6 Ways to Improve your Credit Score
Your credit score plays a big role in your financial life, from qualifying for a mortgage to getting the best possible interest rate. A strong credit score can open doors, while a lower score might hold you back from big financial milestones. Whether you're starting from scratch or rebuilding after some financial setbacks, here are some simple steps to help improve your credit score and the key benefits of doing so.
What’s a credit score?
Your credit score is a three-digit number based on the info in your credit report, which is a snapshot of how you use credit. Think credit card usage, debt repayment, different loans you’ve applied for – that kind of stuff. Lenders use this score to get an idea of how likely you are to repay loans on time. In Canada, scores typically range from 300 to 900, with a higher number indicating better credit health.
Factors that impact your credit score
- Payment history
- Credit utilization
- Credit history length
- Types of credit
- Recent credit inquiries
Did you know?
For folks who are working on their credit score in hopes of becoming homeowners or needing to refinance, NPX – our alternative product under the MERIX Financial umbrella – offers mortgage solutions to those with a minimum credit score of 540.
6 tips to help boost your credit score
1. Pay your bills on time, every time
Payment history is the most important factor contributing to your credit score. Missing or making late payments, even by just a few days, can negatively impact your score. Avoid missing payments by setting reminders or automatic payments to stay on track.
2. Keep your credit utilization low
Credit utilization is the amount of credit you're using compared to your total limit. Try to use less than 30% of your available credit. For example, if your credit limit is $5,000, aim to keep your balance below $1,500.
Quick tip: You don’t have to wait for your credit card due date to make your payment. If your balance is getting close to that 30% mark, make an earlier payment to help keep your credit utilization ratio in check.
3. Don’t apply for too much new credit at once
Each time you apply for a new credit card or loan, a “hard inquiry” or “hard check” is recorded on your report. Too many hard inquiries in a short time can signal risk to lenders and lower your score.
- Hard check
- Soft check
Hard credit inquiries are added to your credit report after you apply for traditional forms of credit and will affect your credit score. Examples: Credit cards, mortgages, auto loans.
Soft credit inquiries check the info in your credit report without affecting your credit rating. Examples: Employment verification or rental application, pre-approved credit card offer.
There are certain situations where it’s harder to avoid multiple hard credit inquiries, like when shopping for a mortgage or car loan. The good news is that all hard checks for a mortgage or car loan are counted as one if they’re within the same time frame – typically 14–45 days.
4. Check your credit report regularly
Mistakes happen, and sometimes fraud does, too. Keep an eye on your credit report to ensure everything is correct. Request a free copy of your report from Equifax or TransUnion
, and dispute any inaccuracies immediately.5. Maintain a mix of credit types
Using a variety of credit products, like a credit card, auto loan, or line of credit, can help strengthen your score, as long as you manage them responsibly. Diversify without overdoing it.
- Installment loan: A loan paid back with interest in regular payments over time, e.g., an auto loan.
- Mortgage: A type of installment loan used for real estate purchases.
- Revolving credit: A credit account that lets you borrow up to a set limit; as you repay it, credit becomes available again.
6. Don’t close old accounts too quickly
The longer your credit history, the better. Even if you don’t use an older card often, keeping it open can help improve your average account age and credit utilization ratio.
The benefits of a strong credit score
- Preferred mortgage rates: Higher credit scores can access lower rates, saving thousands over a mortgage. Minimum 640 credit score to get best pricing with MERIX.
- Higher approval chances: More options when applying for loans, renting, or signing up for services.
- Greater financial flexibility: Higher scores often mean higher credit limits and better access to emergency funds.
How long does it take to see improvements?
Building better credit takes time. According to the Financial Consumer Agency of Canada, “it takes 30 to 90 days for information to be updated in your credit report.” With consistent effort and smart habits, progress is possible, helping you build a stronger financial foundation.
Looking to buy or renew your mortgage?
A healthy credit score can help you qualify for more mortgage options. Reach out to a broker to see how your credit fits into the bigger picture.