How to improve your credit score in Canada: A practical guide

Key details

• The biggest factor: Your payment history is the single most important factor in your credit score, making it important to pay every bill on time.
• How to keep your risk in check: Keep your credit utilization low, if possible. Aim to use less than 30% of your available credit on any card or line of credit.
• Does checking your score matter? Staying informed doesn’t hurt your score. You can get free copies from Canada’s two credit bureaus, Equifax and TransUnion, to keep tabs on it and check for errors.
• Does having credit history matter? The longer you responsibly manage your credit accounts, the better for your score. This makes old credit cards valuable if you can afford to avoid closing them.

There’s a number attached to your name

For some, it’s the result of years of careful work. For others, it’s a blank slate, a starting line in a new country. And for many, it’s a reflection of past struggles.

Whatever your number is today, know this: a credit score is not an end point.

It’s not a lottery, either. Building good credit is a construction project. It's about knowing where to lay the bricks, one by one. This guide is your blueprint. The process of improvement starts now.

What is a credit score, in plain English?

A credit score is a three-digit number that summarizes your credit history.

Lenders—like banks, credit card issuers, and even landlords—use this number to get a quick snapshot of how you’ve managed debt in the past.

A higher score generally suggests to them that you are a lower-risk borrower, which can unlock access to better interest rates and more financial products.

Think of it less as a grade on your character and more as a measure of your financial reliability, based on past behaviour.

Which also means, since it’s based on behaviour, your actions right now—and tomorrow, and the day after, and the day after—can change it for the better.

How is a credit score calculated in Canada?

While the exact formulas used by Canada's two credit bureaus (Equifax and TransUnion) are secret, they are both built around five key factors. Once you understand these, you can start to map out ways of improving your own score.

• Your payment history.
  This is the most important factor. It’s a record of whether you’ve paid your bills—like credit cards, lines of credit, and loans—on time.
• Your credit utilization.
  This is the second-most important factor. It measures the percentage of your available credit that you are currently using. If you have a credit card with a $10,000 limit and a $3,000 balance, your utilization is 30%.
• The length of your credit history.
  This factor has a medium impact. A longer history of responsible credit management is generally better for your score.
• Your mix of credit types.
  This has a lower impact, but is still considered. Lenders like to see that you can responsibly manage different types of credit, such as revolving credit (like credit cards) and installment credit (like a car loan).
• Your recent credit applications.
  This also has a lower impact. When you apply for new credit, a lender will make a "hard inquiry" on your report, which can temporarily lower your score by a few points.

What is a good credit score?

Credit scores in Canada typically range from 300 to 900. While each lender has its own standards, here is a general guide to what the numbers mean:

• 800 to 900: Excellent.
  You are a top-tier borrower and will likely qualify for the best products and interest rates.
• 720 to 799: Very good.
  You are considered a low-risk borrower and will have access to a wide range of products.
• 650 to 719: Good.
  This is the range where most Canadians sit. You will likely be approved for most loans, but perhaps not at the very best rates.
• 600 to 649: Fair.
  You may have some difficulty getting approved for new credit, and any loans you get may come with higher interest rates.
• 300 to 599: Poor.
  This range suggests a history of missed payments or other financial difficulties, making it very hard to get approved for new credit.

Understanding these numbers is the first step.

But understanding without action leaves opportunities on the table. Here’s how you can do something about your number.

The 5 most powerful ways to improve your credit score

This is the part where it’s easiest to feel a sense of hesitation. Learning the “what” and the “why” is ultimately just reading words on a page, but facing the “how” is a different feat.

It invites uncertainty—there are so many steps, and some of them might be wrong, and some might just be less right than others, and what if you don’t take the best one? It’s normal. More than normal: it’s essential.

There’s no better reminder that the outcome matters to you, and no greater force to help you lock in and figure out what step you actually want to take first. Because the truth is, just by taking any of them, you’ll get closer to a better credit position.

1. 1. Make every single payment on time

   This is the most critical action you can take. A single late payment can stay on your credit report for up to six years. Set up automatic payments for the minimum amount due on your credit cards and loans so you never miss a date. You can always pay more, but ensuring the minimum is always paid automatically is a powerful safety net for your score.

2. 2. Lower your credit utilization rate

   Keeping your balances low relative to your credit limits is the second-most important factor. Aim to use no more than 30% of your available credit on any single card or line of credit. If your credit limit is $10,000, try to keep your balance below $3,000. If your utilization is high, focus on paying down the balance as your top priority.

3. 3. Become an authorized user on someone else's account

   If you have a limited credit history, a family member with a long history of responsible credit use can add you as an authorized user on their credit card. Their good payment history and the age of their account can then appear on your credit report, potentially giving your score a significant boost.

4. 4. Check your credit reports for errors

   Mistakes happen. A payment might be reported late when it wasn’t, or an account you never opened could appear on your file. You are entitled to a free copy of your credit report from both Equifax and TransUnion. If you find an error, you can file a dispute by following the instructions on either Equifax or TransUnion’s website.

5. 5. Limit applications for new credit

   Every time you apply for a new loan or credit card, it results in a hard inquiry that can temporarily dip your score. While this effect is minor, applying for many new accounts in a short time can be a red flag for lenders. Be thoughtful about your applications and only apply for credit when you truly need it.

These five principles are the foundation of good credit for everyone. But, depending on where you are in life right now, there may be other factors that are valuable to consider.

Credit strategies, based on where you are in life

Here’s how you can approach building good credit based on your current circumstances.

• For newcomers to Canada:
  First, welcome! We at Questrade hope you find everything you hope for here. Your credit history from your home country unfortunately doesn't follow you here though, so you will be starting from scratch. Your first priority is to create a Canadian credit file.
  The most common way to do this is by getting a secured credit card. With a secured card, you provide a small security deposit (e.g., $500), and that amount typically becomes your credit limit. By using this card for small purchases and paying the bill in full every month, you begin to build a positive Canadian payment history.
• For students:
  Good for you, choosing to learn about this on top of your course load. As a student, you will likely be offered your first credit card. This is a powerful tool, but it requires discipline.
  The best strategy is to use the card for a small, predictable monthly expense, like a streaming subscription or your phone bill. Set up automatic payments to pay the balance in full each month. This builds your credit history without the risk of overspending and accumulating debt you can't manage.
• For new parents:
  Congratulations! A lot’s going to change, and one of those things will likely be income—especially during parental leave—and new expenses. Amid the joy, this can also be a moment of financial strain. It is more important than ever to have a clear family budget.
  If you and your partner share finances, have an open conversation about your credit. Ensure all shared bills are being paid on time and try to keep balances on credit cards and lines of credit as low as possible to protect your scores during a period of reduced income.

What doesn't affect your credit score?

There's a lot of confusion about what impacts your credit. The following things have no effect on your credit score:

• Checking your own credit score or report (this is a soft inquiry).
• Your income, or whether you receive social assistance.
• Your chequing or savings account balances.
• Receiving a quote for insurance.
• Your age, marital status, or race.

A word of caution on 'credit repair' services

You may see ads for services that promise to "fix your credit" for a fee. Be very careful. There are no secret tricks or quick fixes to building good credit.

The only legitimate way to improve your score is through the disciplined habits outlined in this guide: paying your bills on time and using credit responsibly over a period of time.

No company can legally remove accurate information from your credit report.

How long does it take to see improvements?

Building good credit is done one brick at a time, not all at once.

While some actions, like paying down a large credit card balance to lower your utilization, can improve your score in as little as 30 to 60 days, the most significant factor—a long history of on-time payments—takes time to establish.

Be patient, be consistent, and your score will begin to reflect your positive habits.