How to Improve Your Credit Score in Canada

Whether you realize it or not, your credit score has a massive impact on both your daily life and your long-term prospects.

A low credit score can happen for a number of reasons, and repairing it takes time; but if you’re diligent it can be done!

Here are the top five ways to improve yours:

1. Pay Your Bills On Time

The primary way to show your financial trustworthiness is to be diligent about paying your bills on time and avoid falling into arrears.

This indicates to lenders and businesses that you take your finances seriously and are budgeting ahead of time to be able to cover your commitments.

Over a third of the weight of your credit score comes from payment history, so if you do any single thing to improve your credit, this should be it.

If you generally struggle to keep track of your bills, there are numerous free tools and apps designed to help you in this endeavour.

And if you do have past due bills or accounts, pay them off, starting with the oldest.

2. Pay Off Your Debts

Reducing the overall amount of debt you carry will improve your credit as it means you have fewer debt obligations, and therefore are more likely to be able to pay for any new debt.

You may hear this concept called “credit utilization,” which is just a fancy way of saying the ratio between how much credit you’ve used versus how much you have available.

Most experts recommend keeping your credit utilization ratio below 30% – so only use 30% of your credit limits.

To this end, you should also keep your credit card balances low; this not only helps with your ratio, but prevents high-interest payments from escalating.

3. Be Careful About Applying For Credit

Applying for credit will negatively impact your score, so to protect it you should only apply for a new loan only when absolutely necessary.

Do not apply for multiple products at once, even if shopping around for the best deal.

Instead, do your research beforehand and only apply for items you know you will then use.

It’s also a good idea to close any unused forms of credit (such as obsolete credit cards), and to consolidate your credit card accounts via balance transfers, if possible.

Pick those with the highest interest rates or the least benefits to close/clear first.

But remember to leave open your oldest credit account (even if you don’t use it) to maintain a long, continuous credit history.

All of this will ensure that your credit report reflects a conscientious, long-term attitude towards debt.

4. Monitor Your Credit Report For Inaccuracies

Credit report inaccuracies are increasingly common because of identity theft.

All Canadians should periodically check their credit report to make sure that all of the information is correct and relevant to them, to prevent being penalized inappropriately.

If you discover a discrepancy in your report, there is a mechanism by which you can report it and have it corrected by the credit bureaus.

5. Take Out a Secured Loan

Lastly, those with poor credit may struggle to qualify for a new loan.

And how can you show that you’ll make your debt payments on time if no one will lend to you?

This is where secured loans come in.

A secured loan is a loan that is anchored against another asset – such as a car, house or GIC – so that the lender can take the asset in lieu of payment if you default.

These are much safer for the lender, and so are easier to qualify for if you have bad credit (or no credit, if you are new to Canada and need to build your credit history up).

For example, credit cards with low limits, secured against a locked GIC, are quite common among new residents.

By obtaining this type of loan and properly making all of the payments on it, you can slowly build your credit score.

It’s important to note that credit score repair will not help remove existing debt, but it will help you get out of debt more quickly and stay out of debt in the future.

Distribution of Credit Scores in Canada

Source: Equifax

Bad Credit Score Options

If you have bad credit, some of the steps mentioned above might seem unrealistic.

You might not have a choice about how much debt you’re currently carrying, and are already doing the best you can to pay your bills on time.

The good news is there is always help, regardless of your situation.

Here are some tips to help even those in extreme financial distress protect their long term financial health:

  • Speak to a financial advisor. There are multiple free, government-run services to assist with debt management and financial hardship. You do not have to become a financial expert to get yourself out of debt!
  • Consider creating a monthly budget; free software or mobile apps can help you do this, as well as plan ahead for bills and monitor your spending activity. Avoid any tools that require you to pay for them.
  • Avoid bad credit and payday loans wherever possible; although useful in emergency situations, these come with extremely high levels of interest and often hinder more than they help.
  • Consider debt consolidation if you have unmanageable levels of debt and are worried about bankruptcy. Being proactive about this will always be better than waiting until creditors come knocking.

How Long Does It Take To Improve My Credit Score?

Credit bureaus keep your financial information on record for varying amounts of time, depending on the type of information, the credit bureau in question, and your province.

For example:

  • Positive information, such as repaid debts, usually remains on your report indefinitely..
  • Missed debt payments, bankruptcies and collection agency issues remain on your report for 6 years.
  • A debt management plan created by a credit counsellor remains on your report for 2 years after you’ve paid the debts off.
  • A consumer proposal remains on your report for 3-6 years, depending on how quickly you pay off the debts in the proposal.
  • A second bankruptcy will remain on your report for 14 years.

The system is designed so that prior financial hardship does not cause difficulties indefinitely.

You can work your way out of debt and into a higher credit bracket!

Keeping Your Credit Score High

Once you’ve done the hard work to get your credit score up, keeping it there is really more of the same.

People who pay their bills on time, avoid unnecessary debt, and keep an eye on their credit score are more likely to maintain a high score over the long term – even though patches of lower-income or unemployment.

Your credit score is a crucial part of your financial identity, and taking steps to improve it will lead to a cascade of positive developments across all areas of your life!


Amy Orr is an author, freelance writer and editor, specializing in FinTech and Personal Finance. Starting with several prestigious internships in investment banking and asset management, in 2007 she went on to graduate with an MSc in Finance and Investment from the University of Edinburgh Business School.

She has since spent years as both a Portfolio Analyst and as a Financial Researcher/Writer, in both the UK and Canada.

Versed in the intricacies of multiple financial markets, her forte is parsing complex technical concepts into relatable, digestible content for the masses.