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How to Build & Improve Credit Score in Canada

Tuesday, 17 May 2022

Is your credit score stopping you from achieving your goals?

Your credit score is an essential component of your financial success. Maybe you are hoping to get into a new apartment, buy a new car, apply for a credit card, or purchase a home—each of these requires a healthy credit score to get the loan amount you need with favourable interest rates. But do you know how to improve your credit score in Canada? If you're proactive, hardworking, and have discipline, then it's entirely possible to improve your credit score in Canada by following these tips.

What is a credit score and how does it affect me?

First, let’s break down what your credit score is. It’s a three-digit number ranging from 300 to 900 points that reflects your financial reputation. It helps lenders understand how responsible you are in making payments and managing debt. Anything below 620 is considered poor whereas anything over 760 is excellent. Credit scores in Canada are determined based on five main factors:

  • payment history (35%)
  • amount owed (30%)
  • length of credit history (15%)
  • new credit accounts opened within the past 24 months (10%)
  • mix of different types of debt owed (10%)

Why do you need a good credit score?

A good credit score is critical to your financial health because it affects your ability to qualify for loans, credit cards, a mortgage, and other financial products. Your credit history can impact whether you're approved for a rental property or apartment complex and may also influence how much you pay for home insurance. Why do insurance companies check credit?

If you’re struggling with your credit score, follow these tips on how to improve credit score in Canada.

How to Improve Credit Score Canada: Check your credit report for errors.

The first step in how to improve credit score in Canada is to check your credit report for errors. Canadian credit bureaus Equifax and TransUnion both have websites where you can order a report. If you identify any mistakes, request they fix it quickly. Make sure you can provide original documentation to verify the correct information.

As you review your credit report, look out for signs of identity theft or fraud. If there are accounts listed that don’t belong to you, contact the credit bureau and follow this Canadian guide to report identity theft.

You’ll be relieved to know that many property insurance policies include identity theft insurance. Claim adjusters can help you through the process if you discover a serious issue in your credit report.

How to Improve Credit Score Canada: Pay it on time. Pay off your balance.

Late or missed payments can seriously damage your credit rating. So, here are ways how to improve credit score in Canada:

  • Pay off your monthly balance in full.
  • If you must carry a balance, try to pay more than the minimum payment to reduce interest charges and snowballing debt.
  • Set up payment reminders in your phone or calendar so you don’t miss a deadline.
  • Set up automated bill payments to avoid missing payment dates.
  • Avoid using your credit card for emergencies. It may seem like an easy way out, but with interest rates as high as 21%, it can quickly become a problem.

Read our tips on how to pay off credit cards.

How to Improve Credit Score Canada: Keep older credit cards in use.

Keep older cards active and in good standing with regular payments so they contribute positively to a healthy score. Maintaining an older credit card increases the length of your credit history, a factor that improves your score. You don’t have to use an old card often—maybe it’s just your monthly phone bill or insurance payment.

Improve Credit Score by using less than 30% of all debt available to you.

Be careful how much credit you access. Your Debt Utilization Ratio, which measures how much of all available credit you are using at any given time, should ideally be less than 30%. For example, if you have a $5,000 credit card limit and a $5,000 line of credit (total of $10,000 available credit), you should avoid using more than $3,000 in a payment period across both accounts.

If your Debt Utilization Ratio is high, there are two ways you can potentially improve it to boost your credit score:

  1. Pay down existing debt to lower your overall usage; or
  2. Request a credit increase from your lender, though this isn’t always possible (or wise if you have a spending problem).

Limit applying for new cards to avoid hard credit checks

Beware that each time you apply for a new card, the lender will do a hard credit check, which lowers your credit score. Hard inquiries stay on your record for two years, so avoid multiple requests for loans, credit cards, or lines of credit in a short period of time. It may be difficult to receive approval because lenders may view multiple requests as a desperate attempt to get more money quickly.

How to Improve Credit Score Canada: Consolidate your debts

Another suggestion of how to improve credit score in Canada is to consolidate your debts into one account. This ensures you are making equal monthly installments to all your creditors. Plus, making regular and timely payments will increase your credit rating as your balance decreases. If you decide to consolidate, look for a low-interest credit card or line of credit that allows a balance transfer, speak to a trusted financial advisor, or contact your financial institution to explore options.

How to Improve Credit Score Canada: Take care of delinquent credit accounts

When talking about how to improve credit score in Canada, clearing up delinquent accounts can drastically improve your score. Even if you can't pay off the full balance, make a payment you can afford. Then, set up a payment schedule with the collection agency or creditor so they can anticipate when the debt will be paid off. Doing this shows that you can manage your finances and stay committed to paying off debts.

Get a secured credit card so that you don't spend money you don't have

The last recommendation on how to improve credit score in Canada is to get a secured credit card. A secured credit card is linked to a cash balance that helps guarantee your payments. If you pay your bill in full each month, this type of card is a great way to build up a positive credit history and improve your credit score.


You should be proud of yourself for looking for ways how to improve credit score in Canada. As you follow these steps, you’ll be well on your way to accomplishing your financial goals and beyond! Let a BIG financial advisor help you with financial planning, investments, retirement planning, and achieving the lifestyle you want. Contact us today to find financial freedom.  

Author: Amy Legault

By: Amy Legault