Now that you’ve read other episodes in Credit Tip Tuesday, like Frequently Asked Questions About Credit, How A Secured Credit Card Can Build Your Credit and What Is A Credit Score, it is time to discuss what having a ‘good credit score,’ means and what credit score you need to make major purchases. Whether you’re looking to buy your first car, home or rent your first apartment, we’ll be breaking down the credit score range you need to make your dream purchases a reality.
Generally speaking, bad credit means having a score between 300 and 629. While making big purchases vary in price and approval rate depending on the city you live in, we will be giving different examples of how to reach your goals using your credit score.
Getting Approval to Rent an Apartment
Good credit is becoming more important when looking to rent an apartment. Every year, the average credit score needed to rent an apartment has been increasing. Something very important to remember is that credit scores often vary depending on the location and type of building you are renting. If you’re looking to rent an apartment at a high-end building, you will have to have a relatively higher score than if you were looking to rent a unit in a mid-priced or low-end building.
This number can also vary depending on the city you live in. Renters in Toronto and Vancouver will likely have to have a higher credit score to rent a home of similar size, than those living in smaller cities like Halifax or Sudbury. Something to keep in mind is that the higher the rent, the higher the credit score one will need to have. When looking at Calgary, an average credit score of above 650 makes it easier to secure renting your dream home.
Buying or Leasing a Used Car
The average credit score in Canada is 600, this falls in the middle of average ‘poor’ credit scores which is 560 to 659. At many dealerships, there are no minimum credit score requirements for leasing a car. However, in many cases, individuals with lower credit scores will be treated with caution, rather than having their applications rejected.
Credit scores of 700+ : This credit score is seen as ideal for many car dealerships.
Credit scores in the 600 range: Customers with these scores are also attractive to dealerships
Credit scores below 600: It is still possible to sign a car lease, with these credit scores. You may also use your car lease to help build your credit score. Just make sure you make every payment on time!
Leasing a car often means you’ll have lower monthly payments than buying. However, it is important to consider loan payments, interest rates and payment duration, before deciding between buying or renting a car. If you’re looking to build your credit, leasing is the best option, as it will help show your creditor how trustworthy you are.
Before making any major decisions about a car, be sure to visit different dealerships and explore interest rate options to find what deal is best for you.
Buying a Home
Similarly to renting a home, the minimum credit score required for mortgage approval will vary depending on the price and location of the property you are looking to buy. In Toronto, the average home price in 2020 was $929,692, compared to St. John’s where the average single-family home was $271,600 on average.
A high credit score will not only help you get approval for a mortgage but a favourable interest rate. When buying a home, credit scores are one of the most important factors in buying a home, so it is important to know what yours is and how to improve it. In Canada, on average the minimum credit score you will need to get approval for a mortgage is 640. However, many lenders will look for individuals with credit scores of 680 or higher.
What else do lenders consider when giving mortgage approval?
Do you know your credit score? Check yours for FREE today with Plastk.ca or The Plask App. If you’re looking to grow your credit score so you can get your dream purchases, consider Plastk. If you have any questions about your credit score or how you can use your credit card to your advantage, contact our client success team. We’re always happy to help you become a master of your own finances.
Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.