How to Manage and Increase Your Credit Score in Canada Through Your Credit Card
Jun 26, 2024
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Managing your credit score and building credit is important for your financial well-being in Canada. Your credit card activity can have a significant impact on your credit score, and it's essential to know how to manage it effectively. Increasing your credit score is crucial for accessing better loan terms, lower interest rates, and various financial opportunities.
Here are 7 tips on how to use your credit card to manage and increase your credit score in Canada.
Understanding Your Credit Score
Your credit score is a three-digit number that represents your creditworthiness. It's calculated based on information from your credit report, which is updated monthly by credit bureaus like Equifax and TransUnion. A good credit score is between 630 and 739, with the highest being 850.
Regularly check your credit report to ensure accuracy and to monitor your credit history.
1. Payment History
One of the most crucial factors in determining your credit score in Canada is your payment history, accounting for about 35% of your credit score. Late or missed payments can negatively affect your credit score. Ensure you pay your credit card bills on time every month. Set up automatic bill payments or calendar reminders to avoid missing due dates.
2. Keep Your Credit Utilization Low
Credit utilization ratio refers to the amount of credit you use compared to your credit limit. Keep your credit utilization ratio below 35% to maintain a good credit score in Canada. If you have a $10,000 credit limit, keep your balance below $3,500.
You can also request a credit limit increase to improve this ratio without increasing your spending.
3. Use Your Credit Card Regularly
Using your credit card regularly can help improve your credit score in Canada. However, don't use it too much, as high credit utilization can negatively impact your credit score. Use your credit card for small purchases, such as gas or groceries, and pay it off in full each month, not just the minimum payment.
4. Keep Your Credit Card Accounts Open
Closing your credit card accounts can negatively affect your credit score in Canada, especially if you have a long credit history. Keep your accounts open to show responsible credit management and long credit history.
5. Monitor Your Credit Report
Check your credit report regularly for any errors or fraudulent activity. Request a free credit report from each of the two credit reporting agencies in Canada, Equifax, and TransUnion, once a year. Dispute any errors or fraudulent activity immediately.
6. Consider Getting a Secured Credit Card
If you're new to credit or have a low credit score in Canada, consider getting a secured credit card. A secured credit card requires you to make a deposit, which becomes your credit limit. It can help establish a credit history and improve your credit score over time.
Also consider applying for a loan or another credit card that will contribute to a diverse credit mix. Revolving credit (like credit cards) and installment loans (like car loans and mortgages) can positively impact your credit history. Manage credit accounts responsibly to show you can handle different types of credit.
7. Don't Apply for Too Many Credit Cards at Once
Applying for too many credit cards at once can negatively affect your credit score in Canada. Limit new credit applications and space them out over time, as too many hard inquiries can signal that you're desperate for credit and may be a high-risk borrower.
If you're renting with Chexy, ensure that you pay off your credit card bill as soon as possible after your rent is paid to ensure stable and consistent credit growth.
Improving and managing your credit score through your credit card requires responsible credit management. Follow these 7 tips to pay bills on time, keep credit utilization low, use your credit card wisely, keep accounts open, monitor your credit report, consider a secured credit card, and don't apply for too many credit cards at once. With time and effort, you can maintain a good credit score and enjoy better financial well-being in Canada.
Get started with Chexy today to start earning rewards on rent payments and building credit on your largest monthly expense.
Subscribe to The Chexy Rundown for exclusive access to the latest travel deals and credit card rewards.
Managing your credit score and building credit is important for your financial well-being in Canada. Your credit card activity can have a significant impact on your credit score, and it's essential to know how to manage it effectively. Increasing your credit score is crucial for accessing better loan terms, lower interest rates, and various financial opportunities.
Here are 7 tips on how to use your credit card to manage and increase your credit score in Canada.
Understanding Your Credit Score
Your credit score is a three-digit number that represents your creditworthiness. It's calculated based on information from your credit report, which is updated monthly by credit bureaus like Equifax and TransUnion. A good credit score is between 630 and 739, with the highest being 850.
Regularly check your credit report to ensure accuracy and to monitor your credit history.
1. Payment History
One of the most crucial factors in determining your credit score in Canada is your payment history, accounting for about 35% of your credit score. Late or missed payments can negatively affect your credit score. Ensure you pay your credit card bills on time every month. Set up automatic bill payments or calendar reminders to avoid missing due dates.
2. Keep Your Credit Utilization Low
Credit utilization ratio refers to the amount of credit you use compared to your credit limit. Keep your credit utilization ratio below 35% to maintain a good credit score in Canada. If you have a $10,000 credit limit, keep your balance below $3,500.
You can also request a credit limit increase to improve this ratio without increasing your spending.
3. Use Your Credit Card Regularly
Using your credit card regularly can help improve your credit score in Canada. However, don't use it too much, as high credit utilization can negatively impact your credit score. Use your credit card for small purchases, such as gas or groceries, and pay it off in full each month, not just the minimum payment.
4. Keep Your Credit Card Accounts Open
Closing your credit card accounts can negatively affect your credit score in Canada, especially if you have a long credit history. Keep your accounts open to show responsible credit management and long credit history.
5. Monitor Your Credit Report
Check your credit report regularly for any errors or fraudulent activity. Request a free credit report from each of the two credit reporting agencies in Canada, Equifax, and TransUnion, once a year. Dispute any errors or fraudulent activity immediately.
6. Consider Getting a Secured Credit Card
If you're new to credit or have a low credit score in Canada, consider getting a secured credit card. A secured credit card requires you to make a deposit, which becomes your credit limit. It can help establish a credit history and improve your credit score over time.
Also consider applying for a loan or another credit card that will contribute to a diverse credit mix. Revolving credit (like credit cards) and installment loans (like car loans and mortgages) can positively impact your credit history. Manage credit accounts responsibly to show you can handle different types of credit.
7. Don't Apply for Too Many Credit Cards at Once
Applying for too many credit cards at once can negatively affect your credit score in Canada. Limit new credit applications and space them out over time, as too many hard inquiries can signal that you're desperate for credit and may be a high-risk borrower.
If you're renting with Chexy, ensure that you pay off your credit card bill as soon as possible after your rent is paid to ensure stable and consistent credit growth.
Improving and managing your credit score through your credit card requires responsible credit management. Follow these 7 tips to pay bills on time, keep credit utilization low, use your credit card wisely, keep accounts open, monitor your credit report, consider a secured credit card, and don't apply for too many credit cards at once. With time and effort, you can maintain a good credit score and enjoy better financial well-being in Canada.
Get started with Chexy today to start earning rewards on rent payments and building credit on your largest monthly expense.
Subscribe to The Chexy Rundown for exclusive access to the latest travel deals and credit card rewards.