mobile app - credit score

5 ways to build your credit score

By Amanda Owusu

Posted on February 22, 2021
mobile app - credit score

According to Experian, a consumer credit company, credit is the ability to borrow money or access goods or services with the understanding that you will pay it back later. In Canada, credit is really important and can help you make big purchases like a house and car. Credit can also be used to get access to credit cards, phone plans, and other types of goods and services. Having bad credit in Canada can be a disadvantage, which is why it’s important to maintain a good credit score.

What is a credit score?

A credit score is a three-digit number that comes from information taken from your credit report. This number shows whether or not you manage your credit well, and if it would be risky for lenders to let you borrow money. Credit scores usually range from 300 to 900. The lower the number, the worse your credit. In Canada, good credit scores are usually between 660 and 724; 725 to 759 is very good, and 760 and up is considered excellent. It generally takes about 18 months for you to build your credit score to the point that it will be considered when applying for a loan.

What affects my credit score?

Information taken from your credit report has a direct impact on your credit score. Information in your credit report will be taken from places that have extended you credit. This could include institutions such as the bank, your telephone provider, or a car dealership.

Your payment history is something that directly impacts your credit score. Whether or not you pay your bills on time is reflected in your score. If you always pay your bills on time and in full, you can expect your credit score to go up. If you don’t pay your bills on time, you can expect your score to go down. If you miss a payment, your credit score will be negatively affected and will go down.

The amount of debt you have will also impact your credit score. If you have a lot of debt from other lenders, other borrowers may not want to lend you money. It’s best to keep your debt as little as possible. If you owe money, it’s important to make active payments to reduce the amount due. Otherwise, this debt will be poorly reflected in your credit score.

The duration of your credit history also has an impact on your credit score. The longer you are in Canada practicing good financial habits, the higher your credit score will be.

Your credit utilization ratio also impacts your credit score. Your credit utilization ratio is calculated by taking how much you currently owe and dividing it by your current credit limit. The lower this number is, the better. This number represents the percentage of the available credit you have used up. The general rule of thumb is not to use more than 30 to 35 percent of the available limit on your credit cards to help maintain a good credit score.

Five easy ways to build your credit:

Now that you have an understanding of what a credit score is and how it works, here are five easy ways to help build your credit as a newcomer.
piggy bank

1. Apply for a secured credit card

Credit cards provide you with a set amount of funds that you can use. At the end of the month, you are expected to pay back these funds. The better your credit score and payment history, the more funds you can access. This is one of the best ways to build your credit score, as it’s an important form of credit that many lenders look at. Because you’re trying to build your new credit history, you want to go for a secured credit card. This is because these cards are easier to get with no credit history. With a secured credit card, you put down a deposit that will act as collateral in case you don’t make a payment. If you can access an unsecured credit card, this is even better, as the interest rates and fees will typically be lower. The difference between secured and unsecured cards is that with an unsecured one, you don’t have to make a deposit, and it’s harder to get an unsecured card. You usually qualify for these cards if you have good credit history and good financial health.

At the bottom of this article, you will find links to the major banks in Canada and their banking services, such as the credit cards they offer. You can take a look at the links below to find the best option for you!

2. Apply for a phone

Applying for a contract-based monthly phone plan is a great and easy way to start earning your credit. These plans are called “postpaid” and mean that they are paid after the date of use. These are different from prepaid plans, where you pay for the plan before you use it. When you pay your phone bill on time, the phone provider reports this to the credit bureaus, which helps build your credit history. You can go to a major communications provider, such as Rogers, Telus, Bell, and many others, and apply for a postpaid phone plan. The cost of these phone plans varies depending on what features you get, and they can be as low as $40 or as high as $200. Some providers such as Telus don’t require credit history to open an account, if you are new to Canada. Moving2Canada, a guide for newcomers in Canada, has more information on their site about Canadian phone providers and what they require.

3. Pay bills and credit card balance on time

Paying your bills on time is one of the most important things you can do as a newcomer to build your credit history. This shows lenders that you are a good borrower and that you will pay what you owe, which makes it more likely for them to give you money. For example, the bank may offer to raise your credit limit from $1,000 to $2,500 if they see that you have a good credit history. If you do not pay your bills on time, lenders will also see this and be more likely to say no or set more terms. Even if you can’t pay the entire balance, making some effort to pay even a small amount will work wonders for you. If you can’t pay your bill on time that month, call your provider as soon as possible and ask to set up a payment plan that works for you. Not only is paying your bills on time important for your credit score, but it’ll also help you save money. Sometimes when you don’t pay your bills on time, interest is added to your initial balance.

4. Apply to the Landlord Credit Bureau

This is an alternative option for people who are looking for additional ways to boost their credit score. The Landlord Credit Bureau has partnered with major credit reporting agencies like Equifax and TransUnion. This partnership makes it possible for tenants and landlords to have their rent payments reflected on their credit score. You can report your information to the Landlord Credit Bureau, who then passes it onto companies like Equifax and TransUnion, and these companies, in turn, incorporate it in your credit report. If you are paying your rent on time and in full, this could be a great option for you. However, this service is not free and starts at $29.99/year.

5. Use different types of credit

You can also use various types of credit to help build your credit history. Having different types of credits means having credit with different companies that offer different products. For example, having a credit card, a postpaid phone plan, and paying for a car on a monthly basis are three different types of credit. Having different types of credit helps build your credit history faster than having just one. Paying your bills on time shows that you’re able to handle different types and amounts of credit.

Credit is very important in Canada. It can either make your life easier or harder, depending on your financial choices. Making good financial choices can help set you up for success and increase your credit score. Don’t let a bad credit score prevent you from making important purchases for your life in Canada.


Landlord Credit Bureau:

Cell Phone Related:
A newcomer’s guide to understanding Canadian cellphones:

Banking/Credit Card Related:
How to choose the Canadian bank for you (for newcomers):

Canadian Newcomer Banking Programs (Including Credit Cards):

Secured Credit Cards:

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