How to Improve Your Credit Score

Step 1: Get Your Credit Score and Free Credit Report

Getting Your Credit Score

Your credit report and your credit score are two different things, and your report does not include your score. Your credit score shows you how lenders will view your creditworthiness. You can obtain your credit score through an Equifax or TransUnion subscription. Also, many of Canada’s major banks allow you to access your credit score online for free through their online banking platforms, which is ideal for those trying to improve their credit score in Canada. However, the credit score provided by your bank may not be your official credit score according to Equifax or TransUnion.

Credit Canada will also discuss your credit score when you book a free Credit Building counselling session with us. This can be extremely valuable for any individual, whether you struggle with debt, have a low credit score, or even a steady source of income. You can also chat with one of our Credit Counsellors via the chat box on the bottom right on the page if you are not ready to pick up the phone to call.

Getting Your Free Credit Report

Credit reports are a record of your credit history and are maintained by credit bureaus, also known as credit reporting agencies. There are two credit reporting agencies in Canada – Equifax and TransUnion. You can get a free copy of your credit report and score from Equifax up to 12 times a year and once a year from TransUnion, and it will not affect your credit score. Both credit bureaus also offer subscriptions for ongoing monitoring, alerts, and other features. Your credit report contains the following information:

Personal identification, possibly including employment information.
A record of which organizations have recently asked for your credit report.
Your payment history for accounts that are reported to the credit bureau.
Any information on the Public Record, such as collections, judgments, and bankruptcies.
Types of credit that you have (as seen on the chart below).

Step 2: How to Check Your Credit Rating

Each account shown on your credit report will have a rating, which reflects the type of credit and the current payment status of the account. The type of credit is indicated by a single letter and the payment status will be a number between 0 and 9. This scale is NOT linear - the numbers simply describe the current payment status.

The tables featured here explain the meaning behind each letter and number for a credit rating.

types of credit

Step 3: Learn How Credit Scores Are Calculated

If you've ever used a credit card or taken out a personal loan, then you've got a credit score.

Calculating Your Score

Your credit score is calculated by credit bureaus that convert information on your credit report to a number based on a formula called the “FICO formula.” Your credit score will be a number between 300 and 900.

Here are the factors that make up your credit score and a percentage indicating how important they are when it comes to calculating your score.

Payment History (35% of your credit score) – how timely you’ve been when making payments on past and current debt.
Credit Utilization (30% of your credit score) – how much available credit you’re using.
Credit History (15% of your credit score) – the length of time you’ve been using credit.
Diversity of Credit (10% of your credit score) – how many different types of credit you have.
Credit Inquiries (10% of your credit score) – the number of times you’ve attempted to obtain new credit.

What is a good credit score?

Generally, a credit score approaching 700 or above is looked at favourably by lenders, meaning you probably won’t be turned down for credit or a loan, and the interest rate will likely be reasonable. If your credit score is 800 or above, you’re in excellent shape. Learn more about what makes a good credit score.

credit score quality scale

According to FICO, for people with “normal” credit profiles, payment history and credit already used make up 65% of your credit score.

Step 4: Rebuild Your Credit History

For anyone who has had credit problems in the recent past and is wondering how to improve your credit score, here's how you can start taking steps to rebuild your credit. Some of these tips will take longer to implement than others, so don’t be discouraged if you don’t see a difference overnight. The point is to adopt new behaviours early so you can effectively improve your credit over time.

Prioritize Payments

Make payments on past-due accounts that haven’t gone into collections first. Getting current on these is more important, as you want to avoid having your accounts sent to collections, if and when possible. Accounts already in collections will remain on your credit report for 6 years regardless of repayment.

Contact Accounts in Collections

Contact those accounts in collections to see if it's possible to start paying back the debt, but make sure you notify the creditor, as well and get proof of payment. Before contacting collection agencies, be sure you know your rights. Some collectors may demand full payment of the debt and/or threaten legal action.

Use a Secured Credit Card

Consider applying for a secured credit card to assist you in rebuilding your credit rating. Secured credit cards are nearly identical to regular credit cards, but require a one-time minimum deposit, also known as a security deposit, to receive a credit limit. While they may not always come with typical benefits such as cash back or reward points, using secured credit cards can help improve your credit.

Step 5: Start Increasing Your Credit Score

You may be looking for ways to improve your credit score fast, but it’s important to know that it can take some time and patience. However, to give your credit score a boost, you should remember to do (or start doing) each of the following:

Regularly Review Your Credit Report

Review your credit report at least once a year. Errors in your report or instances of identity theft can cause your score to be lower than it should be. Repairing these errors could increase your score dramatically. Look for things like:

Identity-related errors
Incorrect accounts due to identity theft
Balances from accounts that have been paid off
Unauthorized purchases due to fraud or misuse

If you find incorrect information, contact Equifax or TransUnion so they can start the Dispute Resolution process. Get started right away. Suspected cases of identity theft should also be reported to the police as soon as possible. It can take time for errors to completely disappear from your credit history, so the sooner you address the issue, the sooner you can start the process of rebuilding your credit.

Pay Bills on Time

Pay all your bills on time! Most creditors will let you set email reminders, or you can create them on your smartphone, so you’re never late again. You can also set up automated payments so you never miss a deadline.

Avoid Too Many New Credit Applications

Don’t apply for too much new credit in a short period of time; this can make it appear you are relying on credit to make ends meet and raises red flags. Instead, apply for only one credit card at a time or space your applications out over the course of months rather than days.

Save Regularly

Try to save 10-15% of your net income. If you're unemployed, try to save 2-3% of net income. Building your emergency savings will also prevent you from reaching for your credit card to pay for unexpected expenses. Use our Budget Calculator to see how much you can save by making cuts in your spending.

Practice Good Financial Behaviours

Begin practicing better money management, such as budgeting and tracking your expenses. This will help you understand how much money you have coming in, and how much you have going out. That way, you can determine where you can cut back to pay down your debt—which kicks up your credit score! Use our free, downloadable Budget Planner.

Increase Your Credit Limit Carefully

Increasing your credit limit will improve your credit utilization ratio. Make sure your account is in good standing, and then ask your credit card provider to increase your credit limit. If you have a history of on-time payments, you won’t see any real impact on your credit score.

Reduce Credit Card Balances

Regardless of your credit limit, it’s wise to keep your credit card balances as low as possible. Doing so will ensure that you stay on the right side of your credit utilization ratio and avoid taking hits from large purchases.

Avoid Closing Credit Cards

Some consumers mistakenly believe that by closing their credit cards, they can improve their scores. The opposite is often true — closing a credit card can decrease your overall credit mix, which can cause your score to fall.

Diversify Your Credit

Having a strong credit mix can enhance your score. That means having credit cards, personal loans, auto loans, student loans, and/or a mortgage. While you want to avoid taking on unnecessary debt, diversifying your credit mix can help your score.

How to Improve Your Credit Score with Credit Canada

How long does it take to improve your credit score? In some circumstances, you could see your score improve in as little as 30–45 days. More generally, you can expect it to take much longer to see a significant improvement in your credit score.

Credit Canada can streamline the process by providing guidance and counselling to improve your financial literacy — and your financial health.

There are a lot of myths and misunderstandings about credit reports. Our professionally certified Credit Counsellors will help you understand how credit reporting works and how you can improve your credit score.

Turn Your Credit Score Around

Want to rebuild your credit? Take advantage of our FREE Credit Building Counselling sessions by filling out the form below.

How to Increase Credit Score: Proven Steps to Success