What credit score is needed for a loan in Canada?

Your credit score and ranking determine whether you will receive a low-interest rate and the likelihood that you’ll be approved for loans and credit cards. In Canada, there are two different credit reporting agencies, Transunion and Equifax. These agencies each have their own approach to determining scores, but overall they report similar results. In general, a lender or credit company will look at both your credit report and your score to decide your creditworthiness. You are the only one capable of improving your credit score, which is why understanding your score is so important.

What is a Credit Score

For loans in Canada, you’re required to have a credit history. Credit scores range from 300 to 900. Your credit score is derived from your credit history, which is determined by several factors:

  • Payment history: If you pay your bills and loan installments on time, you will have a good credit score. If you default or have a lapse in payments, this negatively affects your score.
  • Length of your credit accounts: The length of your credit history. In other words, how long you’ve been borrowing and repaying loans or credit for.
  • A mix of loan types: If you have a history of different types of loans such as personal loans, credit card transactions, and a mortgage, you gain an advantage when your credit score is calculated.
  • Lack of debt: Ironically, if you have no debt, your credit score will be lower. A credit history is necessary to calculate a credit score, and therefore, you should have one before applying for a loan.
  • Used credit vs. available credit: This looks at how much credit you have available on your credit cards and other credit lines and what percentage of that credit you are using.

Canadian Credit Ratings and Their Meanings

In general, lenders use this rating chart to decide where you stand regarding your credit score and what rates you will receive.

Excellent (780+): If you have a score of 780 or more, you will get the best interest rates on the market. You’re also extremely likely to be approved for a loan.

Very Good (779-720): A score in this range is considered almost perfect, and you will enjoy some of the best rates on the market.

Good (719-680): If your score falls within this range, you will typically not have any trouble getting approved for new credit.

Average (679-620): A score in this range is still reasonably good; however, you will receive slightly higher interest rates.

Poor (619-580): A score in this range indicates that you are high risk. Therefore it may be difficult for you to get approved, and if you are approved, it will be at a high-interest rate.

Very Poor (579-500): It is difficult to get approved for a loan with a score in this range.

Terrible (less than 500): You will not get approved for a loan with a score in this range.

A Fair Credit Score

A fair credit score starts at 575 and goes to a score of 650. The closer your score is to the higher end of this range, the more trustworthy you will appear to lenders.

Essentially, a fair credit score means you pose an average level of risk to financial institutions and credit agencies. Having a fair credit score is necessary for obtaining a loan in Canada.


To get a loan in Canada, you need to have a credit score. A credit score is calculated based on your credit history. Your credit history is composed of several elements. These elements are payment history, length of credit accounts, a mix of loan types, history of loans, and the credit you’ve used versus the credit you have available. The ideal credit score for obtaining a loan is between 650 and 575. However, the higher your score, the better interest rate you’ll receive.