Average Credit Score by Age

Having a good credit score will play an integral role in the financial opportunities that will be available to you throughout your life. A credit score is a good reflection of your ability to be responsible with your money. Now it can also be said that making a good income and being able to save your money is also a great way to be financially responsible, but the importance of a good credit score cannot be overlooked. A good credit score can help you pay for your education, get a car loan, mortgage and a whole lot more. While everyone is in a different place financially, it’s important to know where your credit stands and where it should be. In this article, we’ll talk about the average credit score by age in Canada, discuss the credit score range and the factors that can both positively and negatively affect your credit. 

What is a Credit Score?

A credit score is a 3 digit number ranging from 300-900 that represents your creditworthiness or credit risk in the eyes of the lender. The credit risk meaning the odds that you will pay back your loan in full and on time. The higher your credit score, the less of a risk you pose to not pay back your loan to the lender. If you’re a low-risk borrower, you should qualify for lower interest rates, saving you money on loans. 

What is Considered a Good Credit Score?

Typically if your credit score is between 670 and 750, you’d be considered to have good credit, if your credit score is above 750, you’d be considered to have excellent credit. In Canada, there are two main places you can receive your credit score, Equifax and Transunion. When you make any credit transaction, this is reported to one of the two credit bureaus for them to assess. 

‍Factors That Affect Your Credit Score

How you use your credit to make purchases and pay bills directly affects your credit score. Below we’ll list some of the factors that can affect your credit score:

Your outstanding debt. The more you owe, the lower your credit score will be. If you can’t keep up with your payments, your credit score will decrease. However, if you don’t owe a lot because you're managing your payments effectively, you should see your credit score increase.

The variety of your credit. The more variety you have in terms of how you use your credit, the better. If you can manage to keep up with payments on a car loan, mortgage and credit card simultaneously, you’re showing the lender you can responsibly manage multiple credit products.

Payment history. This is a huge factor in determining your credit score. If you have a history of missed payments, your credit score will reflect that. On the other hand, if you have a history with little to no credit blemishes, you should have a great credit score. Another factor with history is the length of time in which you’ve been using your credit. The longer you’ve been using credit, the better. 

How Lenders See You Based on Your Credit

Poor Credit (Under 500)

Most lenders will be reluctant to approve you for a loan as your credit score indicates that you’ve had significant credit issues in the past. If you do manage to get approved, you will be charged a high-interest rate because of the high risk you pose to the lender. 

Below-average credit (500-610)

Having a credit score in this range means you’ve likely had issues with paying your bills in the past, causing some reluctance from lenders. While it is possible to get a loan in this range, the terms won’t be favourable. 

Average credit (Around 620-670)

This credit score is the average for Canadians, it should be able to get you approved for most loans at a fairly reasonable interest rate.

Good credit (675-740)

If your credit score is in this range, you’ve shown in the past that you’re a responsible borrower who can manage to pay his/her bills on time and in full. You should be able to qualify for loans with low-interest rates. 

Great credit (750-800)

You’ve shown lenders you can manage your credit debts’ responsibility and lenders see you as very low risk. Loans you apply for in the future should have low-interest rates.

Excellent credit (800+)

You’ve had no blemishes in your credit and lenders are more than willing to give you a loan with the best terms available. 

‍Average Credit Score by Age in Canada by Age

While everyone is in unique situations financially, this section will cover the average credit scores of people by age and the situations they’re likely to find themselves in. These results are based on a study done by Equifax Canada in 2018.

Age 18-25 (Credit Score: 625-675)

Canadian’s in this age category typically do not have a long credit history as credit only becomes available to Canadians upon reaching the age of 18. On top of that, most Canadians this age are not making a significant amount of income and are often trying to pay off student loans. At this stage, it’s important to use your credit when you can afford it. Whether you use your credit card to pay for groceries every week or fill up your car with gas, this is a way to slowly build a good reputation with lenders.

Ages 26-40 (Credit Score: 675-725)

This age demographic is where you see a lot of Canadians make big purchases like vehicles and homes. On top of this, many people between 26 and 35 are having children which is also costly. It’s important to have good credit in this period of your life because you’ll need to be approved for several loans and you’ll want the best terms available. 

Age 41-55 (Credit Score: 725-775)

By this age, you’ve probably been eying the possibility of retirement. While retirement is still a few years away for most people that are around 50 years old, you’ve probably been putting money away for the previous decade or two. You should be responsible with your finances by now and your credit score should reflect that. 

Age 55+ (Credit Score: 775+)

For a lot of Canadians 55 years and older, they have their cars and mortgage almost paid off, if not fully paid off. Now they’re getting to the point where retirement is near or already began. At this point, you’d have established a great reputation with lenders and are likely to have to rely less on using your credit. 

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