Practical Steps to Improve Your Credit Score

Your credit score can affect everything from mortgage approval to the interest rate a lender offers you. The good news is that credit scores are not fixed — they respond to consistent, deliberate habits over time. Understanding how Canadian credit bureaus calculate your score is the first step toward building a stronger financial profile.

How Credit Scores Work in Canada

In Canada, the two main credit bureaus are Equifax and TransUnion, and each may calculate your score slightly differently depending on the information reported by your lenders. Scores typically range from 300 to 900, with higher scores generally reflecting a lower perceived risk to lenders.

Several factors influence your score, including payment history, credit utilization, length of credit history, types of credit used, and the number of recent credit inquiries. Payment history and credit utilization tend to carry the most weight, which is why they are often the best areas to focus your efforts.

It is worth checking your credit report periodically, since errors or outdated information could be dragging your score down without your knowledge. Both Equifax and TransUnion allow Canadians to request a free copy of their credit report.

Pay Your Bills On Time, Every Time

Payment history is one of the most heavily weighted factors in your credit score. A single missed payment reported to the bureaus could stay on your file for years and may have a lasting impact on your score, depending on the severity and how your lender reports it.

Setting up automatic payments for at least the minimum amount due on credit cards and loans can help remove the risk of forgetting a due date. For those managing multiple bills, using a calendar reminder system or a dedicated budgeting app may also help keep payments organized.

If you are ever unable to make a payment, contacting your lender before the due date could open the door to arrangements that prevent a missed payment from being reported. This proactive approach is generally viewed more favourably than falling behind silently.

Manage Your Credit Utilization

Credit utilization refers to how much of your available credit you are using at any given time. For example, if you have a credit card with a $5,000 limit and carry a $2,500 balance, your utilization on that card would be 50 percent. Many financial experts suggest keeping utilization below 30 percent, though lower is often better for those aiming to maximize their score.

Paying down balances before your statement date, rather than just before the due date, could help lower the utilization percentage reported to the bureaus, since many lenders report your balance as of the statement closing date rather than what you owe after payment.

If you have room in your budget, requesting a credit limit increase on an existing card could also lower your utilization ratio, provided you do not increase your spending to match. This strategy should be used carefully, as a hard inquiry from the request could cause a small, temporary dip in your score.

Be Strategic About New Credit

Every time you apply for new credit, a hard inquiry is typically recorded on your file, which could cause a small, temporary decrease in your score. Applying for several credit products in a short period may signal financial stress to lenders and could compound this effect.

It is generally advisable to space out credit applications and only apply when there is a genuine need. For those planning a mortgage application in the near future, it may be worth avoiding new credit applications, large purchases on credit, or co-signing loans in the months leading up to it, since lenders will review your credit profile closely at that time.

Maintaining older credit accounts in good standing, rather than closing them, can also help preserve the average length of your credit history, which is another factor considered by the bureaus.

Monitor Your Credit and Correct Errors

Reviewing your credit report regularly can help you catch inaccuracies, such as accounts that do not belong to you, incorrect balances, or outdated information that should have been removed. Both Equifax and TransUnion offer free credit reports upon request, and many banks and credit unions now provide free credit score monitoring tools as well.

If you spot an error, you can file a dispute directly with the credit bureau, which is required to investigate within a set timeframe. Correcting inaccurate information could have a meaningful impact on your score, depending on the nature of the error.

For Canadians preparing to apply for a mortgage, reviewing your credit report a few months in advance gives you time to address any issues before a lender pulls your file. A mortgage professional can also help you understand how your credit profile may be viewed by different lenders, since approval criteria can vary depending on the institution.

Key Takeaways

• Payment history and credit utilization are among the most influential factors in your credit score
• Paying down balances before your statement date may lower reported utilization
• Space out new credit applications to minimize the impact of hard inquiries
• Regularly reviewing your credit report can help you catch and correct errors
• Reviewing your credit profile months before a mortgage application allows time to address issues

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or mortgage advice. Any numbers, rates, or scenarios mentioned are examples only and may not reflect current market conditions. Always consult a licensed mortgage professional or financial advisor for guidance specific to your situation.