How to improve your credit score (and how long it takes)

Improving your credit score takes a bit of time. But the good news is that you can work your way to a better score with a few good habits and tweaks.

If you’re working on getting your financial house in order, or you’re gearing up for that big purchase, a good credit score can help you access the best rates and services. Whatever your reasoning, learning what impacts your credit score and how to improve it can benefit your overall financial well-being. So, let’s dive in.

Finding out you have a good credit score is kind of like getting a really good report card. Your credit score is a 3-digit number that banks and other financial institutions use to evaluate your creditworthiness and how likely you are to pay back debt.

If you have a good credit score, you’ll usually qualify for better interest rates, and you’ll typically pay lower charges on credit card balances and loans. Having a good credit score (660-724+) can help you save more in the long run on the financial products and services we all need and use. That’s why it’s essential to start by building your credit score.

Using a credit card is a great way to quickly build up your credit score in Canada and good credit history. Every month, your credit card provider will report your credit card balance and payments to Canada’s two credit bureaus: Equifax and TransUnion. So, when you use your credit card and make your payments on time in full, you’re actually helping to improve your credit score.

If you’re just starting out, are a newcomer, or someone with little to no credit history, it may be difficult to get an unsecured credit card. Some providers have strict requirements about what credit score or yearly income applicants need to apply. But, some providers in Canada offer special secured credit cards designed specifically for young people or newcomers where no credit history is needed to apply. So if you’re without a credit history, you can seek out a secured credit card or a newcomer program.

Now that you know why it’s important to start building your credit history and score, we can talk about improving it. The truth is there are many different factors that can increase your credit score.

If you’re wondering where to get your free credit score in Canada, you can check yours in minutes with ClearScore. Once you start to monitor your credit score, you can do the following things to help improve it.

Pay down revolving account balances

Many Canadians don’t know what credit utilization is, but we’re here to tell you that credit utilization makes up about 30% of your credit score. Your credit utilization is based on two numbers – the total amount of available credit that you’re using compared to the total amount of credit that’s available to you.

Let’s say you owe $3,000 on your credit card and your limit on that card is $10,000. Since you’ve used 30% of the total amount of credit available to you, your credit utilization in this example would be 30%. Generally speaking, credit bureaus suggested that you should keep your ratio below 30%.

Learn more about how your credit limit can affect your score.

Don’t miss payments

Another way to help increase your credit score is to have a long history of paying your credit card bills on time. Your payment history makes up a whopping 35% of your credit score (the most of any category) so it’s crucial that you pay your bills on time.

If you can’t make a bill payment, or you forgot, the typical timeline goes as follows: 30 days, 60 days, 90 days, 150 days and then it will be written off as a loss and categorized as uncollectible. It’s critical to pay your bills on time or at least be aware that you’re late. Unpaid and late bills will negatively impact your credit score, and chronically missed payments could lead to higher interest rates, late fees, penalties, reduced credit limits, and even court judgements.

A great way to combat missing bill payments is by setting up automatic bill payments and setting reminders on your phone.

Reconcile past due payments

If you are behind on paying your bills, making them current is a great start to improving your credit score. A late payment can remain on your credit report for up to seven years (which we'll get into later). So making sure all of your accounts are current can be good for your credit score and stops further late payments from being added to your credit history and additional late fees. If you’re having trouble with credit card debt, you could try speaking with a credit counsellor to negotiate lower payments and interest rates and bring your accounts current.

Limit how often you apply for new credit

Anytime you apply for new credit, the financial institution will check your credit, otherwise known as a credit inquiry. A “hard” credit inquiry can slightly lower your score, whereas a “soft” credit check (like when checking your free credit score with ClearScore) has no impact.

Try to be mindful of how much new credit you apply for and the number of credit card accounts you have. If you apply for new cards, make sure you don’t do so too frequently, as this behaviour may look irresponsible to creditors.

The length of time to improve your credit score will depend on the type of marks on your credit report, like past due payments, and when those items fall off your report. Derogatory marks like collections or bankruptcies can last up to seven years on your report. It’s a good idea to thoroughly review your credit report to ensure there aren't any errors or discrepancies.

If you do spot an error, it’s best to dispute it with the credit bureaus. For example, you might check your report and see a mark that indicates you didn’t make a payment when you actually did. When you’ve submitted your dispute, the bureaus have 30 days to contact the creditors, verify the information, and take care of the claim. This process can take up to six months in Canada.

With good habits and some work, you could be able to see some score improvement in up to six months.

If you have a late payment that’s past due, the original lender may eventually sell the account to a collections agency. A collection item will stay on your credit report for six years from the date of your last payment. Unpaid collections are removed from your credit report after six years – but it’s highly recommended you pay back any debt in collections, as this type of mark can significantly impact your credit score.

Learn more about which debts you should pay off first to improve your credit score.

How long do bankruptcies stay on my credit report?

Your credit report will show if you’ve ever filed for bankruptcy, which forgives debt that you can’t pay back but offers creditors a chance to obtain some measure of repayment based on your available assets.

A bankruptcy will stay on your credit report for six years from the date of discharge. If you’ve filed for bankruptcy twice (known as a double bankruptcy) it will stay on your credit report for up to 14 years.

How long will a default stay on my credit report?

The length of time that unpaid debts remain on your credit report will vary based on the province where you reside. In British Columbia, Alberta, Saskatchewan, Ontario, and New Brunswick, defaults for unsecured debt typically stay on a credit report for two years.

In Quebec, unsecured debt will remain on a credit report for three years, while Manitoba, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador will retain this kind of debt on a credit report for six years.

The first step to eliminating marks on your credit history is to request a copy of your report and review each section carefully. If you see an error that could impact your credit score, you can contact Equifax or Transunion to formally start a dispute claim online or by mail.

You can also file a dispute directly with the lender by contacting them directly. You can do this by writing a detailed dispute letter to your creditors that outlines each mistake and a request asking the credit agencies to correct the inaccuracies.

While there’s no quick fix to securing an excellent credit score overnight, checking and monitoring your score can help you keep an eye on things and is a simple way to catch inaccuracies that may be negatively impacting your credit score.

Checking your credit score with ClearScore is a great way to gain insight into your financial well-being. Plus, you’ll get clear, personalized insights about your credit score and tips on how to improve it. By improving your credit score, you have a better chance of getting better credit offers and saving money.