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26 Ways To Improve Your Credit Score


Here Are 26 Ways To Improve Your Credit Score


Tips to help you improve your credit score and get in the green! 

1. Ask your lender/creditor for your credit score

They won’t supply you with a full report but you may be able to find out your credit score. If you are about to apply for a loan or finance you can ask your lender/broker nicely if they’ll tell you what your credit score came out after they conducted a credit check.

I’d only suggest this if you are actually about to apply for credit as every credit check that is carried out will negatively affect your credit score.

2. Don’t use all of your credit

As a credit score considers payment history and credit utilization making on time payments is the best way to improve your credit score.

30% Credit Utilization

If you have a credit card with $1000 limit try to keep the balance below 30% for maximum credit score boosting effectiveness. This shows to lenders that you aren’t ‘maxing out’ your credit card all of the time meaning you are more responsible in handling credit.

3. There are two major credit reporting agencies

There are two credit reporting agencies in Canada: Transunion Canada & Equifax Canada and it is very likely they will both have a different credit score for you.

​Why? Well, both agencies have thier own secret scoring criteria so even if they have the same information about you the credit score can still be different. Which brings me on to my second point; your credit score depends on what is reported to the respective agencies. Both Equifax and Transunion may not receive all of your payment history or credit information.

You should be checking your report and credit score with both Transunion and Equifax; this is because when applying for credit some lenders will only use Equifax over Transunion or vice versa so you need to know you’re in the good books for both agencies.

If your Equifax report is error-free that doesn't mean your Transunion report is. Check both credit reporting agencies to ensure your credit file has no errors.

4. If you’ve separated, divorced or split up make sure you’re financially separated also

That goes for joint bank accounts, lines of credit and mortgages. Anything with both your names on generally means you are both financially responsible for the credit. For example, if you have a car loan in your name that is a gift to your now ex, but he/she pays for it, if he/she stops paying guess who’s credit score is affected? Yes, yours! This should be done sooner rather than later for obvious reasons!

5. Error on your credit file? Default you had no idea about? You need to fight it!

Support your case

Gather all receipts, emails, letters and other documents relating to the error. You'll be asked for this when you submit to Equifax Canada or Transunion Canada. You want as much evidence as you can gather.

Contact the credit reporting agencies

Fill out the forms for Equifax Canada and/or Transunion Canada

Before they can make any changes, the agencies will contact the lender or company and check to see if there is an error. If the lender agrees there is an issue the error will be removed and your credit score should increase as a result.

Contact the lender or company

You may be able to expedite the correction by contacting the lender or company that has incorrectly noted the error on your credit file. The company may not be able to do much but at least if they noted you called it, could speed up the process.

Ask for the formal complaint procedure

Still no luck? You can work your way through their, sometimes lengthy complaint procedure. It might take a while but it’s worth it. Anything that can boost your credit score is always worth it. If in the end you’re still not happy, you can make a complaint with the relevant consumer affairs in your province/territory.

Add a ‘consumer statement’

It’s free of charge and allows you to provide details about an item on your credit report. You can write up to 100 words (200 in Saskatchewan) to explain the error. Even though lenders can read this, the majority of automated credit scoring systems that lenders and companies use will automatically decline you based on a low credit score; therefore they may not get a chance to read your statement. As a last resort though, at least it’s something.

6. Ordering your credit report for free

Having access to your credit report is vital if you wish to improve your credit score. Instead of paying Equifax or Transunion monthly you can order for free and receive it by good old snail mail. Follow these links for Equifax Canada and Transunion Canada to get your report mailed to you. However, you cannot get your score for free.

Instead of subscribing you can always sign up for one month, find out your score and then cancel. Wait a year and do it again, it’s not ideal but it’s better than paying $16.95/month for 12 months!

7. Pay insurance annually

Some insurers will carry out a credit check if you elect to pay monthly as they want to know if you’re able to pay on time. If you can afford it, pay annually to avoid such credit checks. After the first year they may let you pay monthly without conducting a credit check.

This also goes for new utility accounts (gas, electric etc.); some will allow you to have a hold on the account for a year (BC Hydro holds $250 for one year. As long as you’ve been paying on time it’s returned at the end of the year).

8. Ask for a ‘soft search’ when inquiring about a loan or credit card

This means the lender will receive less information than if they did a ‘credit check’ although it might be enough for them to give you a Yes or No without impacting your credit score.

Unfortunately there aren’t many lenders that have adopted this practice but it’s worth a try. If there’s doubts as to whether you’ll be accepted, you have to ask yourself if it’s really worth the risk of potentially hurting your score.

Ask your lender the likelihood of being accepted for a credit application. If there is very little chance it may be better to wait and improve your credit score rather than get declined.  If you get declined you will have to wait even longer to reach a credit score high enough.  

9. Beware of store cards

Some offer cash-back in-store, others give you points that are later converted into cash redemption in-store while sounding great store cards can often have hidden dangers. Most store cards charge around 2.5% foreign transaction fee if you use the credit card abroad.

The advertised interest rate can also change if you happen to miss a payment or two with some store cards hiking the rate two-fold!

Store cards often have high interest rates compared to a major bank or credit union. If you are relentless in paying off your credit card bills in full each month or set up a pre-authorized debit then a store card can have it's benefits. 

10. Have a default? Try to mitigate the damage

A default is a big mark on your credit file and will cause your credit score to plummet. Usually, after 3 missed payments, and multiple attempts from the creditor or lender to contact you for payment, and you still do not pay, they will send you a letter notifying you that if you don't pay immediately then your debt will be passed onto debt collectors and you will have defaulted.

You MUST contact your lender/creditor ASAP if this is the case. If it has been added recently you may be able to re-negotiate a settlement without receiving a default on your credit file.

Otherwise, call your creditor or lender and see if you can negotiate paying them back directly so long as they wipe the default off from your credit file. You’ll usually have to speak to someone higher up in management and they could refuse but it’s worth a try.

6 Years Until Default Is Removed

If all else fails you can write a ‘consumer statement’ described earlier. Alternatively, wait 6 years and the default will no longer be on your file and your credit score will improve.

11. Are creditor’s reporting accurate credit limits?

I once had a cell phone plan with a large mobile communication company in Canada. My credit limit showing on my credit file was set at $500, however, my credit utilization was at $505 or 101% every month, for almost a year.

It looked as though I had been maxing out my credit limit with the company month-on-month for an entire year!

In actual fact it was nowhere near. I’d paid my bill on time each month at around $80 per bill, not $500! A long phone call later and It had been corrected on my report the next month.

To another creditor or lender doing a credit check, for example another mobile telecommunications company, it could be seen as risky and could result in a decline down the road.

12. Don’t have too many credit accounts open

You definitely want a long 'average credit account length' but having 5 credit cards, a car loan and a mortgage can also be bad. I know, this credit score business can be confusing! To lenders this can seem risky as you may have a high debt to income ratio.

A rule of thumb is to have only a maximum of 4 credit card accounts open at any time. Remember, you should always keep your oldest credit card account open along with other accounts that have no annual fee to raise your average credit account age.

13. Keep your long standing credit accounts open

A longer credit history shows to the lender or creditor you can manage credit well for a long period of time. You’ll want to keep some credit accounts open as lenders also look at your average credit account age so if you keep getting new credit cards every 6 months your average credit account age will be low; think about leaving one credit card active for a longer time, a card with a low or zero annual fee is best for this purpose.

14. Pay on time - duh!

Sorry to state the obvious but it’s one of the biggest factors in determining your credit score. Pay all bills, loans and mortgage payments on time. Consider setting up pre-authorized debit to ensure that bills are always paid on time.

Sometimes credit card bills can be hard to keep track of, but if you set up a pre-authorized debit from your chequing or savings account then you can rest assured your credit card bill will be paid each month, so long as you have a balance in your regular account of course.

A missed payment will lower your score. Before paying the bill and getting frustrated with yourself, call the lender or creditor and explain the reason you didn’t pay on time and kindly ask if they can remove the missed payment from your credit file, it will help improve your credit score in the long run.

15. No credit? Low credit score? Try a secured credit card

When first moving to Canada I had the problem of having no credit history so I opened a secured TD Green Visa credit card account.

Basically, you pay a refundable deposit of the credit limit of the card and once you have demonstrated you can pay your credit card bills on time and are responsible the bank will refund the deposit.

The TD Green Visa has no annual fee, has a respectable rate at 19.99% APR and has a credit limit of $500 meaning you only have $500 of your money frozen. If you opted for a secured credit card with a $2000 limit you would have to pay a deposit of $2000 and so on.

A secured credit card can improve your credit score when you have little options for obtaining credit in the first place.

Other options include: Scotiabank Momentum credit card which has an APR of 19.99% and offers 1% cashback on grocery, gas station and drug store purchases, as well as 0.5% on all other purchases. This card has no annual fee and a credit limit of $500. 

16. Prevent a credit check by providing your own

Think about providing your lender or creditor with a copy of your up to date credit report from Equifax or Transunion.

When you obtain your credit report from Equifax or Transunion your credit score isn't affected.

I’ve personally used this tactic when applying for a rental property. This prevents a credit check which will negatively affect your credit score.

17. Make sure your addresses are up to date

This often gets missed and can affect your credit score. When you get a copy of your credit report ensure that all open credit accounts have the correct address for you on file. Having multiple ‘active’ addresses can confuse lenders and creditors when they do a credit check and could even lead to a declined application and thus negatively affecting your credit score.

18. The rejection cycle

You apply for some credit, let’s say a credit card. You really want the 25,000 bonus Aeroplan miles and you get rejected.

You then think you’ll try applying for another credit card that gives you 10,000 Airmiles  instead and then you also get rejected. The cycle continues, and with each application your chances of approval are getting less and less, all while lowering your credit score each time.

Credit Score Rejection Cycle

You can quickly lower your score by 100 points just by applying for numerous credit cards all within a short space of time. This goes for cell phone contracts as well; if you’ve been declined from Telus then it’s unlikely that you will be approved by Bell. You have to ask yourself if it’s worth another attempt as all inquiries remain on your credit file for six years.

Unfortunately most lenders do not publish their scoring criteria so if you’re rejected by X you still may be approved by Y. If you wish to try another lender or creditor you must check your credit file for inaccuracies before hand.

Applied for a credit, be it a cell phone plan, credit card, loan and you’ve been rejected?
Stop before hurting your credit score even more

Check your credit file with the credit agency that the creditor or lender used to check your credit file before you do anything else. It's worth asking but usually you won't be told why you were rejected, however the answer might become obvious upon checking your credit file. There may be an error on your credit file that could lead to multiple declines on future credit applications. 

19. New immigrant? Have proof of residency

If you’re new to Canada and are struggling to get credit you should try to have a cell phone contract in your name or even better, a utility bill such as gas, electric, water etc. This will then show up on your credit file when you apply for credit increase your chances of an approval.

You should also look into a secured credit card as explained earlier in this article. ​

20. If you can’t pay your debt or bills contact your lender/creditor

Contacting your lender may help. I know it has helped people in past and instead of defaulting or missing payments you can agree special payment terms for a period of time. This is great if you lost your job and need some breathing room. If you just don’t pay the bills then your credit score will be affected. 

21. Don’t waste credit applications

Applying for credit within a short period of time can result in your credit score decreasing as lenders see it as you are rushing to get hold of a lot of debt. Aim to apply for only 2 per year, whether that be a cell phone plan, a new car lease or a credit card.

Think of them as tokens, you only get 2 per year and spend them wisely.

You also want to prioritize your credit applications. A new car lease can lower your credit score initially, even if you are accepted. This is because you have now taken on $1000s of debt/credit. Over time however your score should increase to more than it was previously as long as you make the payments on time and in full.

However, if you are about to apply for a mortgage only 4 months away you should leave some space between your last credit application and your mortgage application. It raises your chances of being approved and getting a better rate.

22. Time it right

Problems such as a default on your credit file, 3 missed payments or anything else drastically affecting your credit score stay on your credit file for 6 years. If you’re only 1 year away from them being purged, it makes sense to wait until they have cleared and then apply for credit, you’re chances of acceptance will be much higher.

23. Beware of the payday loan

Often advertising “$200 loan, first month free” can be very dangerous. In Alberta, the government is proposing to force these lenders to reduce interest rates so they are more affordable. Unfortunately, most people that require these loans are on low income and therefore a $100 loan could end of costing you $1000s if you do not repay. Currently charging 59.90% APR, one payday loan company's interest rate is at least double, if not triple most credit cards.

24. Know your rates

Each credit card has an Annual percentage Rate (APR%). An APR is the annual rate charged for borrowing or earned through an investment, and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan. It's important to know the APR as the higher it is, the more interest you will have to pay. This could lead to increased debt and if you cannot afford the interest that you'll have to pay, your credit score could take a hit. 

Line Of Credit
Bank Or Union
Store Cards

25. Never pay a credit score repair company

According to the Office of Consumer Affairs, there is no company that can fix your credit score in addition to what you can already do yourself. There are no loopholes, and it will end up costing you money that you don’t need to pay. If you follow some of the steps in this article then you will be able to do it yourself.

26. Keep it steady. Consistency matters

Lenders prefer homeowners over renters. Full-time employed over self-employed. They also prefer if you have been at the same address or workplace for a few years. If you’re renting and moving property every year, this can make getting credit slightly more difficult than someone that owns a property. There are some exceptions to the rule; it is possible to have never owned a property but have 10 years of solid credit history, and also have an impressive credit score that only some homeowners could dream of. 

Try to keep the details consistent on each application: Phone number, address, job title. Always be honest. Just bear in mind, stability is something lenders do check when looking up your credit file.

About the Author Aaron Cresswell

Having traveled to 20 countries, Aaron has seen the sights and loves to share with you his hints and tips on how to save you money everyday. In his spare time Aaron enjoys bike riding, hiking and of course searching for ways to sensibly save you money! Hit the Facebook and Twitter buttons to connect :)

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