How to build a credit score in Canada as a newcomer, when you are only given access to very few credit products, have a low credit limit, and have a single secured credit card. Well, the answer is simple, yet so many people do not pay attention to it: be careful with your money and give yourself time. Many Canadians take ages before they have a satisfactory credit score, but there are ways to speed the process up.

Building your credit score in Canada is a very easy job – all you need to do is avoid bad credit and work on good credit. Credit utilization, even with a single credit card, is the next best way to build your credit. Under this notion, you could use your credit every month, for monthly payments and then pay off the amount owed by the end of the month.

It is this credit activity that will be used over time to build your credit. Then, you can use the credit to prove to financial institutions that you can make minimum payments on the credits and loans that you take out. But what exactly is a credit score?

Defining Credit Score

Credit score ratings in Canada are a three-digit number that ranges from 300-900. This rating is established by the credit bureau based on your payment history. Insurance companies, banks, and all other financial institutions can pull your credit score and use it to understand your profile as a paying customer better. When it comes to this, they will use it to see how much of a loan you can take on, and how risky lending to you would be.

Naturally, a lower score is not better – quite on the contrary. The absolute lowest credit score can get is 300 – and this is the credit score that you are awarded as a Canadian, as a newcomer to Canada, you will start at about 0. Over time, as you use more credit tools (credit cards, loans, lines of credit), you will be able to build your score up. Once you’ve arrived at 750, you can be sure that you will be receiving better deals from the banks and that you will be able to take on a higher credit card debt, have better loan options, have lower interest rates applied to your loan application, etc.

In reality, your credit score will determine the quality of your life in Canada. As we all know, saving money for a few smaller items is just fine, but saving up for a home is next to impossible. Leasing companies and banks insist that many of their customers take on debt, in the form of a loan, rather than save up – inflation reduces the value of your money and you will end up saving more than you could have/should have for the same purchase.

How To Build a Credit Score in Canada?

So, what can you do to increase or build your credit score in Canada? We’ve said before that a very low credit score will mean that you can get less money out of a bank or will even have to pay a higher interest rate on it. In fact, the higher your credit score, the better, as anything over 750 credit score will mean you will be receiving much better deals from any financial institution.

And while many may never see the perfect score of 900, it is still useful to strive for it. A late payment will hurt your credit reporting agencies, and your credit applications in the future may come at a much higher price and may even be declined. With this in mind, let’s consider the five proven ways to increase your credit score:

  • Make your payments on time and pay off all outstanding debt by the end of each month
  • Use credit cautiously, which should say there is more than simply saying ‘stay within your limits’
  • Reduce credit inquiries and/or applications you make
  • Track your credit history and credit score and inform the corresponding agencies if you notice any mistakes
  • Use different forms of credit to help you build your credit history faster

Make Prompt Payments and Settle Your Account in Full Each Month

When building up your credit as a newcomer to Canada, the first thing to do is go to your bank and open a bank account there. Then, you should ask the bank or a credit card issuer to issue a credit card to you. You can use this card for any recurring purchases, paying your bills online, etc. Throughout the month, as the credit builds up, you should pay it off. This way, you have a credit that has been registered and a payment registered as well – and this will have a positive impact on your credit score.

Examples of payments that you can use this type of credit for include your utilities, payments for the internet provider and mobile phone companies, grocery items, etc. In reality, you should be paying things that you can estimate the debt for or the amount of. This way, you will know that within a period (a month), you can pay them all off. When it comes to major purchases, we advise you to seek other forms of payment, at least for the first few years in Canada or until you’ve managed to establish a healthy credit history.

Cautiously Use Credit

When you first open a bank account in Canada and get your credit card, you will also receive a credit limit – which can be very low, as your initial credit score will be very low (new Canadians or Canadian permanent residents start with 0). Then, you should use only a part of this limit every month – usually a third or about 35% is advisable. If you use more of the credit and pay off more of it every month, you may not necessarily increase your credit score – in fact, using too much of your credit could harm your ability to take loans out down the road, as this can signal to banks, lease companies, and car retailers (all of which have access to your credit score) that your financial situation may not be the best – as you are using so much of the credit.

Reduce the Quantity of Credit Inquiries And/or Applications You Make

Although you can access the information on your credit history and credit score an indefinite number of times, we recommend you refrain from doing so. We would recommend you only check your credit score once every few months and refrain from credit applications that are too often. The thing here is that often credit checks by financial institutions may signal to them that you are trying too hard to get access to some extra cash – and that you may be living beyond your means.

For this reason, be careful about how you use your credit and always focus on paying your outstanding balance on time. As an authorized user, you should still consider the message that frequent checks may leave on your credit history. If you are preparing to purchase a car or take out a mortgage, get all the quotes from banks and car dealerships in two weeks. This will signal that you were simply seeking quotes to ensure you get the best possible deal.

Report Any Errors on Your Credit Report

If you have old, but active credit card accounts, close them out. Although occasionally they can help you build your score, they can also hurt it in a way. Our recommendation is to just take credit cards when necessary and possibly to take out more than you realistically need for the sake of building a higher credit score. We only recommend this be done for a while. After all, two credit cards will have two limits, and using around a third of each will get you to your goals twice as fast.

When it comes to how the cards are utilized, we recommend you use them wisely and always stay within reasonable limits of what you can do to secure a good standing with credit card companies. After all, having access to credit that is too easy can make you spend more, and any unpaid balance will remain on your credit history for up to six years. The credit building program always states that you should pay off the entire amount owed by the end of the month.

When it comes to the negative impact that your payments may have on your credit score and credit history, there are two basic kinds, the soft hits – those that only you can see, for example requesting your credit report, or businesses asking for access to your credit score to ensure their files on you are up-to-date. The hard hits, on the other hand, are those changes to your credit score and credit history that are visible to you AND financial institutions. These include new applications for credit cards, mortgages, and employment applications. These are all registered by the Canadian credit bureaus and will easily bring your credit score down.

Utilize Various Forms of Credit, Including Cards, Loans, and Lines of Credit

There are different kinds of credit products and for a good reason. Your credit cards, for example, can be used for smaller purchases on a month-by-month basis. At the same time, loans are for larger purchases, such as a new car or a home. A line of credit falls somewhere in between these two and can be used for purchases not small nor big – a new water heater could be a good example.

We recommend you use different forms of credit, but only when you need them. While using them, you will need to make sure that you can cover all these types of credit and that your credit accounts do not suffer from unpaid balances or tardy payments for, let’s say a mortgage or a car payments. A credit application can be seen in your credit history, so make sure you use it wisely.

Ways to Improve Credit Rating Quickly

So, you got to Canada and understand that building your credit over time is a necessity. But, how to increase your credit score quickly in Canada? Your credit provider may not want to disclose the best credit practices for you, after all, why would they? They rely on your credit report as an accurate model of your spending habits and they use it to build up your risk profile, which helps them determine how much of a loan they can issue to the specific credit user and what interest rate they should charge them. However, good practice and emphasis on credit history and following it thoroughly have yielded some ways to increase your credit score:

  • Know the factors that affect your credit score
  • Always make your payments on time
  • Take out credit only when necessary
  • Clear your debt
  • Budget carefully
  • Increase your savings
  • Recognize that some other accounts that may have their own ‘credit’ reports have no bearing on your credit score or credit history

Know the Factors That Affect Your Credit Score

Credit scores are calculated using different mathematical formulas. These formulas take into account different factors and turn them into numbers. Once a formula has been run, the result obtained is your credit score. Let’s have a look at the factors that can affect your credit score:

  1. the length of time that you have had credit – the longer you have had the credit, the better, especially if used for the right purposes and paid back in time
  2. whether you carry balance on your credit cards or not – some balance is OK, carrying too much debt is not
  3. how often you have missed payments – with these, it is important to note that a single late payment can require several timely payments to bring the credit score back to where it was before you missed a payment – be very careful to always have enough money to pay back the purchases made through your credit card that month
  4. the total amount of debt you currently have – bear in mind that higher debts for purchasing a home, etc. will have a significant say on your credit score – this does not mean you should not take them out, but it should rather signal to you that you should not be taking several larger loans all at once
  5. the money you spend on your credit card – remember, always stay within a third (or about 35%) of your credit card limit – using too much can signal that you are not responsible with your payments to credit issuers and that the financial credit may be your means of providing for yourself. This is a common example of what makes a poor credit history. Positive credit history will have a moderate usage of your credit card, mostly for recurring monthly costs and groceries, and will not be a form of a substitute for your income or rent payments, if you rely solely on credit to make it to the end of the month
  6. possible history of filing for bankruptcy – if you’ve ever filed for bankruptcy, your credit score will be brought back to the minimum value of 300 with most credit bureaus. However, months of credit transactions, and being careful of how you use the mix of credit products available to you will bring this minimum credit score back up. Consistent payments, regular loan payments, and regular monthly utility payments will help you rebuild your credit score in a relatively short time
  7. Whether you’ve had debt sent to collections – this will negatively impact your credit score, as this is a sure signal that you are not always able to make all the payments on time

Check Out How to Build a Good Credit Score in Canada:

Always Pay Your Payments on Time

Making all your payments on time will help you improve your credit score. The payments should also be made in full, so make sure you understand exactly how much money you will be giving every month for the utilities, Internet, telephone and smartphone, your loan payments, etc., and dedicate this money to your budget even before the paycheck hits. This way, you will know how much money you are spending every month. Automating your payments will be of great help here.

Take Out Credit Only When Necessary

You should take out credit only when necessary. We spoke about the need to use your credit card to build your credit score, but taking credit from time to time for larger purchases is necessary as well. This would say that you do not really need to take credit every time you purchase a new appliance, as it may hurt your credit ability and credit score in the long run. Many credit requests can hurt personal loan payment ability as smaller credits and loans have higher interest rates, can look bad in the eyes of credit lenders, and can have you overpay for basic services if you do not make all your payments on time.

Clear Your Debt

In case you need to take out another loan, this can easily be done by simply checking how much money you spend already and then deciding if you can take on more debt or not. If yes, perfect, head to the nearest bank. If not, then you may need to allocate some more money to pay off your existing debt and to reduce your total monthly expenditure. This will help you tremendously, both financially, and emotionally, and it will also help you by increasing your credit ability or how much more money you could borrow from banks and other financial institutions.

In case you have outstanding debt that you should tackle, here are three basic ways to do so:

  1. the avalanche method – you make minimum payments towards all the debts you have, and you use any leftover money you have to pay off an extra amount towards the debt with the highest interest rate – financially, this approach makes the most sense
  2. the snowball method – with this method, you pay off the smallest debt first. The method is not the best as it will allow a lot of interest rates to accrue on other debts and may lead to you overpaying on interest, in the long run,
  3. the interest-priority method – with this method, you have a good look at all the debt you have and you take into consideration the interest rate on those. Then, you focus all your forces on paying off the debt with the highest interest rate first, then move on to the second one, etc. There is also a modified method based on this model of debt repayment, whereby you first tackle debt that accrues most interest considering the total amount owed, instead of the interest rate itself.

The first method of debt repayment is the best method finance-wise. It will take you the longest to see the number of debts being repaid, but will end up in the shortest total payoff period and will cost you the least. The remaining two are good, but you may end up paying the debts off for a longer time and paying more in interest, which is not a good thing. Consider a mix of the methods, as this may work the best in your particular case, although payment deadlines should always be respected, as payment performance may suffer otherwise.

Budget Carefully

When considering how much debt you can take on, you need to understand your expenses first and see how much funds you have to dedicate to pay credit per month. This will help you better understand how much credit you can take out and can help you prevent any mishaps down the road. When it comes to consumer credit, also consider if you need it or not. If it is a smaller payment, run it with your credit card and ensure that you get all your payments accounted for in your budget. Once you have the budget in place, you can also consider some ways to save money to ensure you have extra funds to pay back the credit.

Increase Your Savings

Increasing your savings can have multiple benefits to your finances. This way, you can pay off your credit and loans faster, improve your credit rating faster, learn to be thrifty with the money you have, or even learn a skill or two anew. Not only this, but your savings can also offer a cushion to fall onto if you happen to lose your job or an unexpected expense comes up. This being said, you will need to consider contacting a bank advisor, or a personal finance expert to learn more about how to cut back on expenses and how to help yourself out of debt.

Recognize That Your KOHO Account Has No Bearing on Your Credit History

When it comes to KOHO and similar solutions for tracking your credit history and credit score, there is nothing in the app itself that will help you actually increase your score. Quite on the contrary, these apps serve to provide advice that banking apps would not – advice on how to increase your credit score and do so quickly. They can also track your expenses and help you better organize your finances, including setting up reminders to pay your bills. This can help you over time, but bear in mind that the app itself will do nothing for your credit score.

Ways to Check Your Credit Score

We’ve covered the quick ways to build credit. But how about checking it quickly? There are three ways to check your credit score:

  • By Way of Credit Bureaus
  • Through Particular Banks
  • Through Independent Contractors or Third-Party Companies

By Way of Credit Bureaus

There are two large credit rating organizations in Canada: EQUIFAX and TransUnion. These two can both provide your credit report and you can choose one and pull the report from it. Although they allow checking your credit score for free in certain periods, we would always recommend you check with one first, and after six months, with the other. This way, you can be informed about your credit score without being all hyped about it and pulling the report too often.

These two bureaus or credit rating organizations use somewhat different formulas for credit scores and their calculation. Whatever company you may choose, it is important to understand that an excellent credit history is important, to never borrow more than you can return, and to stay moderate with your spending. When it comes to the future credit products that you can use, a lack of credit history can hurt your ability to do so, so be mindful of your credit score, work on it, and periodically check with a major credit bureau.

Through Particular Banks

Some of the best Canadian banks offer checking your credit score for free, often through online banking solutions. Here, the Royal Bank of Canada (RBC) allows you this as many times as you would like. You can also open a bank account with this bank (checking and savings account). This is one of the good banks for students, as it allows you to take out a student credit card and start building a good Canadian credit report while still young. We recommend you only use this option carefully, as being a student means not having a fixed income and having variable expenses. You can use it to pay your rent, Internet provider, and even your mobile service provider. This way, you will have a better-than-average credit score once you finish your studies.

Through Independent Contractors or Third-party Companies

Yet another way to quickly check your credit score is through third-party companies. These companies will allow you to get your credit rating report, often for free, but you will need to provide some private information to get this information. When it comes to these services, we recommend you stay careful, read online reviews, and avoid giving your sensitive information to just about anyone online. This way, you can overshare or even compromise your data and your identity – identity theft for the sake of using someone else’s credit report is not unheard of.

What Is Considered a Good Credit Score?

So, what exactly is a good credit score? We’ve said before that any score above 750 is considered good, but let’s break it down – chasing the 750 may not be the best option for many. So, here is what a good credit score is in Canada:

  • 300-599 – a poor credit score, you may be denied credit or loans in most banks or be very limited with the amount of credit you can take out or be asked to pay higher interest rates
  • 600-649 – fair credit score, you will have access to most limited credit products, but will still be expected to pay higher interest rates
  • 650-719 – a good credit score – when it comes to this bracket, you will now be in the top half of the credit ladder and on a good way to improve your score even further
  • 720-799 – a very good credit score – you will see a significant expansion to the loan amounts that you can take out and the overall credit ability concerning your salary
  • 800-900 – excellent credit score – you will be able to take loans out with significantly reduced expenses and interest rates, may see a significant increase in your credit ability and the credit you can take out as well as more financial and credit tools at your disposal

Average Canadian Credit Score

Even the best banks in Toronto cannot give you this piece of information, but a credit score of 650 is the average Canadian credit score. This is a bit on the low side of the spectrum: remember that you will need to have a credit score of at least 720 to be considered really good. When it comes to this, it may take some time and a lot of financial discipline to get it right, but it is not impossible even if you are starting from scratch.

Who Has Access to Your Credit Score?

Your credit history and credit report or credit score details are kept secret and are only available upon request by several types of institutions that should have access to this type of information. Just as your bank has access to your Canadian credit card information, the institutions that have access to your credit score are as follows:

  • credit card companies
  • car leasing companies
  • banks
  • credit unions
  • insurance companies
  • the government
  • employer
  • landlords
  • retailers
  • mobile phone companies

You will need to be informed when anyone tries to get access to your credit report and you will also need to give consent, at least verbally in some provinces, such as Nova Scotia, Prince Edward Island, and Saskatchewan. When it comes to other provinces, you may be asked for a signed consent. These institutions can get information from credit bureaus and can check your credit standing, credit increase, or credit decrease. This will give them a rough idea of your spending habits, credit interactions, and any past credit issues you may have had.

Remember, when you come to Canada, your credit score will be low, but all financial institutions know this. What is important now is to understand that building credit from scratch can be a difficult credit journey. However, as long as you maintain good credit habits, your creditworthiness will keep increasing. Errors in credit card usage and credit history do happen but can be corrected, so it is important to be mindful of credit transactions and your credit history and to secure good credit service for years in Canada to come.


How Much Credit Score Do You Start with In Canada?

When you first move to Canada, you will start with a credit score of 0 – it will be non-existent, at least according to However, you will be able to use your utility bills, credit card transactions, rent, etc. to slowly build your credit. This being said, it is a long journey, but well worth it.

Do Phone Bills Affect Credit Score Canada?

Your phone company may report your bills and amounts owed to the credit bureau. When it comes to these, your paid phone bills will reflect positively on your credit score. Your unpaid bills will reflect negatively, so you will need to take care of these bills as well. When it comes to the best ways to pay them, we recommend automated payments.

How Long Does It Take to Build Credit Canada?

Building your credit in Canada can take quite a long time. In reality, it can take between 1-2 years to bring your score up from about 500 to 700. You can speed this process up by getting educated on the topic of credit score (use this article), or even hiring a financial advisor to help you out. Most banks will offer their services for free, for as long as you have a bank account with them.

How to Build Credit without Credit Card Canada?

Your credit card is a great way to build credit, but if you do not have one, there are additional credit products that you can use as a credit-building service. When it comes to these, they include loans and personal loans, being added to someone else’s credit card, getting a credit builder loan, and disputing errors in your credit report.

Final Thoughts

Having a good credit score in Canada is important, so you should be informed on how to build it from scratch. Newcomers to Canada start with a credit score of 0 upon arrival, as there is no information on how well you handle your finances. However, being smart with how you spend your money and how much you get in credit from banks, you can increase it and get a decent credit score within a few years, which is something many Canadians dream of. Follow our guide to ensure you get the best that the Canadian financial market has to offer.