How to Increase Your Credit Score
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Clear steps to build stronger credit and unlock better financial products
A strong credit score opens doors to better mortgage rates, premium credit cards, cash back options, and lower borrowing costs. In Canada, scores range from 300 to 900. Most lenders consider 660 or higher as good, 720 as very good, and 760 or above as excellent.
The average Canadian credit score sits around 672, according to recent Borrowell and TransUnion data. If your score falls below this range, targeted actions can help you climb quickly. If you’re already above average, refinements can push you into the excellent tier.
How Credit Scores Work in Canada
Canadian credit scores are calculated by two bureaus: Equifax and TransUnion. While their formulas differ slightly, both weight five core factors. Understanding these factors shows you exactly where to focus your effort.
| Factor | Weight | Impact |
|---|---|---|
| Payment History | 35% | One missed payment can drop your score by 60-110 points |
| Credit Utilization | 30% | Using more than 30% of available credit hurts your score |
| Length of Credit History | 15% | Older accounts help; don’t close your oldest cards |
| Credit Mix | 10% | Having both revolving and instalment credit helps |
| New Credit Inquiries | 10% | Multiple hard inquiries in a short period signal risk |
Payment history carries the most weight. A single late payment can erase months of progress. Credit utilization ranks second, making it the fastest lever you can pull for short-term improvement.
Pay Every Bill on Time
Payment history makes up 35% of your credit score. Late payments are reported to credit bureaus and can remain on your report for up to six years in Canada. Even one missed payment can significantly lower your score when you’re building credit.
Set up automatic payments for at least the minimum amount due. Most Canadian banks let you schedule this through online banking. You can still pay more manually, but the automatic payment ensures you never miss a due date.
- Automate minimum payments: Link your chequing account to credit cards and loans to cover minimums automatically
- Set calendar reminders: Add alerts three days before due dates to review balances and make manual payments if needed
- Contact lenders early: If you anticipate missing a payment, call your lender before the due date to discuss options
- Pay statement balances in full: This keeps your credit utilization low and saves you from paying interest charges
Consistency matters more than the amount. Paying the minimum on time is better for your score than missing a payment while trying to pay more.
Keep Credit Utilization Low
Credit utilization measures how much of your available credit you’re using. It accounts for 30% of your credit score. Lenders view high utilization as a sign that you may be overextended financially.
The ideal utilization ratio in Canada is below 30%. Better yet, keep it under 10% if possible. For example, if your credit card limit is $5,000, try to keep your balance below $1,500, and ideally below $500.
If you can’t pay down balances immediately, consider requesting a credit limit increase. This reduces your utilization ratio without requiring you to pay down debt. Just make sure not to use the extra credit.
How to Calculate Utilization
Add up all your credit limits across all cards. Then add up all your balances. Divide total balances by total limits, then multiply by 100 to get your utilization percentage.
- Example: You have two cards with limits of $3,000 and $2,000 (total $5,000), and balances of $900 and $600 (total $1,500). Your utilization is 30%.
- Target: To improve your score, reduce that $1,500 balance to under $500 (10% utilization).
- Timing: Pay down balances before your statement closing date, not just the due date. This reports a lower balance to credit bureaus.
Check Your Credit Report
Errors on your credit report can unfairly lower your score. Common mistakes include accounts you don’t recognize, incorrect payment information, or outdated negative items that should have been removed.
You’re legally entitled to one free credit report per year from both Equifax and TransUnion. Request yours by mail, phone, or online. Review every section carefully for inaccuracies.
Free credit monitoring services like Borrowell and Credit Karma provide weekly score updates and report access. Borrowell partners with Equifax, while Credit Karma works with TransUnion. Both are completely free and show your information in plain language.
- Dispute errors immediately: Contact the credit bureau in writing with supporting documentation to correct mistakes
- Monitor regularly: Check your report at least quarterly to catch errors early and track your progress
- Verify personal information: Ensure your name, address, and employment details are accurate and current
Build Credit History Length
The length of your credit history accounts for 15% of your score. Lenders prefer to see a long track record of responsible credit use. This factor improves naturally over time, but you can optimize it.
Keep your oldest credit accounts open, even if you rarely use them. Closing old accounts reduces your average account age and can hurt your score. Instead, use these cards occasionally for small purchases to keep them active.
If you’re new to credit, consider becoming an authorized user on a trusted family member’s account. Their positive payment history can appear on your report, though only some Canadian issuers report authorized users to the bureaus, so confirm before relying on it.
Use Credit Building Tools
Several products in Canada are designed specifically to help you build or rebuild credit. These tools report positive activity to both Equifax and TransUnion, creating a foundation for score improvement.
Secured Credit Cards
Secured credit cards require a refundable security deposit that becomes your credit limit. You deposit $200 to $1,000, use the card responsibly, and get your deposit back when you graduate to an unsecured card.
Options like the Home Trust Secured Visa or Capital One Secured Mastercard report positive activity immediately. Use the card for small purchases, pay the balance in full each month, and you’ll see steady score improvement.
Credit Builder Programs
Services like KOHO Credit Building and Borrowell Credit Builder offer products where you make small monthly payments into a locked account. These payments are reported to credit bureaus as positive trade lines.
After the term ends, you receive the money back. This approach helps those with no credit history or those recovering from past credit damage establish a consistent payment record.
Rent Reporting Services
Rent payments traditionally don’t appear on credit reports. Services like FrontLobby and Borrowell Rent Advantage now report your on-time rent payments to credit bureaus. This is especially helpful for renters with limited credit card history.
| Tool | How It Works | Best For |
|---|---|---|
| Secured Credit Card | Deposit $200-$1,000; use like regular card | Building first credit or rebuilding after damage |
| Credit Builder Loan | Monthly payments into locked savings account | Adding instalment credit to your mix |
| Rent Reporting | On-time rent payments reported to bureaus | Renters with limited credit card access |
| Authorized User | Added to someone else’s established account | Quick boost from trusted family member |
Avoid These Common Mistakes
Certain actions can damage your credit score quickly. Avoiding these mistakes is just as important as implementing positive strategies. Small missteps can erase months of careful progress.
- Applying for too much credit: Multiple hard inquiries in a short period can drop your score by 5-10 points each and signal financial stress
- Closing old credit cards: This reduces your available credit and shortens your average account age, hurting both utilization and history length
- Maxing out credit cards: Even if you pay the balance in full, high utilization at statement time is reported to bureaus and damages your score
- Ignoring small balances: A forgotten $20 balance can become a missed payment if it goes unpaid, causing significant score damage
- Co-signing without caution: You become responsible for the debt, and any missed payments by the primary borrower hurt your credit
If you need to apply for multiple products, do it within a 14-day window when possible. Credit bureaus typically count multiple inquiries for the same type of product as a single inquiry if they occur close together.
How Fast Can Your Score Improve
Timeline expectations depend on your starting point and the actions you take. Most Canadians see meaningful movement within 60 to 90 days with consistent effort across multiple factors.
Paying down high credit card balances can produce results within 30 to 60 days. This is the fastest lever for improvement. Correcting errors on your credit report can add 20 to 50 points once the bureau processes your dispute.
Building payment history takes longer but creates lasting results. Six months of on-time payments establishes a foundation. Twelve to 18 months of consistent behaviour can move you from poor to good credit, or from good to excellent.
| Action | Timeframe | Expected Impact |
|---|---|---|
| Pay down high balances | 30-60 days | 20-60 points if utilization drops significantly |
| Dispute and correct errors | 30-45 days | 20-50 points per corrected error |
| Become authorized user | 60-90 days | 50-150 points with good account history |
| Build consistent payment history | 6-12 months | Gradual improvement of 100+ points |
| Secured card + rent reporting | 12-18 months | Can reach 650-700+ from zero credit |
Recovering from serious damage like collections or bankruptcies takes longer. Negative items remain on your report for six to seven years in Canada, but their impact diminishes over time as you add positive history.
Bottom Line
Your credit score responds directly to your financial behaviour. The most impactful actions are straightforward: pay every bill on time, keep credit card balances below 30% of limits, check your reports for errors, and avoid unnecessary credit applications. These fundamentals account for 65% of your score.
Most Canadians can see meaningful improvement in 60 to 90 days by focusing on utilization and payment consistency. Significant transformation from poor to good credit typically takes 6 to 12 months of disciplined habits.
While you’re working on your score, explore tools designed for credit building. Compare credit cards to find options that match your current credit profile. Once your score improves, you’ll qualify for better rates and more rewarding products.
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How to Increase Credit Score – FAQ
What is a good credit score in Canada?
In Canada, credit scores range from 300 to 900. Most lenders consider 660 or higher as good, 720 as very good, and 760 or above as excellent. The average Canadian score is around 672.
What is the ideal credit utilization ratio in Canada?
Keep your credit utilization below 30% of your available credit limit. For optimal score improvement, aim for under 10%. For example, on a $5,000 limit, keep your balance below $1,500, or ideally below $500.
How fast can I increase my credit score in Canada?
You can see meaningful improvement in 60 to 90 days by paying down high balances and maintaining perfect payment history. Significant improvement from poor to good credit typically takes 6 to 12 months of consistent positive behaviour.
Does checking my own credit score hurt it?
No. Checking your own credit score is considered a soft inquiry and does not affect your score. You can check as often as you like through services like Borrowell, Credit Karma, or by requesting your report directly from Equifax or TransUnion.
What is the difference between secured and unsecured credit cards?
Secured credit cards require a refundable security deposit that becomes your credit limit. Unsecured cards do not require a deposit. Both report to credit bureaus, but secured cards are easier to get approved for with limited or damaged credit history.
How long do negative items stay on my credit report in Canada?
Most negative items remain on your Canadian credit report for six to seven years from the date of last activity. This includes late payments, collections, and consumer proposals. Bankruptcies can remain for six to seven years depending on the province.
Will paying off a collection account improve my credit score?
Paying off a collection changes its status from unpaid to paid, which is better for future credit applications. However, the collection itself remains on your report for six years. The score impact improves over time as you add positive payment history.
Should I close credit cards I no longer use?
Generally no, especially if they’re your oldest accounts. Closing cards reduces your available credit and can increase your utilization ratio. It also shortens your average account age. Instead, use old cards occasionally for small purchases to keep them active.
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