About 61% of the Canadian population have FICO scores above 750 according to a Government of Canada, Statistics Canada and the Canadian Banker’s Association. Consumers that reach this height will typically qualify for the best rates and terms on various financial products, such as credit cards, mortgages, student loans, auto loans and personal loans. It’s the most stable credit score range you can have.
If your goal is to achieve a perfect credit score, you’ll have to aim for a score of 900. That’s the highest FICO score available for the most widely used versions of both credit scoring models in Canada. While this may seem like a challenge, Forbes Advisor is here to help. We’ll walk you through the steps you can take to get the highest credit score possible.
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Why Your Credit Score Is Important
Your credit score is important because lenders use this three-digit number to determine how risky of a borrower you may be. The higher your credit score is, the greater your chances are of qualifying for a loan and securing the best interest rate. Typically, the best rates and loan terms are reserved for people who have good credit (720 or higher).
During your lifetime, agood credit scorecan help you save a ton of money in interest. It can also help you avoid some fees. For example, if you took out a personal loan, a high credit score could help you avoidpersonal loan origination fees—fees charged to process the loan.
However, If you have a bad credit score (lower than 625) or minimal credit history, you might not meet a lender’s minimum credit scoring requirements. This can prevent you from getting access to the cash you need. You most likely would need to apply for a loan with a co-signer or co-borrower to qualify, or you can explore bad credit personal loans and secured credit cards reserved for those with bad credit.
Key Characteristics of Consumers With the Highest Credit Score
Although there’s no defined formula for a perfect credit score, here’s what the highest credit score consumers have in common:
- Long credit histories. Most people with perfect credit scores have a long credit history.
- Perfect payment history. A person who has perfect credit typically has a perfect payment history. This means they have nocollections, late payments or other negative information listed on their credit reports.
- Low credit utilization ratio. The majority of people with scores of 900 don’t use much of their available credit. To pull this off, it’s recommended you keep your overall credit utilization across all credit accounts well below the recommended 30% to more like under 10%.
- A low number of recent credit inquiries. Although some open new credit accounts, the majority of them don’t. When you apply for a new account, it typically requires ahard credit inquiry, which can damage your score between one and five points.
How to Get a Perfect Credit Score
If you want to increase your chances of landing a perfect credit score, follow these five steps. While there’s no guarantee you’ll achieve perfection, at the very least, you could improve your score.
1. Never Miss a Payment
Since payment history accounts for 35% of your credit score, it’s important to pay all your bills on time. After your payment becomes 30 days late, your creditors may report it to one of the two major credit bureaus— Equifax or Transunion. This can damage your credit score, and the late payment can remain on your credit report for up to seven years.
To decrease your chances of missing a payment,enroll in autopayor use a bill management app to get reminders and view all your due dates at once.
2. Keep Your Credit Utilization Rate Low
The second most important credit score factor is yourcredit utilization ratio—it accounts for 30% of your score. Your credit utilization ratio measures the amount of credit you use versus the amount you have available. While it’s usually recommended to keep your credit utilization ratio below 30%, a ratio closer to 0% will helpboost your credit scoreeven more.
3. Don’t Apply for Credit Too Often
When you apply for a loan, a lender pulls your credit, which causes a hard credit inquiry to show up on your report. This inquiry remains on your report for up to two years. According to FICO, each new hard credit inquiry can lower your score by up to five points. Although the impact of this type of credit check lessens over time, it could keep you from having a perfect credit score.
4. Review Your Credit Reports
Credit report errors happen. If a creditor reports negative information that’s inaccurate or incomplete to the credit bureaus, it can damage your credit score. To catch and fix reporting errors, review your credit reports at least once a year, which is something you are entitled to do for free under Canadian law. You can request your annual free credit report by filing a consumer disclosure with Equifax or TransUnion through the instructions here and here.
You can view both your credit reports for free by visiting either Borrowell.com (Equifax) or CreditKarma.ca (TransUnion) and signing up for a free account.
5. Become an Authorized User
If you don’t have a lengthy credit history, ask a family member who has excellent credit to add you asauthorized useron their oldest credit cards. Your score can increase if the credit card issuer reports information to the credit bureaus for authorized users. However, the downside is that your score can decrease if the primary cardholder misses a payment and it’s reported on your credit report.
Benefits of High Credit Scores
High credit scores usually come with multiple benefits, including:
- Lower interest rates. When you apply for apersonal loan, mortgage,auto loanor student loan, you’ll have a better chance of qualifying for the best interest rate. This can save you thousands of dollars during your lifetime.
- More lending options. If you have a high score, you shouldn’t have much trouble meeting any lender’s minimum credit score requirements. This gives you access to lenders who only offer loan products to applicants who have excellent credit profiles.
- Credit card rewards and promotional deals. Since some of the best cash back credit cards require excellent credit scores (780 and above), you’ll most likely qualify. In addition, you’ll also be able to qualify for a 0% APR credit card that doesn’t charge interest on purchases or balance transfers for up to 12 months.
- Lowercar insurancepremiums. If you live in a province with credit-based auto insurance, you could pay a lower monthly premium.
- Lower security deposit for an apartment. When you purchase an apartment, you’ll probably pay less of a security deposit than someone who has a low credit score.
Bottom Line
Although having the highest credit score possible isn’t a bad goal, don’t stress out if you can’t achieve it. It takes a lot of time and only a small percentage of people have perfect credit. Instead, focus on taking the steps mentioned above tobuild good credit habits. Over time, you’ll develop a top-ranked credit score.
