range from 300 to 900. The higher the score, the better. High scores may indicate that you’re less likely to default on your repayments if you take out a loan.

Below you’ll see a general breakdown of credit score ranges and what each range means in terms of your general ability to qualify for lending or credit requests, such as a loan or mortgage.

Note that the ranges can vary slightly depending on the provider, but these are the credit score ranges you’ll see on Credit Karma. The best way to know where your scores stand is to check your credit report:

● 800 to 900: Congratulations! You have excellent credit. Keep reaching for the stars.

● 720 to 799: You have very good credit! You should expect to have a variety of credit choices to choose from, so continue your healthy financial habits.

● 650 to 719: This is considered good to lenders. You may not qualify for the lowest interest rates available, but keep your credit history strong to help build your credit health.

● 600 to 649: This is fair credit. History of debt repayment will be important to demonstrate your solid sense of financial responsibility.

● 300 to 599: Your credit needs some work. Keep reading for some improvement suggestions below.

How to go from good to great (or bad to good)

To borrow from Leo Tolstoy, all great credit scores are alike, but all bad credit scores are bad in their own way. That is, ideal credit scores are built on a similar set of healthy financial habits, but your scores can be damaged by any number of factors. There are many different issues that can hurt your credit, such as:

● Late or missed payments.
● Too many (or too few) open credit accounts.
● High credit card balances.
● High balances on loans.
● Too many credit applications.

The first step toward improving your credit health is avoiding getting trapped in the highs and lows of managing your credit.

Heather Battison, vice president of TransUnion Canada explains how consistency is key: “The most important factor for building and maintaining your scores is to pay your bills on time and in full each month. This activity demonstrates your ability to responsibly manage credit and can positively impact your credit scores.”

It’s also key to remember that your payment history isn’t just about paying your credit card bill. “It also includes things like your cellphone bill,” says Trevor Gillis, associate vice president of account management at TD Credit Cards.

Gillis says building good credit scores is “based on using your credit card responsibly, which means making at least the required monthly minimum payment (if you can’t pay off the balance in full), making your payments by the payment due date and keeping your credit card utilization low.”

Beware of third-party companies that claim they can quickly boost your scores. According to the Office of Consumer Affairs, only your creditors are able to alter the information on your credit file. When it comes to building good credit, there are no shortcuts.

Here’s the good-to-great news: Improving your credit health isn’t only achievable, but also the steps involved can help you establish an overall healthy financial life. Read our tips for everyday ways you can improve your credit health.

If you have a 650 credit score, you may be wondering what that means. Is 650 a good credit score, a bad score, or somewhere in between? What does having a 650 credit score mean for your wallet? Read on to find out all you need to know about having a 650 credit score.

650 credit score basics

While there are different models and algorithms for calculating your credit score, for the purposes of this article, we’re going to talk about your FICO Score. A FICO Score is a three-digit number, ranging from 300 to 850, and the higher your score, the better. A 650 FICO score is generally considered to be Fair.

If you have a 650 credit score, you may still be denied some loans and credit cards — and you may be forced to pay higher interest rates for the ones you are approved for. You need at least a 700 score to have Good credit — but 650 isn’t considered Poor either. Rest assured that a little bit of credit improvement can result in saving a lot of money.

The chart below shows the various credit range scores. As you can see, if you have a 650, you fall into the Fair category, along with 21 percent of our credit sesame members.

Comparing Credit Score Ranges of Credit Sesame Members

Show 102550100 entriesSearch:

Score Range	Value Range	Members
Excellent Credit Score	800 & Above	19%
Very Good Credit Score	740 – 799	19%
Good Credit Score	670 – 739	17%
Fair Credit Score	580 – 669	21%
Poor Credit Score	579 & Below	24%

Showing 1 to 5 of 5 entriesPreviousNextSource: Credit scores were calculated from 5,000 Credit Sesame members on 2/6/18.

Now you know you are not alone in having a 650 credit score, let’s find out more about your credit score and the steps you can take to help you increase it.

How to improve your 650 credit score

If your credit score isn’t where you want it to be, don’t fret — there are steps that you can take to help build and improve your credit:

• Make all of your payments on time — every time. This is the single biggest thing you can do to help improve your credit score. Consistently making your payments on time will lead to a steady increase in your credit score.
• Reduce your credit utilization. Your credit utilization is a ratio of the amount of debt you currently owe to the sum of your total credit limits. The lower this number, the better — so always aim to use less than 30 percent of your available credit at any given time.
• Limit the number of hard inquiries. While it doesn’t hurt your score to check your credit yourself (a soft inquiry), a hard inquiry, such as when applying for a new credit card, can ding your score slightly. Limit the number of credit applications to see a rise in your score.

These are just a few of the steps you can take to improve your credit, but there are many different steps and strategies to improve your credit score. However, the data below shows how some of our Credit Sesame members were able to improve their score over three months, six months, and 12-months using some of these strategies.

For example, by reducing their debts, members increased their 650 score by two percent in just three months, four percent in just six months, and nine percent in 12 months.

In Canada, credit scores range from 300 (just getting started) up to 900 points, which is the best score. According to TransUnion, 650 is the magic middle number – a score above 650 will likely qualify you for a standard loan while a score under 650 will likely bring difficulty in receiving new credit.

Lenders who pull your credit bureau file may see a slightly different number than you see when you pull your own file.  This is due to the fact that each creditor applies a specific set of risk rules, giving and taking points for different purposes or preferences. This proprietary method of scoring will make a difference in the final calculation. The score you pull for yourself is calculated using an algorithm created for consumers that approximates these different formulas, and should still be in the same numerical range as the lenders’ scores.

Order your credit report from both credit reporting agencies in Canada – Equifax and TransUnion – at least once per year for free (when requested by mail, fax, telephone, or in person), and you can pay to see your credit score if you choose.

How can a low credit rating affect my life?

Credit scoring is used by lenders, insurers, landlords, employers, and utility companies to evaluate your credit behaviour and assess your creditworthiness.

1. Applying for a loan. Your credit score will be a big factor into the decision of whether you are approved or denied your application for more credit. Your credit score will also affect the interest rate and credit limit offered to you by the new credit grantor – the lower your credit score, the higher the interest rate will be and the lower the credit limit offered  – the reason for this is you are considered more of a credit risk.

2. Applying for a job. A potential employer may ask your permission to check your credit file and based on what they read, they may decide not to hire you due to your poor credit history. Yes, having bad credit could cost you a job!

3. Renting a vehicle. When you sign an application to rent a car, the rental company can check your credit history to determine what their risk may be when they loan you their property. So although you are not applying for credit, the application documents you sign provide your written permission to access your credit information.

4. The same is true when applying for rental housing – the landlord may assess your tenant worthiness and their risk by factoring in your credit rating and score, and they could pass you over for someone with a better credit rating.

What information is used to calculate my credit score, and what factors will lower my score?

If you have tried looking on the consumer reporting agencies’ (CRAs, also know as Credit Bureaus) websites, you have seen they provide VERY little information as to how your credit score is calculated. They believe this information is proprietary and therefore their “secret”. They do, however, provide a list of the main factors which affect your credit score:

1. Payment History
Equifax says: “Pay all of your bills on time. Paying late, or having your account sent to a collection agency has a negative impact on your credit score.”
TransUnion says: “A good record of on-time payments will help boost your credit score.”

2. Delinquencies
Equifax lists: “Serious delinquency; Serious delinquency, and public record or collection field; Time since delinquency is too recent or unknown; Level of delinquency on accounts is too high; Number of accounts with delinquency is too high”
TransUnion lists: “Severity and frequency of derogatory credit information such as bankruptcies, charge-offs, and collections”

3. Balance-to-Limit Ratio
Equifax says: “Try not to run your balances up to your credit limit. Keeping your account balances below 75% of your available credit may also help your score.”
TransUnion says: “Balances above 50 percent of your credit limits will harm your credit. Aim for balances under 30 percent.”

Ok, so avoid maxing out your credit – because if you don’t really need more credit you’ll be able to get it, and if you do really need it then you are more of a risk.(Funny how that works)

4. Recent Inquiries
Equifax says: “Avoid applying for credit unless you have a genuine need for a new account. Too many inquiries in a short period of time can sometimes be interpreted as a sign that you are opening numerous credit accounts due to financial difficulties, or overextending yourself by taking on more debt than you can actually repay. A flurry of inquiries will prompt most lenders to ask you why.”
TransUnion says: “Avoid excessive inquiries. When a lender or business checks your credit, it causes a hard inquiry to your credit file. Apply for new credit in moderation.” 

There are two types of Credit Bureau file inquires: “hard inquiries” such as an application for new credit, which will lower your score; and “soft inquiries” such as requesting your own credit report, and businesses checking your file for updates to your existing credit accounts for approving credit limit increases, for example – these will not appear on your file or lower your credit score.

Although a “flurry of inquiries” may indicate financial difficulties, it could also be that you are moving to a new city, and will need to apply for a new mortgage, a new electric/gas account, cable, phone and other utilities accounts. These “inquiries” into your account will deduct points from your score, so you may take a rather large hit (points wise) on your credit rating for moving houses.

Also of concern is that inquiries for non-credit purposes (such as utility companies and car rentals), will cause your credit score to drop without adding points for having credit in good standing, as with a credit card that you pay off every month. So be careful to only apply for credit you really need.

There really isn’t a magic number of credit cards everyone should have. More credit cards could actually boost your credit score, which is important for getting loans, saving on insurance rates, and even getting a job. Having multiple cards can also be more risky. On the other hand, not having enough credit history can set you back. Here’s what you need to know.

Holding several credit cards is fine for your credit score

The average number of credit cards Americans own is two to three, according to The Motley Fool. Last year, FICO found that people with high credit scores (800+) tended to have an average of three open cards. This could be because people with higher credit scores are able to open more credit cards, though.

While there can be negative aspects to owning multiple cards besides just your credit score (more on that in a bit), generally speaking, your credit score won’t go down just because you have several cards. The exception is if you’re opening and closing a bunch of cards at once (“churning” cards) to maximize the rewards you earn from various cards.

More credit cards means higher credit limits and (possibly) better debt utilization 

The number of credit cards you have does make a difference for one of the biggest factors: Your total debt owed, as a percentage of your credit limit. Since every new credit card increases your total credit limit, adding another card decreases your debt-to-credit ratio (as long as you don’t add more debt). For example, if you owe $500 on one credit card with a $1,000 limit (50% utilization) and open a new credit card with a $4,000 limit, that would make your overall utilization 10% ($500 out of $5,000). And that’s much better in lenders’ and credit scoring agencies’ eyes.

A greater variety of cards could offer more benefits 

Many people use credit cards not just for the convenience but for the rewards (although finance experts don’t agree on whether chasing rewards is worth it). You can use one card that has a high cash back for gas and groceries, for example, and a second one that rewards you with travel points when you dine out or travel. This maximizes the rewards you can get.

Besides those rewards, valuable features like price protection, travel insurance and car rental insurance might convince you to select a particular card. The fringe benefits, like travel credits, free checked bags on airlines, and airport lounge access, can also be compelling reasons to open a new card.

Opening new cards does affect your credit history

First, don’t rush in to open a bunch of cards every time you see attractive offers. Although opening new accounts, as mentioned above, tends to only cause a temporary drop of a few points, the new cards will also reduce the average age of your credit history (how long you’ve had your credit accounts). That’s not as significant as how you well you pay your debt either, but if you’re going to be in the market for a major loan soon, it’s something to consider, as these small hits can in turn reduce the interest rate you’re eligible to get.

More cards are a hassle to maintain 

To prevent credit card companies from potentially closing your accounts due to inactivity, you’d need to regularly use each of your cards—when you have more than a few, that can get unwieldy. You don’t want your account to get closed, because that couldgreatly impact your score since it reduces your overall credit limit and could reduce the total age of your account history.

Also, even with automatic payments, it’s just harder to keep track of dozens of cards.

More cards and higher credit limits could trick you into spending more 

If you’re not careful, you could end up overspending (especially if you’re chasing rewards and trying to meet minimum spend requirements). And overspending could catapult you into a cycle of struggling to pay your monthly statement in full, and if balances start building up, that’ll definitely reduce your credit score.

However, if you’re responsible with your spending, pay your bills in full each month, and keep your balances low, additional cards won’t likely hurt and they could even help your credit. How many is right for you really depends on your comfort handling and managing them.

Your credit score is an important part of your financial picture. Lenders combine your credit score with the information in your credit report to assess your risk as a borrower. If your score is high, you look like less of a risk; if your score is low, lenders may question your ability to pay what you owe.

It’s important to note that each credit reporting agency has different scoring models, so your credit score will vary between agencies. Additionally, your score is updated each time there is a request for a score, and new information received impacts the model.

Improving your creditworthiness takes time, but it’s worth the effort. Here are four reasons that it’s important to have a solid credit profile:

1. Your credit score can help you when you borrow money.

At some point, chances are that you will need to borrow money. If you want to buy a house, you will almost definitely have to take out a mortgage. Many people also borrow in order to buy a car.

A good credit score can save you thousands of dollars over the life of a loan. For example, you may get a better mortgage interest rate with a high credit score than you would with a lower score. On a 30-year mortgage for $200,000, the savings can be significant.

If you can get a rate of 4.29 percent on a $200,000 mortgage, your total interest paid will be $155,884. But if you have a lower credit score and only qualify for a rate of 5.5 percent, you will instead pay $208,808 in interest over the life of the loan, or nearly $53,000 more. On top of that, you will also have a higher monthly payment.

The same principle applies whether you are borrowing for a car, an education, or a personal loan: The better your credit score, the more you can save when you decide to borrow.

Keep in mind that the score your lender sees may be different from the score you see, depending on the credit reporting agency your lender uses to pull your scores.

2. Your credit score can impact your insurance premiums.

While some states prevent insurers from using your credit score for setting insurance premiums, many states do allow it. And with a lower score, you could end up paying more each month for coverage.

However, you could pay hundreds of dollars less in insurance premiums over your lifetime by improving your creditworthiness and positively impacting your credit score.

3 You may qualify for better terms when you sign up for cable or Internet.

Many Internet, TV, and cell phone service providers now check your credit before they set you up with service. In some cases, if your credit is poor enough, you might be denied an account.

Even if you aren’t denied service, you might have to pay a security deposit or pay some part of your service up front. This can be frustrating and costly as it can change your monthly cash flow and strain your budget.

4. Access to better financial deals.

When you have good credit, you have access to better financial deals and opportunities. You may be able to refinance your home to a lower interest rate; you might have access to better rewards credit cards with lower interest rates; and you might even be offered checking accounts, investment accounts, and credit cards with signing bonuses. Having access to these financial deals may help you better manage your resources in the long run.

Credit is part of your financial power. It helps you to get the things you need now, like a loan for a car or a credit card, based on your promise to pay later. Working to improve your credit helps ensure you’ll qualify for loans when you need them.

What is Credit?

Types of Credit

There are many types of credit. The two most common types are installment loans and revolving credit.

Installment Loans are a set amount of money loaned to you to use for a specific purpose.

Common Examples of Installment Loans

• Student loans
• Auto loans

Revolving Credit is a line of credit you can keep using after paying it off. You can make purchases with it as long as the balance stays under the credit limit, which can change over time. Credit cards are the most common type of revolving credit.

Credit Cards

Not all credit cards are the same. Make sure you explore all pros and cons of credit cards when choosing the right one for you.

Interest Rates

Interest is a cost of borrowing money. Lenders generally charge a certain percentage of the average daily balance of your account, which is called an interest rate. This interest rate is applied to your outstanding balance on a monthly basis. Credit cards may have different interest rates for different types of activities, like purchases or cash advances, so make sure you read the fine print.

Fees

Many credit cards charge fees, but not all cards charge the same fees. Take care to fully understand what fees you are responsible for.

Credit Limit

Your credit limit is the maximum balance you can have on your credit card. It is determined by your lender, based on your credit history and income.

Credit Origins: Reports and FICO Scores

Your credit report is what the nationwide consumer reporting agencies use to calculate your credit score, which is used by lenders to determine your credit worthiness. The three major nationwide consumer reporting agencies are Equifax, TransUnion, and Experian.

What is a FICO Score?

Credit reports are used to generate a credit score. One of the most commonly used credit scoring formulas is Fair Isaac’s FICO score, which ranges from 300 (low) to 850 (high). The higher your score, the more likely you are to be approved for new credit, or offered a lower interest rate. Many factors from your credit history are used to calculate your FICO score. The nationwide consumer credit agencies don’t disclose how scores are calculated, so no one knows exactly how they are determined. The agencies may have different data on your credit history, so your score can vary between the agencies.

Your credit report shows your payment history (on time, late, or missed) for the past seven years.

Hard Inquiries vs. Soft Inquiries

Every time a potential creditor accesses your credit report and score, it’s recorded on your report as a hard inquiry. Too many of these can show potential creditors that you are attempting to open more than one line of credit and they may choose not to loan you money.

You might also hear about soft inquiries. They occur when your credit report is reviewed when you’re not looking to open new credit lines. Unlike hard inquiries, soft inquiries aren’t considered by lenders when evaluating whether or not to loan you money.

Examples of Soft Inquiries

• Landlords run credit checks when you apply to rent property
• You accessing your own credit report for monitoring

Your Superpower: Good Credit

Many aspects of life are affected by credit ratings. They may:

• Determine whether a lender approves a new loan.
• Influence your interest rates and fees on the loan.
• Be reviewed by employers before they offer you a new job.
• Be used by landlords when deciding whether to rent to you.
• Determine your student loan eligibility, including most private loans.
• Be reviewed by insurance companies when you apply for many types of insurance, including car or homeowners insurance.

Good Credit vs. Bad Credit

Having good credit means that you are making regular payments on time, on each of your accounts, until your balance is paid in full. Alternately, bad credit means you have had a hard time holding up your end of the bargain; you may not have paid the full minimum payments or not made payments on time.

Going into 2020, the minimum credit score needed to get approved for a mortgage is 640, though it would be more accurate to say that anywhere between 620 and 680 would be considered a minimum, depending on the lender.  But it should also be noted that the credit score required to get approved for a mortgage in 2020 also depends on several other factors associated with the borrower. For example, a borrower with a high income and low debt amount might be able to get away with a slightly lower credit score than a borrower with a lower income and lots of debt.

Also, the loan amount required and the amortization requested will also play a role in the credit score required for mortgage approval. For instance, a higher loan amount would be considered a riskier endeavour for lenders, who may, in turn, require a higher credit score. Borrowers will also have to undergo a stress test during the mortgage approval process. In order for applicants to qualify for a home loan in Canada, they will have to prove to their lender that they’re capable of affording their mortgage payments into the future if interest rates rise, which they likely will.

Getting Pre-Approved

A good way to know if you’ll receive mortgage approval before you actually apply is to get pre-approved, which most potential homeowners will do 60-120 days before they plan to purchase a home. This is when your lender examines your financial records to determine the maximum amount they would grant you, as well as the interest rate they would give you once you’re approved. A pre-approval will also provide you with a better idea of what your future mortgage payments will look like, as well as how your finances will be affected by your down payment, closing, moving, and future maintenance costs.

For the purpose of the pre-approval process, you’ll need to provide your lenders with various documents, such as:

• Proof of identity and residency
• Proof of employment (salary/hourly rate, time and position at the company, etc.)
• If self-employed, Notices of Assessment from the Canada Revenue Agency from the past two years
• Proof that your finances are suitable enough to afford future payments
• Information pertaining to your assets (vehicle, other property, etc.)
• Information pertaining to your current debts and other financial obligations

One important thing to understand here is that the pre-approval is optional and does not actually guarantee that you’ll be approved for the amount you’re pre-approved for in the first place. In fact, even if you’re pre-approved, you still might not be officially approved for a mortgage when you apply. The pre-approval process is simply a way of understanding the debt you’ll be taking on and determining whether you’ll be able to handle the financial strain a mortgage puts you under. It’s also a way of knowing your true price range and showing your lender that you are serious about buying a home.

Can I Get a Mortgage if My Credit Score is Low?

When we talk about minimum credit scores required to get approved for a mortgage, we’re talking about conventional lenders, such as big banks. These traditional lenders are usually quite stringent about their mortgage approval requirements, including the credit scores needed for mortgage approval.

There are options for bad credit borrowers who are looking for a mortgage to finance a home purchase. Credit unions, trust companies, and subprime lenders are potential sources for mortgages for borrowers who can’t qualify with their banks because of their sub-par credit scores. These sources often deal with people who may be viewed as risky to conventional lenders.

It should be noted that if you do plan to apply for a mortgage with one of these lenders with a bad credit score, you will likely pay a higher interest rate than you would if you had a higher credit score and applied with a conventional lender.

That’s why it’s best to consider taking the time to improve your credit score before applying for a mortgage. That way you’ll have an easier time getting approved for a home loan and clinch a lower rate, which will make your mortgage less expensive.

How to Improve Your Credit Score

So, it’s clear that a good credit score is one of the more important factors when trying to gain mortgage approval. Since it’s also a factor in calculating the interest rate you’ll be given, a favourable score can also save you thousands of dollars over the course of your amortization. Therefore, it’s best to get your credit score in the best shape you can manage before you apply with any lender. If your score is lower than 600-650, or you would simply like to improve it as much as possible, there are a few simple tricks you can use.

• Paying bills on time and in full
• Do not carry a large amount of unpaid debt
• Use no more than 30% of your available credit card limit
• Don’t apply for too much new credit in a short amount of time
• Review a copy of your credit report for mistakes or signs of identity theft
• Consider a secured credit card if you’re building from the ground up

The time it takes to repair your credit can vary widely, depending on a number of factors – from how many mistakes you have to fix to what you want to accomplish once your credit is fixed. Since people often repair their credit with a specific goal in mind – like buying a house or negotiating an interest rate with a creditor – it’s important to know how long the process can take so you can plan ahead effectively.

With that in mind, we’ve put together the information below to help you understand the different timespans that can be involved with credit repair. If you want to get started or you need more information, call us or complete the form to the right to connect with a Debt.com-accredited service provider now.

Starting the clock on your first disputes

Credit repair starts by reviewing your credit reports to identify potential errors and mistakes. It takes about half an hour to download your reports from annualcreditreport.com. That’s the time it usually takes to login in, answer the security questions and download your three reports. Then you review your reports to see what they say and take note of any errors. If you’ve never looked at a credit report before, it can take 1-2 hours to review all three reports in-full.

Once that is done, dispute letters have to be drafted and documentation needs to be gathered before you submit your disputes to the credit bureau(s). The time required for this step varies, depending on the nature of your disputes and how organized you’ve been about keeping financial records. This part of the process can take anywhere from a few hours if you’re organized to a few days if you need to hunt down statements and documentation that proves your case.

If you’re repairing your credit on your own, you determine how fast this part of the process goes because you’re in the driver’s seat. If you pay a credit repair service, the company will help you expedite so this gets done as quickly as possible.

Once your first disputes are submitted to the credit bureaus, the official clock on the responses starts. The credit bureau has 30 days to contact the creditors to verify the information and respond. This is why it’s a good idea to send your letters by registered mail, so you have proof of the delivery date.

After 30 days, the credit bureau must respond to your inquiry. In some cases, more documentation may be required if the bureau needs something else to verify or reject a dispute. As a result, there can be some back and forth before disputes are resolved.

Fact: Mistakes that appear all of your credit reports must be disputed with each credit bureau individually.

In addition, you may have to file more than one dispute letter. If you have a large number of mistakes that you identify, you usually don’t want to submit more than a few disputed items at a time in each dispute letter. As a result, you may have to submit a few disputes at a time and resolve them in sets.

In general, credit repair takes about three to six months to resolve all of the disputes that the average consumer needs to make. Of course, if you only have a few mistakes to correct or you repair your credit every year, it may not take as long; you might be done in just over one month. On the other hand, if you’ve never corrected your credit and have a large volume of things to dispute, it may take longer.

If you’re doing the work on your own, it’s basically going to be that you have to keep working until it’s done. If you have retained representation, your credit repair company should be able to give you an idea of how long it should take in your situation.

Rebuilding while you repair

It’s important to remember that credit repair is usually one step (often the first one) you take when you want to build your way to a better credit score. So while the repair process may only take 3-6 months, the time it takes to rebuild your credit can take longer. It can take up to a year or more to achieve a good credit score, depending on how low you start.

One thing you can do to expedite the process to better credit is to start taking steps to build credit while you’re getting items removed through credit repair. So you stay on top of your payments to build a positive payment history and take steps to reduce your credit card debt load so your credit utilization ratio is as low as possible.

This one-two punch of credit correction is how you go from a bad credit score to a good one. But you have to be patient. If you’re working towards a major goal like a new home, give yourself at least six months to a year to improve. This will ensure you have time to get the credit you need before you apply.

In some cases, you might not have enough credit history to have a credit score. Depending on your age, there are several ways to establish credit.

If you are under 21, you must have a cosigner or be able to demonstrate that you have an adequate source of income to pay back any credit that is extended. With responsible usage, a parent cosigning a credit card (or adding you as an authorized user to one of their accounts) is a great way to help establish a positive credit history.

For others, the best way to establish credit may be to work with your bank or credit union to open an account with a small credit limit to get you started. Opening a secured credit card is another way to get started building your credit. Then, with time and good account management, a good credit history (and scores) will be within your reach.

Common Credit Score Facts

Credit Reports and Credit History

Credit scores are not included with credit reports. Additionally, credit scores are not stored as part of your credit history. Your credit score is calculated only when your credit score is requested. Your credit score can change over time, based on your credit history—including late payments, amount of available debt, and more.

Joint Accounts

Joint accounts are meant to help individuals who cannot qualify for a loan by themselves. With joint accounts, all of the joint account holders, guarantors, and/or cosigners are responsible for repaying the debt. The joint account, along with its credit history, appears on the credit report for all account holders. When all payments are made on time, the joint account can help build positive credit. However, if someone defaults on payments, all of the joint account holders will see the default on their own credit reports. Depending on the severity of the late payments and negative information, everyone’s credit scores could be impacted significantly.

Marriage

When you get married, your credit scores (or reports) won’t merge with your spouse’s. Joint accounts you share may appear on both of your credit reports, but your credit history will remain independent.

Checking Your Own Credit

Another common question is whether checking your own credit report or score can hurt it. The answer is no. Checking your own credit scores doesn’t lower them. Checking your own credit report creates a special kind of inquiry (known commonly as a soft inquiry) that isn’t considered in credit score calculations. Without the risk of harming your scores by checking your credit report and scores frequently, don’t steer away from viewing them as often as you need to.

How to Improve Your Credit Scores

If you reviewed your credit information and discovered that your credit scores aren’t quite where you thought they’d be, you’re not alone. Since your credit scores use information drawn from your credit report, your credit activity provides a continually-updated basis of data about how responsible you are with the credit you’re currently using. At Experian, we provide information that can help you see your credit in new ways and take control of your financial future. You can learn more about:

• How choices that you make can improve your credit score
• Why using secured credit cards can improve your credit history
• What a credit repair service can – and can’t – do for your credit
• How to protect or restore your good credit after major life events like marriage, divorce, or the death of a spouse
• Why knowing your FICO^® Score* is important when you consider making a big purchase
• When you know the kinds of activities in your credit that can affect your scores, you can work to take better care of your credit, too. Things like late payments, liens or bankruptcies all have varying levels of impact in your credit scores since they’re reflected on your credit report, too. Getting familiar with your credit report can help you see the impact these kind of events can have in your credit.