Having bad credit can feel overwhelming. It affects your ability to borrow, get a mortgage, or even rent an apartment. The good news is you can rebuild your credit in Canada with the right approach. Here’s how to take control of your financial future.
Understand Your Credit Score
Before you can fix your credit, you need to know where you stand. In Canada, credit scores range from 300 to 900. A higher score shows lenders you are responsible. A lower score signals risk.
Start by checking your credit report with Equifax or TransUnion. Look for errors. Incorrect information, like missed payments or accounts that don’t belong to you, can lower your score. Dispute mistakes immediately. This step gives you a clear picture of your starting point.
Pay Bills on Time
Late payments hurt your credit. You need to be consistent. Set up reminders or automatic payments for bills, loans, and credit cards.
Even small payments count. Pay what you owe, not just the minimum, whenever possible. On-time payments are the fastest way to rebuild your credit.
Reduce Your Debt
High debt affects your credit score. Make a plan to pay it down. Start with high-interest debts first. You can also use the snowball method, paying small debts first to gain momentum.
Keep your credit utilization low. Aim to use less than 30% of your available credit on each card. Using too much can signal risk to lenders.
Consider a Secured Credit Card
Secured credit cards help rebuild credit. You deposit money as collateral. Your credit limit usually equals your deposit.
Use the card for small purchases and pay the balance in full each month. This shows lenders you can manage credit responsibly. Over time, your on-time payments improve your score.
Become an Authorized User
Ask a family member or trusted friend to add you as an authorized user on their credit card. You don’t need to spend, but their good payment history can boost your score.
Make sure the card issuer reports authorized users to credit bureaus. Not all do, so confirm before relying on this method.
Keep Old Accounts Open
Length of credit history affects your score. Don’t close old accounts, even if you don’t use them often. A long, positive credit history helps rebuild credit faster.
Use old accounts occasionally to keep them active. Even small charges paid on time count.
Avoid New High-Risk Loans
Avoid payday loans or high-interest borrowing. They may seem like quick fixes but can make your credit situation worse. Stick to low-interest, manageable options like personal loans or lines of credit.
Monitor Your Progress
Track your credit score regularly. Many banks and credit card providers offer free updates. Monitoring lets you see the impact of your efforts and catch errors quickly.
Set goals. For example, reduce credit utilization below 30% in six months or pay off one high-interest debt in three months. Tracking progress keeps you motivated.
Build Positive Financial Habits
Rebuilding credit is more than paying bills. Create a budget, save an emergency fund, and borrow responsibly. These habits reduce the risk of future credit problems.
Make small, consistent changes. Over time, responsible behavior is reflected in your credit report. You’ll qualify for better loans, lower interest rates, and improved financial security.
Written by:
Amy Orr is a professional writer and editor with over 10 years of experience in the Canadian, U.S. and U.K. financial markets. She has written for numerous publications on topics as diverse as economic literacy, corporate finance, and technical analysis of numerical data. Prior to transitioning to full-time writing, she worked in the hedge fund sector. Her academic background is astrophysics, and she has a Masters in Finance from the University of Edinburgh Business School.
