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Low or Zero Credit Score – Might be Your Credit History

The Borrowell Team

Jun 10, 2020 6 min read

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I Have A Zero Credit Score – Now What?
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    Update: Borrowell now offers free weekly credit score updates! If you're starting to build up your credit history, sign up for Borrowell to track your progress on a weekly basis.

    Seeing a zero credit score can be a disheartening experience. Usually, a zero credit score means that there's not enough credit history on your credit report to calculate a score. The credit bureaus don't have enough information about your spending history to calculate a score for you. It's important to understand how credit bureaus calculate your credit score in Canada, and how your credit history plays a key role.

    Credit history accounts for approximately 15% of your credit score and is weighed based on how long your accounts have been open, how long it’s been since you’ve used them and whether they’re still active. Most credit bureaus look for a minimum of six months of responsible credit in order to calculate your credit score.

    Credit History Accounts for 15% of your credit score.

    It’s a bit of a “what comes first?” conundrum. If a person has never had credit, banks and lenders may be wary about lending that individual money. But then how is this person supposed to get credit if they’ve never had access to it?

    Establishing history takes time, but responsible habits can often translate into positive results, we’ve got some tips to help you start building! But first, let’s start with the basics.

    What is a credit score?

    A credit score is a metric used by banks and lenders to access creditworthiness. Credit scores, range between 300 and 900 depending on the scoring model. There are two credit reporting agencies in Canada that calculate credit scores: Equifax and TransUnion.

    How is a credit score calculated?

    Both credit reporting agencies collect financial information from banks and lenders and use this information to calculate one’s credit score using complex models. Borrowell uses Equifax and provides the Equifax Risk Score (ERS) 2.0 score for its customers. It’s a popular score, used by many banks and lenders, and is also the score that is used in Borrowell’s internal lending decisions.

    Not sure what your credit score is?

    Sign up for Borrowell to get your credit score for free! If your credit score is low, get personalized coaching on how to improve it.

    Get Your Free Credit Score

    What is a zero credit score versus a low credit score?

    It’s important to note the distinction between having a zero credit score and having a low credit score. If you have a low credit score, you may have difficulty accessing credit because you need to rebuild your credit. Missed bill payments, high credit utilization, bankruptcy, and a number of other factors can cause your credit score to drop.

    Not having a credit score means there is an absence of a score – meaning the credit reporting agency doesn’t have enough information about you to produce one. There are a few reasons why this may be the case:

    New to credit

    If you don’t have any credit accounts or credit history, the credit reporting agency won’t have enough information to make a decision about whether or not you’re worthy of credit. This is common for students just starting out! 

    New to Canada

    New to Canada? Welcome! Even if you had a credit history before, it’s important to build it again in the country you’ve relocated to. Again, it comes back to credit history. 

    Credit hasn’t been used recently

    If you had a credit card and used it responsibly, in theory, you should have a credit score. But if you stopped using credit in favour of a debit card, which doesn’t report to the credit bureau, there eventually may not be enough information to produce a score. Keep in mind that there are practical ways to build credit without a credit card, so don't worry if you're hesitant about using credit cards.

    Why is having a credit score important?

    Having a good credit score affects your overall financial well-being. It can help you access better financial products, such as the best credit cards and low-interest personal loans. In fact, premium credit cards often require credit scores above 660. Checking your score and report in general can help you protect yourself against identity theft.

    Steps to consider to build your credit score

    Building a credit score takes hard work and patience. It takes diligence and isn’t something that will happen overnight. There are a few things that you can do to start building your credit. 

    Get a co-signer

    This is a person who agreed to be responsible if you don’t’ pay your debt back as agreed. Younger people typically start this way by getting their parents to co-sign a student loan or credit card. Just keep in mind that if you miss payments this will also impact your co-signer- so the agreement should not be taken lightly. 

    Apply for a secured loan

    A secured loan is backed by something you own, like a car. If you have something you can use as collateral, this might be a good option, however, keep in mind that if you don’t honour your payments you may lose that asset. 

    Apply for a secured credit card

    The responsible use of a credit card and managing payments is critical to building a credit score. This means watching credit utilization and paying bills on time, every time. A secured card has a slightly different qualification process and requires a security deposit making it different than a traditional unsecured card.

    What is a secured card?

    A secured credit card is just like any other credit card. The one difference is that cardholders are required to send in security funds as collateral to show commitment to using the card responsibly.

    Unlike a pre-paid card, which needs to be loaded with money, a secured card gives the cardholder a credit limit and a chance to build their credit, as their activity is sent over to credit reporting agencies monthly. With pre-paid cards, no credit card activity is sent to the credit reporting agencies. However, with the Guaranteed Secured Mastercard®, Capital One sends cardholders’ activity to the agencies on a monthly basis, which helps customers build better credit if they use their cards responsibly.

    A secured card is an excellent tool to help you if you have little to no credit history build credit and set yourself up for future opportunities. There are many great secured credit card options in Canada, including Refresh Financial's Secured Card and Capital One's Guaranteed Secured Mastercard.

    How to use the Guaranteed Secured Mastercard

    Once security funds have been received and the account has been activated, it’s important you use the card responsibly. Here’s what responsible use means:

    • Paying the balance on time, every month. Being on top of due dates and making sure no payments are missed is key to building your credit.

    • Setting up alerts and reminder emails is a great way to stay on top of credit use and keep an eye on upcoming bills.

    • Having patience – building credit takes time! Improving a credit score and establishing a good credit history is a process that requires dedication. Over time, ongoing responsible use can help improve your credit score.

    The Bottom Line

    The Guaranteed Secured Mastercard from Capital One is a great choice if you are looking to build credit, but it’s important to remember that building credit requires a commitment to making payments on time and using credit responsibly.

    Sign up to Borrowell to start tracking your progress, receive weekly credit score updates, and get ongoing tips to help you improve over time- it’s free and it only takes a few minutes. You can then see credit products that match your profile, including Capital One’s Guaranteed Secured Mastercard and apply in just a few clicks. 

    The Capital One product details described in this article may have changed since the time of publication. Please see for the current product details.

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