Credit Score Repair Tips for Canadians

Having a decent credit score is essential in today’s financial landscape, especially in Canada, where a good credit history is often the one thing that allows you to secure a mortgage, loan, or credit card. Whether you have made some bad decisions with your finances in the past or if you are trying to build your credit from the ground up, repairing your credit score is possible. This guide offers relevant and practical tips for Canadians looking to repair and increase their credit scores.

Understanding Your Credit Score

Before you can begin repairing your credit score, it is helpful to understand how credit scores work. In Canada, credit scores often range from 300 to 900. In general, anything above 700 is good, and anything above 800 is excellent.

Things That Affect Your Credit Score

• Payment History (35%): This refers to whether or not you paid your loan/credit card on time.
• Credit Utilization (30%): The amount of your credit cards’ limits that are being used. If you are using a high percentage of your limit, this can negatively affect your score.
• Length of Credit History (15%): Typically, the longer your credit history, the higher your score.
• Credit Mix (10%): Refers to the variety of credit accounts you have, including credit cards, mortgages, and car loans.
• New Credit (10%): Applying for too much new credit in a short time can decrease your score.

By understanding the factors above, you will be able to take specific steps to improve your score. For a deeper dive into general credit improvement strategies, read How to Improve Your Credit Score.

Best Credit Score Repair Tips for Canadians

• Review Your Credit Report Regularly

The first step is to review your credit report and check for errors. In Canada, you are entitled to a free credit report from the two main credit bureaus: Equifax Canada and TransUnion Canada; you can request a free credit report once every year.

Why it matters: Errors on your credit report can hurt your score. Errors can range from incorrect personal information to duplicate accounts or accounts that do not belong to you.

Action step: Review your report for errors and dispute the errors with the credit bureau. Both Equifax and TransUnion have simple online dispute processes.

• Pay Your Bills on Time

Your payment history is the most critical factor influencing your score. Late payments and collections can appear on your credit report for up to 6 years and hurt your score.

Why it matters: Paying your bills on time demonstrates to creditors you are dependable and responsible.

Action Step: Either set up auto pay for your recurring bills or set phone reminders so you never forget to pay a bill. You can build a positive payment history and raise your score.

• Lower Credit Card Debt

Credit utilization rate (how much available credit you are using) is another factor in your score. High balances relative to your available credit act as a signal to lenders that you may be over-extended.

Why It Matters: Having low balances (below 30% of your available credit limit) shows you’re responsible with your credit.

Action Step: Pay off high-interest debts first or roll balances into a lower-interest loan to help reduce overall debt quicker. Focus on paying down high-interest debts first. If you’re overwhelmed by multiple balances, consider low-interest credit cards for debt consolidation to help manage repayments more efficiently.

• Dispute Errors on Your Credit Report

As stated before, inaccuracies or errors will lower your score. You should dispute the mistake as soon as you find it.

Why It Matters: If you can show that something on your report is not accurate, you can see a significant boost to your credit score.  

Action Step: When you find information that is incorrect, such as wrong account information or accounts you didn’t open, contact Equifax or TransUnion and dispute the mistakes. These credit bureaus are required to conduct an investigation and resolve disputes in 30 days.

• Negotiate with Creditors

Negotiating with your creditors can be an effective way to repair your credit if you have outstanding debt. Creditors will sometimes work with you to establish a lower payment plan or a settlement to help you get the debt paid off.

Why it’s Important: If your creditor agrees to a reduced payment or a settlement, it can reduce your debt and improve your credit score moving forward.

Action Step: Contact your creditors and negotiate a reduced payment amount or a reduced interest rate so you pay it off sooner. If you are not able to find the payments manageable, consider contacting a credit counsellor. For more context on what to avoid, check out The Pitfalls of Credit Card Debt.

• Consider a Secured Credit Card

The secured credit card serves as an ideal tool for people with poor credit or no credit history to repair or rebuild their credit. The main requirement to obtain a secured credit card involves depositing money into an account that ideally matches your credit limit.

Why it matters: Secured cards help you show responsible use of credit, which will improve your score over time.

Action Step: Find the best secured credit card offers in Canada. Use the card responsibly to make small purchases and pay off the card in full each month. Learn how to choose the right product for your situation by reading How to Choose the Right Secured Credit Card.

• Avoid Multiple Hard Inquiries

Any time you apply for credit, a hard inquiry is logged on your credit report. A single hard inquiry will not have a huge impact on your score, but many hard inquiries in a short amount of time will reduce your score.

Why it Matters: Lenders may be concerned about you if multiple hard inquiries occur in a short time, suggesting you are in financial distress.

Action Step: Make an effort to limit the number of credit applications you make. When comparison shopping for loans or credit cards, try to do all of the applications in a short time frame (typically 14-45 days) so they are treated as one hard inquiry.

How Long Will It Take To Repair Your Credit Score?

Repairing your credit score is not a rapid process. The length of time will depend on how serious the issues are with your credit score. For example, if you have been consistently late on your payments, you are unlikely to see significant improvement instantly, but after several months or even years.

Action Step: Set your expectations accordingly. Some actions, like paying down a high balance or rectifying errors, can have results within a few months. Overall, improving your score might take several months to a few years.

Other Resources and Help In Credit Repair in Canada

In addition to the above tips, there are other resources Canadians can use to aid in credit repair:

• The Financial Consumer Agency of Canada (FCAC) – through the FCAC, consumers can find out how to repair their credit score and understand their credit report.
• Credit Counselling Service – Credit Canada is a national non-profit company that helps Canadians with debt management programs and consumer and credit financial education.
• Equifax Canada and TransUnion Canada – both provide resources and tools to assist Canadians in monitoring and managing their credit score.

Conclusion

Improving your credit score takes time and dedication. By following the recommendations in this guide, Canadians can take actionable steps to improve their credit scores and to improve their financial future. Begin by checking your credit report, follow up with paying all your bills on time, and next, try to reduce the balances of all your credit cards. Following these steps will help you improve your credit score and ultimately achieve your desired financial outcomes.