10 Tips on How To Increase Your Credit Score in Canada

A credit score is a number that indicates how likely you are to pay off your debt. Thus, maintaining a good credit score is important as it affects your ability to get approved for loans, mortgages, and other lines of credit.

Improving your credit score can also save you money on interest rates and help you get approved for loans faster. Here are some tips on how to increase your credit score in Canada.

1. Understand What Goes Into Your Credit Score

Understanding what goes into your credit score can help you boost it effectively. Naturally, the higher your credit score, the higher your chances of getting approved for a loan and getting the best interest rates. Thus, you should aim for your credit score to be as high as possible.

But what is considered a good credit score? According to Equifax, the credit score range in Canada is 300 to 900. A score of 760 and higher is viewed as an excellent credit score; 725 to 759 is very good, 660 to 724 is good, and a credit score of 560 to 659 is fair. Anything below 560 is regarded as poor.

Your credit score is calculated by the two leading Canadian credit bureaus, Equifax and TransUnion. The score is calculated based on the following factors:

  • Payment history
  • Credit utilization
  • Credit mix and public records
  • Length of credit history
  • Credit inquiries

Payment history is the most important factor in your credit score, as it makes up 35% of your credit score. It includes your history of paying off debts and whether you pay your bills on time. That’s why making timely payments is crucial when aiming to maintain or raise your credit score.

The credit utilization ratio is the percentage of the credit limit you use on your credit card. It accounts for 30% of your credit score. Thus, it’s important to keep your credit utilization low, ideally below 35%.

Credit mix refers to the types of credit accounts you have, like revolving lines of credit, such as credit cards, and installment loans, like car loans. It’s usually taken into account by Equifax.

On the other hand, TransUnion focuses more on public records, which include bankruptcies and overdue accounts. Bankruptcies can have a major negative impact on your credit score and stay on your report for up to seven years. This category constitutes 10% of your credit score.

The length of your credit history measures time from when you first opened a line of credit. The longer your credit history, the better. It makes up 15% of the credit score.

Credit inquiries constitute 10% of your credit score, and they indicate how frequently you ask for a new line of credit. Every time you apply for a line of credit, it’s recorded as a hard inquiry that will temporarily lower your credit score. Namely, a hard credit check will stay on your report for up to three years, but it only affects your credit score for the first 12 months.

2. Get a Copy of Your Credit Report and Review It for Errors

Your credit report is a detailed record of your credit history. It includes information on all of your current and past lines of credit, as well as any late payments, bankruptcies, or other information that affects your score.

You’re entitled to one free credit report per year from each of the two national credit bureaus, Equifax and TransUnion. Once you have your credit report, review it carefully to make sure there are no errors. If you find an error, contact the credit bureau and dispute it.

Errors in credit reports occur more often than you might think, so be sure to inspect your credit report thoroughly. However, if you find no mistakes and your score still seems too low, don’t despair; there are other ways to boost your credit score, which the rest of our article covers.

3. Don’t Close Old Accounts

As the length of your credit history is one factor that affects your credit score, it’s recommended to keep old accounts open if they are in good standing. You should keep them active, so use them from time to time. This will also help you keep a low credit utilization ratio.

4. ​​Keep Your Credit Utilization Low

Credit utilization shows the ratio of your total credit to total debt. It makes up a large part of the credit score calculation, so you should aim to keep it as low as possible. The ideal way would be to pay off your debt on time. However, this may not be possible for everyone.

Another solution would be to ask your credit card issuer to increase your credit limit. That way, you wouldn’t have to decrease your credit usage if you aren’t able to, but your credit utilization ratio would still go down. Keep in mind that you will likely need a good repayment history with this issuer to be approved.

5. Get a Secured Credit Card

A credit card is different from a debit card in that the latter doesn’t offer a line of credit. A secured credit card requires the user to leave a deposit, which is usually equal to the credit limit.

Because the deposit is used as collateral, secured credit cards are easier to get approved for than unsecured credit cards. Furthermore, since the secured credit card issuers report to the credit bureaus, acquiring this card and using it responsibly is another of the tricks to increase your credit score.

6. Obtain a Credit Builder Loan

Getting a credit builder loan is another viable option to boost or build credit in Canada. This type of loan differs from usual loans in that it requires the individual to pay off the loan and interest first before accessing the money.

It is typically offered by smaller financial institutions, such as community banks, credit unions, and some online lenders. These loans usually work best for those with little to no credit history. Not only will acquiring this loan help you with your credit situation, but it’s also a great way to build up your savings.

If you need a loan and your financial situation doesn’t allow you to sign up for a credit builder loan, you can check out some of the best loans for people with bad credit scores. Additionally, if you don’t want the application for the loan to hurt your credit score, you may opt for a loan that doesn’t involve a credit check.

7. Become an Authorized User of Someone Else’s Credit Card

Another way to improve your credit score is to become an authorized user of a family member’s or friend’s credit card. You should choose a person with a good credit score and a low credit utilization ratio. As an authorized user, you will get your own card to use, but the account will be in the primary cardholder’s name.

Since you’ll share the same credit limit as the person who authorized you, your credit utilization ratio will be lower. The positive payment history of the primary cardholder will be reported on your credit report as well. What is more, you get to demonstrate that you can use a credit card responsibly.

8. Be Careful When Opening New Accounts

When it comes to effective tips to increase your credit score, being wary of opening too many new accounts definitely belongs on the list. While it can be tempting to acquire a bunch of new credit cards or apply for loans to improve your credit score, this can backfire. Each time you apply for a new line of credit, it will result in a hard inquiry on your credit report.

Too many hard inquiries in a short period can look bad to lenders and damage your score. So, while it’s important to show that you can use credit responsibly, you should be careful about opening up too many new accounts at once.

9. Use a Credit Monitoring Service

A credit monitoring service can help you keep track of your credit score. These services will report any changes or suspicious activity, which can be especially helpful for those trying to improve their credit score. You can track your progress and ensure that nothing negatively impacts your score. They are a great way to prevent theft and identity fraud.

Many different credit monitoring services are available, so do your research to find one that best suits your needs. Some popular options include Credit Karma and Borrowell.

10. Handle Your Collection Accounts

A collection account is an overdue debt sold to a collection agency. However, a debt getting sold doesn’t mean you’re off the hook when it comes to paying it off. The collection agency will still try to collect the debt from you, and you’re legally obliged to pay.

The debt collection usually happens after ​​120 to 180 days of failing to make payments. Once the debt has been turned over to a collection agency, it will stay on your credit report for six years.

Paying off the collection accounts so that you don’t get sued is always a good idea, but this alone won’t help increase your credit.

So, you might wonder how taking care of your collection accounts will help maximize your credit score. What you can do is open a dispute with the credit reporting agency after completing your obligation to pay off the debt in its entirety. In the dispute, you should ask for your debt to be erased from your credit history. This might not always work, but it’s worth trying.

On a Final Note

Keep in mind that there is no way to instantly improve your credit score unless you find some errors in your credit report. By being patient and using the methods discussed in this article, you’ll see improvement fairly quickly, sometimes even within 30 days.


How fast can I improve my credit score?

How fast you can improve your credit score largely depends on your current credit score. Making timely payments, keeping your credit utilization low, and other methods can help you boost your credit score in as little as 30 days.

How can I improve my credit score in Canada?

There are a number of ways to improve credit score. First, make sure you consistently pay your bills on time. You can also keep your credit utilization low by paying down your debts and increasing your credit limits.

Another good idea is to keep your old accounts open, especially those in good standing. Finally, you can check your credit report regularly for errors and dispute any that you find.

What is a good credit score in Canada?

If you’re wondering how to increase your credit score in Canada, understanding what is considered a good credit score is the first step. Any score from 660 to 724 is considered good, 725 to 759 is very good, and 760 to 900 is excellent.

Milica Milenkovic
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