Steps to Build and Keep a Good Credit Score in Canada
A good credit score in Canada plays a vital role in your financial health. It impacts your ability to secure loans, credit cards, mortgages, and even influences the interest rates you receive. Whether you’re planning to buy a home, lease a car, or apply for a personal loan, your credit score can make or break the deal.
In this article, we’ll cover what a good credit score in Canada is, why it matters, and the essential steps to build and maintain it.
What Is a Good Credit Score in Canada?
In Canada, credit scores range from 300 to 900. Here’s how they’re typically categorized:
A good credit score in Canada usually falls between 660 and 724, but the higher your score, the better your chances of getting approved for credit products with favorable terms.
Why Is a Good Credit Score Important?
Having a good credit score means lenders see you as a responsible borrower. This opens the door to several benefits:
Better interest rates: Lower rates on loans and mortgages.
Higher credit limits: Access to larger amounts of credit.
Faster approvals: Quick approvals for credit cards and loans.
Negotiating power: Leverage for better financial terms.
Now, let’s dive into the steps to build and maintain a good credit score in Canada.
1. Check Your Credit Report Regularly
Your first step to improving your credit score is knowing where you stand. Get a free credit report from Canada’s two main credit bureaus:
Review your report for any errors or fraudulent activity. Incorrect information, like late payments that never happened, can drag down your score.
Tip: Dispute inaccuracies immediately with the credit bureau to correct your report.
2. Pay Your Bills on Time
Payment history is the most significant factor affecting your credit score, making up about 35% of the score calculation. Late or missed payments will negatively impact your credit.
Set up automatic payments for bills and loans.
Use reminders or calendar alerts to ensure timely payments.
3. Keep Your Credit Utilization Low
Credit utilization refers to how much of your available credit you’re using. A good rule is to keep it below 30% of your total credit limit.
If your credit limit is $10,000, keep your balance under $3,000.
High utilization signals lenders that you may be over-reliant on credit, which can hurt your score.
4. Avoid Applying for Too Much Credit at Once
Every time you apply for a new credit product, a hard inquiry is made on your report, which can slightly lower your score. Multiple inquiries in a short time can make you look risky.
Tip: Apply for credit only when necessary.
5. Build a Long Credit History
The length of your credit history also matters. Lenders prefer borrowers with a consistent record of responsible credit use.
Keep your oldest credit accounts open.
Avoid closing credit cards you don’t use often, as this can shorten your credit history.
6. Diversify Your Credit Mix
Having a variety of credit accounts such as a credit card, car loan, and mortgage can improve your score, as it shows you can handle different types of credit responsibly.
But: Don’t take on unnecessary debt just for the sake of diversity.
7. Limit Hard Inquiries and Manage Soft Pulls
Hard inquiries from lenders can temporarily lower your score. Soft inquiries, like checking your own credit report, don’t affect your score.
Pro Tip: Compare credit products using tools that only perform soft pulls before applying.
8. Monitor Your Credit Regularly
Use credit monitoring tools to track changes in your score. Some banks and financial apps offer free credit score updates.
Detect fraudulent activity early.
Stay aware of factors affecting your score.
Ignoring your credit report: Errors can lower your score.
Closing old accounts: Reduces your credit history length.
Missing payments: Even one late payment can hurt.
Maxing out credit cards: High utilization damages your score.
How Long Does It Take to Improve a Credit Score?
Improving your score doesn’t happen overnight. It can take 3 to 6 months to see significant progress, depending on your starting point and financial habits.
Maintaining a good credit score in Canada is essential for financial stability and opportunities. By making timely payments, keeping credit utilization low, and monitoring your credit regularly, you can build a strong score and keep it that way.
Need Help Improving Your Credit Score?
If you’re struggling with credit issues or want personalized guidance to maintain a good credit score in Canada, reach out to us today. Contact us now to get started! Our experts can help you create a plan to boost your credit and achieve your financial goals.
