How to Build your Credit Scores in Canada?


Credit scores determines and improves a person’s financial stability and well-being. Building a good credit score may take a long time if not carried out carefully and in a planned manner.
High credit scores help get loans with lower interest rates and better mortgages. In contrast, a lower credit score shows irresponsibility towards handling credit and may cause you a harder time getting credit. Credit scores show your dependency on credit to carry out your means of living. While a lower credit score indicates that you are highly dependent on credit and increases your implementation of being insolvent, a higher credit score shows how responsibly you manage your credit and will probably pay it back in earlier or at least due time frames.

Range of Credit Scores in Canada

credit scores

A higher credit score Credit scores range from 300-900, 300 being the lowest while 900 being the highest. If your credit score is high, it is less risky for the banks to invest in your financial requirements. For newcomers in Canada, most banks offer credit when you create an account. Building an excellent credit score is a time-consuming process in Canada. Your credit score will increase more based on how consistently your bills have been paid over the years than how you have paid off your credit card bills. Even after reaching your desired credit score, you must maintain to increase it or prevent it from dropping back down. Credit scores are calculated using complex methods, so it is impossible to know your exact score.

Factors Impacting Credit Scores

The duration of time you have attained credit for

The time you have taken credit for shows how much time, according to you, you will be able to pay back. If it is for a long time, it leads to an idea that you may not be able to fulfill the repayments. Longer the period, the more uncertainty it is to get back payments.

Existence of at least some balance on your credit card

There must be at least some balance left on your credit card; if there is no balance on it, it shows that you are not just completely dependent on your credit card, but you have also run out of other paying methods and may be insolvent.

How many times you’ve failed to make payments?

How often you make payments matters. So does how often you don’t! When you fail to make payments, it reduces your credit scores as it increases your chances of not being able to pay back on time by the algorithm used for calculating credit scores.

Suppose you have ever filed for bankruptcy

Filing for bankruptcy acts as the biggest devil of all! Filing for bankruptcy immediately declares that you cannot or were not able to pay back at one point. It negatively impacts lenders and decreases your chances of getting a loan. It lowers your credit score.
All of these factors depict your financial responsibility. They give lenders an idea of the probability of getting repayment. By keeping in mind and managing what affects your credit score, you will be able to manage it beneficially and have a higher chance of easily getting loans at low-interest rates.

Alternative-Multiple Lines of Credit

Taking out multiple lines of credit also leads to closing those credits frequently. It further impacts the average age of your loans and, in turn, leads to a lower score and plays a major role in your financial history. Having multiple lines of credit also may implement that you impulsively take credits which further means that you may be reckless towards your credit management. Using different lines of credit helps improve your credit score. If you have only a single credit method, say credit card, it is beneficial to have multiple types of credit instead of a single one. You can opt for a credit card, lines of credit, or a car loan to prevent a greater impact on your credit score. Remember that you should be able to pay them back; otherwise, it will deplete your credit score even more.

Hard Hits and Soft Hits on your Credit Report

Knowledge about “hard hits” and “soft hits” is also essential regarding your credit reports in Canada.


Hard hits appear in your credit report and can be accessed by anyone who views your credit report. They affect your credit score. These can include:-
1. applications for new credit cards
2. some types of rental applications
3. any employment applications


Soft hits appear in your credit report but can only be accessed and viewed by you. They do not impact your credit score. these include:-
1. requesting your credit report
2. businesses that have existing accounts with you seeking your credit reports.

Beneficial Way to Use Your Credit Limits

Another tip for building your credit score in Canada is to stay within your credit limit. Use approximately 35% of your credit limit. It is beneficial to have higher credit limits and use fewer of them each month as it shows growing independency towards credit and impacts your probability of solvency by increasing it. If you use big amounts of credit available to your lenders, they see you as a risk.

Know Your Credit Usage

Calculating your credit usage can be a great tool to figure out a better way to utilize your credit. You can add up all your credit options like credit cards, loans, and lines of credit.

Helpful Ways to Build your Credit Limit

1. Pay your bills timely

You can gain the biggest upper hand on having a higher credit score by always paying your bills before their due date. In a world surrounded by credit card offers and other attractive loan offerings, it is easy for Canadians to get mesmerized and take unrequired credit. But this extra credit will give birth to the depletion of credit points. So avoid unnecessary loans. While if the credit is required, you need not stress it specifically if you take credit in longer gaps and fewer times. Frequently applying for credit persuades lenders to believe you are not responsible and are misusing the services.
Additionally, even paying your credit bills at once creates a negative impact. So pay them in installments. Another useful tip for building your credit score is never to skip on bill payments even if it is in dispute and contact your lender if you cannot pay your bills.

2. Budgeting goes a long way!

Budgeting wisely is another great way to increase your credit score. Although it may not directly impact your credit score, it affects your financial stability and may indirectly affect your credit score through various connected factors. Having a fixed ratio of your available balances set aside for different expenses such as repayments, necessities, and more is a great way to check your credit score better and provide increased stability.

3. Make sure you save

Boosting your savings may also help repayments and reduce the need for additional credit, which will help you build your credit score. Savings help you have that extra cash you might need and save you from taking extra credit.

4. Use your Credit Card’s Features

You can also utilize your credit card’s high balance alert feature to help stop new charges if your credit utilization ratio exceeds your decided limits. This feature will, in turn, help you maintain how much you spend on your card and keep your score in check.

5. Get a Car Loan

Getting a car loan can greatly benefit you, increasing your credit score. A car is something that you might need daily.
Additionally, suppose you can pay it monthly. In that case, it creates a credit report showing you are properly managing the credit you have taken. It is also a payment more affordable than a mortgage or home loan.

6. Use Credit Monitoring Services

In addition to monitoring your credit scores and advising you with better credit management, they also assist you by letting you know about suspected frauds or errors. Keeping a check on your credit reports regularly also helps you find any inaccuracies in the reports and take action to get them fixed and build up your credit scores.


How can I check my credit score?

Option no. 1-

You can check your credit scores by obtaining your reports under the “credit file disclosure” section of the website of EQUIFAX or by obtaining them from the website of TRANSUNION under the section “consumer disclosure” Note that the credit scores they show may be slightly different due to different algorithms they use to calculate credit scores. Still, they offer an approximate idea of your credit score.

Option no. 2-

You can access your credit score free anytime if you have an account with ROYAL BANK OF CANADA.

Option no. 3-

Another option to access your credit score will be third-party companies. Some may offer their services free, while others charge a fee. Be sure to thoroughly review the terms and conditions of such websites before providing them with your information, especially check if they might further share your details with any other agency or institution. Be aware of fraudsters and secure your personal information.

How can I get my Credit Report?

Consider requesting your report from some bureau/company, then wait six months before you order from any other organization. By spacing out your requests, you may be able to detect problems sooner. To order a credit report physically, you will not be charged, but you may have to wait for some time till it is delivered. You can also view your credit report online through companies TRANSUNION and EQUIFAX, but they will charge you a fee.

What is the difference between Credit Score and Credit Report?

Know that your credit score is your current credit score ranging between 300-900, while a credit report is a document showing all past effects on your credit score.

How long does Information stay on credit reports?

Positive information regarding your credit stays in your credit report indefinitely. In contrast, the negative information regarding your credit scores, such as late payments, may change from time to time and stays up to 6 years.


One can build up their credit scores in Canada using preventive techniques, correct measures, and insight into how the credit scores work. Working on credit scores is helpful in times of dire need of financial assistance and should always be looked upon attentively.

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