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8 Tips to Improve Your Credit Score in Canada

The Borrowell Team

Mar 01, 2020 6 min read

Update: Borrowell now offers weekly credit score updates! Sign up for free to measure, monitor, and improve your credit score today!

It's always good to know what you can do to improve your credit score, no matter where you are on your financial journey. Whether you’re looking to rebuild your profile or planning a big purchase in the future, increasing your score can mean more attractive interest rates and offers on things like credit cards, loans, mortgages and lines of credit. 

Credit score ranges.

What is a good credit score in Canada?

Your credit score is a number that typically ranges between 300-900, depending on the scoring model. According to Equifax, lenders generally see those with credit scores of 660 and higher as lower-risk borrowers.

At Borrowell, we use the Equifax Risk Score 2.0 (ERS). This is a popular and legitimate score, used by many banks and lenders. If you aren't already a member, you can sign up to Borrowell to track your progress and check your credit report anytime - free - as well as get personalized tips from our Credit Coach, Molly. It only takes a couple of minutes to sign up and checking won't impact your score.

In the meantime, here are 8 tips to consider to help you improve your credit score.

Tip #1: Pay Bills On Time

Payment history counts towards 35 percent of your credit score. So making sure you pay your bills on time is one of the best things you can do to improve your credit score. This shows any potential creditors that you are financially responsible. Although some lenders and companies offer grace periods, it's important to make sure you pay all bills by their due date to avoid anything being reported to the credit bureau. 

A delinquent account (when you miss or are late on a bill payment) can have a negative impact on your credit score. If you have any past due accounts, then you should pay off the oldest ones first.

Tips #2: Consider a Secured Credit Card

If you have no credit or are in the process of rebuilding, a secured credit card might be a good option. These are available with most major credit card companies and require that you make a single deposit upfront - this then becomes your credit limit (so if you put down $300, your credit limit is $300). The idea is to demonstrate that you can use the card responsibly and pay your balance regularly. After a period of time, often a year, many lenders will allow you to upgrade or reapply for an unsecured card. You can learn more about credit cards and how they work in our Borrowing 101 series.

Tip #3: Pay More Than The Minimum Payment On Your Credit Card

If you do carry a balance on your credit card, then you should try to pay more than the minimum payment. Paying more than the minimum amount will decrease your credit utilization rate, or the percentage of the available credit available to you that you’re actually using. A low credit utilization rate can help improve your score.

As a bonus, making more than the minimum payment will help you pay your credit card off much quicker. This will save you money that’s just going to interest. Credit card companies often include an estimate of the amount of time that it will take to pay off your card along with your monthly statements.

Tip #4: Under-Use Your Credit Card

Creditors look at the amount of credit you have available and the amount you have used. Keeping the balance on your card low will look good on your credit report. Try to keep the credit utilization below 30 percent. This means that if you have a credit card with a limit of $1,000, then you should keep the balance below $300. One tip for achieving this is to make more than one payment a month on your credit card bill, if you can manage to do that.

Tip #5: Take An Offer to Raise Your Credit Limit

Although it may seem counterintuitive, accepting getting an offer to increase on your credit limit can help improve your credit score. If you keep your spending the same but increase your limit, then you will be decreasing your credit utilization. For example, if you increase your limit from $3,000 to $4,000 and keep your balance at $1,000, then your credit utilization will decrease from 33 percent to 25 percent.

Just be very careful to use the extra credit responsibly. It can be very tempting to increase your spending along with your new limit, but can often lead to a slippery slope of compounding interest. 

Tip #6: Be Cautious When Seeking Additional Credit

Applying for any type of new credit product can result in a hard hit to your credit report, which has the potential to negatively impact your score. So you may want to think twice before getting a credit card just to get a promotional offer, as it may affect your credit score.

You can check and monitor your credit score for free with Borrowell. Your credit score and report will be updated for you weekly, and your credit score will not be impacted when you check it. This is because checking your score is considered a soft inquiry.

Tip #7: Keep Your Oldest Credit Card

If you have had a credit card account that you haven’t used for years, then you may be thinking about closing it. However, a better option might be to keep the account open, and use it occasionally so your lender doesn’t close it for not being used. One of the factors that can affect your credit score is the age of the oldest account on your report, and in this case, the older the better! By keeping the account open you’re building your credit history and your total available credit (which plays a role in credit utilization). 

Tip #8: Mix It Up

The type of credit you are using can help improve your credit score. There are two types of credit, instalment and revolving. Credit cards are an example of revolving credit, whereas a personal loan is an example of an instalment. Using both types can demonstrate the ability to manage credit effectively to lenders and credit bureaus like Equifax and TransUnion.

Lastly! Just Checking Your Credit Score May Help You Improve It

A new study from Borrowell found a connection between checking your credit score and improving it. This is how you can improve your credit score.

The study found that our most engaged members increased their credit score by an average of 18 points over time! But it also found a positive relationship between checking your score and good credit behaviour in general. So, if you want to improve your credit score – you can start by checking it.

How did we find this connection?

Borrowell members receive their free Equifax credit score and Equifax credit report from Borrowell each month. To measure member engagement, we looked at the difference between a member’s first score when they started using our free credit monitoring service and their most recent score. Engaged members improved their score by an average of 18 points.

When we restricted the sample of members to those who had credit scores below the median, we found the most engaged members increased their scores by 30 points.

But what’s even more exciting is we found members who check their credit score actually have fewer delinquencies, collections, and lower credit utilization ratios.

The Bottom Line

There are lots of different factors that impact your credit score. Being aware that you need to improve is a positive first step. Don't forget to track your progress - seeing your score increase over time can encourage you to keep going. As your score changes, you can also see which financial products fit your credit profile, as well as your likelihood of approval for a wide range of credit products.

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Borrowell® is a registered trademark of Borrowell Inc. All Rights Reserved. The Equifax credit score is based on Equifax’s proprietary model and may not be the same score used by third parties to determine your credit profile. The score provided to you for educational use is the Equifax Risk Score.

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