Best Way to Improve Your Credit Score In Canada

Credit Cards, Auto Loans, Mortgages – in 2018, it’s rare to find a Canadian without any form of debt. While taking out a loan is often a necessity for purchasing big-ticket items, many Canadians hold on to the debt for good, ruining both their credit score and chances at affordable loan rates.

While repairing a credit score doesn’t happen overnight, dealing with debt is a manageable process. Here we will look at the most common factors contributing to poor credit and give you tips of how to improve your credit score living in Canada.

Canada's Credit Score Ranges

What Causes a Bad Credit Score in Canada?

A poor credit score can be caused by several situations; however, unpaid credit card bills and loan payments are the main causes of concern for Canadians. No matter the situation, every transaction gets tracked into a credit report and can stay there for years if not dealt with. Here are the top situations to avoid:

Careless Credit Card Usage

With over 68.5 million Visa and Mastercards in circulation across Canada and over $1.973 trillion in consumer debt (according to, it’s hard not to attribute this to the poor credit scores experienced by many Canadians.  As credit cards are the first credit product most people sign up for, it’s the easiest and quickest one to get off-track with. However, with the fairly new “tap” option dominating most retail locations, credit cards are becoming easier and more convenient to use. Unfortunately, this is where the issue arises – as people forget to pay their credit card bills, their credit history goes down the drain.

The most common behaviours of careless usage include:

  • Late Payments
  • Short Payments
  • Not Paying at all
  • Constantly having a high balance
  • Maxing out your credit cards
  • Failing to pay your bills months at a time (6 months or more)

Failing to pay your credit card bills for a prolonged period moves your account to collections. At this stage, legal repercussions may arise, and a poor credit score will remain on your credit report for up to 7 years. This means that lenders will be less likely to approve your loan requests and if they do, the interest rate may be higher than that of borrowers with good credit.

Defaulting on Loans

Missed mortgage payments or car loans are the second largest factor contributing to bad credit among Canadians. These types of loans often involve “collateral,” meaning that they can be repossessed by the lender to compensate for the loss. While one payment may not damage your credit, multiple infractions and repossessions may stay on your credit report for over 7 years.


The third and worst factor for a credit score is the declaration of bankruptcy. This decision will not only impact your credit score, but it will also remain on your credit report for a length of 7 to 14 years (depending on whether if it’s your first or second time declaring the status). Keeping this in mind, we suggest consulting a licenced insolvency trustee to make sure that this is the only option available.

How to Increase Your Credit Score in Canada

The are no easy ways to improve credit quickly, however, the best way to repair credit is re-establishing it over time. Below, we discuss six steps to boost your credit score in Canada and maintain it for good. If you don’t know how to get your credit report and want to check your current credit rating, we recommend requesting a free and simple credit report from Equifax or TransUnion.

Step 1 – Identify the Problem

Simply knowing that you have poor credit is not enough to repair it. While many Canadians fall into a financial crisis due to circumstances beyond their control (ie. unemployment or divorce,) many don’t take the time to figure out how they got there in the first place. While the most common reasons are defaulting on loans or not paying your credit card, we always recommend talking to a financial planner or credit counsellor to get to the route of the problem.

Step 2 – Create a Plan

Once you’ve identified the problem, it’s important to create and follow a monthly budget. If you don’t know what should be included in your monthly budget or don’t know how to create one, we’ve created a simple to follow template here. Please remember that your monthly expenses should not outweigh your monthly income.

No matter the debt, it is important to allocate a part of your income towards savings. This is a crucial step in dealing with unplanned situations and will allow you to avoid using your credit card in case of emergency. A good number to work up to is $1000 as this can usually cover an emergency home or car repair. In short, staying within your means and putting away savings is a great initial step to getting out of debt and building your credit back up.

Step 3 – Pay off Your Debts

Pay Off Your Credit Card

Now that you’ve created a budgeting plan, the best way to build your credit score is by paying off your existing debts. Paying your credit card below 50% of the limit will help with your credit score significantly; anything over 75% can result in a negative impact. Keep in mind that owing less money means less interest. This will allow you to allocate more money towards savings.

Pay Off Your Late Payments

Catching up on late or overdue payments is another necessary step to repairing your credit. If this is not done, your credit report will get worse and worse over time. In case of an emergency, where you are unable to pay, we recommend calling your creditors and working out a plan to get you back on track. This is helpful to note as creditors will often work with you and give you extra time for payment.

In the case that this doesn’t work, reaching out to credit counselling organizations who offer debt repayment programs is an excellent choice. These programs are designed to help you pay off your debts with an affordable monthly plan, which will leave you all caught up at the end of the program. These programs not only have a positive impact on your credit score, but people who complete the program also tend to have top credit rating and higher credit scores than most Canadians.

Continue Making Your Payments on Time

Making your payments on time is the simplest way to rebuild and maintain good credit. Paying off your bills every two or three days before they’re due ensures that there are no delays when they are getting processed. The quicker you pay off your loans, the quicker you’ll be debt free.

Re-establish Your Credit

While paying off your debts is a necessity to having better credit, having no active-credit for a prolonged period of time is also a bad option. Having no credit score means that your credit history cannot be evaluated. This means that lenders will treat you the same as an individual who has bad credit as they have no proof that you will reimburse them for their loan. For this reason, it’s important to have a credit card or a small line of credit to show that you can handle the responsibility. In essence, you need credit to build up your credit rating.

Another popular way to re-establish credit is taking on an auto loan. While loans themselves may be difficult to obtain with bad credit, auto loans are simple. This is because dealerships have lenders who are willing to help and know that their loans are secured by the vehicle. If you’re looking to re-establish your credit with an auto loan, we recommend choosing an experienced lender with a proven track record. Always check Google reviews to make sure the company is the right fit for you.

Don’t Give Up

You can do this! Take a deep breath and work through the steps. Unfortunately, there is no way to fix your credit score quickly, however,  spending your hard-earned money on interest and debt is a sure way to end up bankrupt. If you have gone bankrupt, while your credit score may be low, it’s not irreversible. Stay responsible and take it one day at a time. For additional help, free credit counselling programs are always available.


Whether you have bad credit or no credit, following the above steps is a manageable way to improve your credit score. To review, here are the four key factors to not only re-establish your credit but to maintain an excellent credit report:

  • Get a free credit check on Equifax and TransUnion
  • Pay your bills on time to improve credit score
  • Keep your credit card balance below 50%
  • Stay on top of new loans
  • Have savings for a rainy-day fund

Remember, less debt means less money going towards interest payments. The better your credit, the better the rewards. While this may take time, don’t give up, allow yourself the peace of mind that you deserve. You got this!

If you need help fixing your credit, auto loans are a great place to start.  For those affected by bankruptcy, building credit without a credit card could be a hassle. That’s why at Cheap Cars Canada we helped thousands of Canadians secure affordable auto loans and build their credit back up the right way.

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2018-12-12T12:13:42-05:00 April 2nd, 2018|Bad Credit|


  1. Avatar
    Marcie Barrow June 15, 2018 at 6:25 pm - Reply

    My credit went from Excellent to Fair because I got into a relationship with a person that I trusted and let him be on my credit cards, etc. He defaulted and declared bankruptcy and left me holding all bad credit and now I have to endure the Fair Credit Rating because I stupidly trusted someone.

  2. Avatar
    gerald allard July 26, 2018 at 8:57 am - Reply

    Comment…appreciate the good pointers,

    thank you

    • Avatar
      Darvin August 28, 2018 at 5:21 am - Reply

      Hey, that’s poefrwul. Thanks for the news.

  3. Avatar
    Tina August 28, 2018 at 7:20 am - Reply

    Fell out of bed feeling down. This has brgithened my day!

  4. Avatar
    Christina Alexander September 10, 2018 at 6:23 pm - Reply

    I too ended up with someone for 8 years and it was all very abusive in every way including financial. He got my car stolen and the thieves used my licence plate for tons of speeding and parking tickets adding up to $3000. Plus he frauded me buying phones and getting loan. I was young, scared and stupid. Now I have no licence or car, until I pay off the tickets, I waited too long to go to court to get it settled. He finally got deported back to Lebanon. And I m STILL finding out about more fraud he did whole we were together. I dont know what to do or how to fix this. I have 6 children and always broke cause I am on Disability.

  5. Avatar
    Dolbak Finance October 13, 2018 at 3:41 am - Reply

    Thank you so much for the informative and interesting post I like your points which you have discussed over here, great job. Thanks for sharing such a interesting post ever.

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