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Credit Repair Guide: How to Rebuild Credit in Canada

4 min read

Credit repair guide on how to rebuild your credit in Canada

Written By

Courtney Johnston
Courtney Johnston

Your credit history reflects your past financial behaviour. It looks at factors like on-time bill payments, account use, and unpaid debts. This data is then translated into a three-digit score, known as your credit score. And if your score is lower than you’d like, don’t worry. Repairing your credit history isn’t as daunting as it seems.

The average credit score in Canada is around 680, which is considered “good.” But plenty of Canadians fall below this line, making it harder to open new credit accounts, qualify for lower rates, and even get approved for an apartment or mortgage.

Ready to get started on rebuilding your credit? Here’s what you need to know.

What is credit rebuilding?

Credit rebuilding is the act of improving your credit score over time by using your credit responsibly. There are many different ways to approach credit repair, and you don’t have to pay a credit repair company to help you.

But your credit also won’t improve overnight. It can take months or even years, depending on your current credit score. However, adopting good credit habits will help you continuously improve and maintain your credit score.

What is a good credit score in Canada?

Canada uses the FICO scoring model to determine your credit score. Credit scores range from the low 300s to 900, with 900 being your highest credit score. For your score to be considered “good,” you’ll need at least 660, according to Equifax.

However, each lender may have its own criteria for approving a borrower for a new loan or credit account. For example, you might need a score higher than 680 to qualify for a home loan in Canada.

However, knowing your credit score rank can help you see how well you’re doing financially and where you can improve.

Credit score ratings in Canada

Want to know where your credit score falls? Here’s a cheat sheet:

Credit score


Below 560

Poor or bad

560 to 659


660 to 724


725 to 759

Very good

760 and higher


What factors make up your credit score?

Your credit score is made up of five factors:

  1. Payment history - Whether you paid on time, in full, or missed a payment.

  2. Credit utilization rate - How much credit you carry versus the amount available to you. The lower your credit utilization ratio, the higher your credit score.

  3. Length of credit history - How long you’ve maintained the accounts on your credit report.

  4. Public records - Any bankruptcies, collections accounts, or other negative marks on your credit.

  5. Inquiries for new credit accounts - How many new accounts you’ve applied for over a set period of time.

Your payment history makes up the largest percentage of your credit history (35%) and is the main factor that can push your credit score higher or drive it down. Your credit utilization rate is the next highest (30%). Experts recommend utilizing 30% of your available credit or less to keep this number down.

How can you find your credit score?

You can access your credit score for free from Equifax, one of the two main credit bureaus in Canada. You may also be able to access your credit score from any credit building money apps you’re signed up for. Additionally, some credit cards and third-party apps, like Credit Karma, offer access to your credit score.

Some apps limit how often you can check your score, but as long as you view it monthly, you can stay on top of your progress.

If you live in Quebec, you can also access your credit score for free from the other credit bureau, TransUnion. If you live outside of Quebec, you have to pay for this service.

How to access your credit report from the Canadian credit bureaus

Both Equifax and TransUnion let you access your credit report online for free.They update your credit report monthly, but you can access it more frequently, if you need to.

You may also be able to access your credit report from other third-party money management apps. Some services may charge you to gain access to your credit report, so it’s a good idea to pull it online directly from the credit bureaus.

Why is having a good credit score important?

Okay, you know what a good credit score is and how to access it. But why does it matter if your credit score is high or not? This three digit number plays a big role in your finances, whether you realize it or not.

Your credit score helps determine whether you’ll be approved for a new loan or credit account. If your score is lower than the lender’s minimum requirement, you’re more likely to be rejected for another credit account. A low credit score can create a barrier that makes it seem like it’s impossible to build credit.

In addition, if you have a low score, you may get approved for a new credit line, but at a higher interest rate. Whether it’s a mortgage, loan or credit card, having a higher interest rate on your credit account means you could pay more in interest charges than someone with a higher credit score.

Lastly, you may also need a high credit score to get approved to rent a house or apartment. Some landlords and property managers have a minimum threshold when approving new tenants. Even if you’ve always paid your rent on time, a low credit score could hold you back from better housing options.

How do you rebuild your credit score?

If your credit score is below average or just lower than you’d like, it’s possible to rebuild your score. You’ll need to be disciplined to stay on track, but with a little bit of effort and the right credit building strategy, your credit score can improve in as little as a few months.

10 smart ways to repair your credit history

It’s time to dive in. Here are ten ways you can try out to help repair your credit and grow your score over time.

1. Make on time payments

If you’re not already making on-time payments on your credit cards, loans, and other credit accounts, it’s time to start. Lean on your budget to figure out how to free up extra money to apply to your debt each month.

Enrolling in autopay can provide peace of mind, while ensuring you always pay your bills by the due date. If you don’t already have this set up, consider it. Remember, on time payments make up 35% of your credit score, so missing even one payment is enough to set you back.

Continuously making on time payments for several months should be enough to bring your score up a few points. You may need more time to see improvement if your score is extremely low.

2. Pay more than the minimum amount due

On your credit card statement, you likely receive a minimum amount due. While paying this amount will help you stay current on your credit card bill, it’s not enough to avoid interest. The only way to avoid interest payments entirely is to pay your bill in full. But if you have debt and can’t afford to pay it off, there’s another option.

Try to pay more than the minimum when you can, even if it’s just $20 extra dollars a month. It may seem like a small step, but it will help reduce your overall bill, lower your interest charges, and slowly bring down your credit utilization rate, to help your score increase.

3. Treat your credit card like a debit card

If you’re still using a credit card to pay for daily or monthly expenses, avoid racking up any new debt by treating it like a debit card. What does that mean? It’s actually pretty simple: Each time you use your credit card to pay for an item, pay off the charge immediately from your bank account. This way the money’s being pulled directly from your bank account and you don’t have to worry about incurring a credit card balance.

If you don’t want to make payments every day, instead you could pay your credit card balance off weekly, so that you don’t have a surprisingly high amount to pay at the end of the month. This can help you keep better track of your spending to avoid charging purchases you can’t afford on your card.

4. Don’t apply for more than one credit account at a time

One way to boost your credit score is to increase the amount of credit that’s available to you. If you’re trying this method, you may be applying for several new credit cards or credit accounts.

Unfortunately, applying for multiple credit accounts at once is a red flag to lenders. It makes them think that you can’t afford your bills and are looking to supplement your income with credit accounts.

It can also ding your credit score, which isn’t the opposite of what you’re trying to accomplish.

5. Consider a balance transfer card

Carrying a balance on your credit card account can be expensive, particularly since annual percentage rates (APRs) are hovering well above 20% on average. But what else can you do if you can’t afford this debt?

A balance transfer card lets you move debt from one credit card to a card with a 0% introductory APR offer. For a set period of time you’ll be able to pay down your debt without incurring interest charges that continue to add to your balance.

But there are some risks to balance transfer cards. They sometimes come with a balance transfer fee (usually 3% to 5% of your transferred balance) which can add on to your debt. However, in most cases, this fee is less than what you would have continued to pay in interest.

Additionally, depending on your level of debt, you might not be approved for a credit limit high enough to help you make a dent in your debt. Lastly, if you’re not able to pay off your debt during the balance transfer’s introductory period, you’ll begin accruing interest again.

There are also several ways you can be ineligible for your balance transfer offer, like if you spend with your credit card and don’t make minimum payments or pay your card’s monthly payment late. Make sure you review the specific card rules before signing up for a balance transfer offer.

6. Explore debt repayment strategies

There are many different ways to work on paying down your credit card debt. While you don’t need an exact debt payoff strategy to help you succeed, it can be helpful to follow one if you’re not sure where to start.

The debt snowball method is one popular debt repayment strategy that focuses on paying the minimum on all accounts, then applying any extra money to the account with the smallest balance. Once that’s paid off, move onto the next highest. This can be a more motivating way to tackle your debt, because you’ll see movement much faster.

The debt avalanche method focuses on making all minimum payments on your debt accounts and applying any additional funds to the account with the highest interest rate. This strategy can help you save the most in interest payments over time.

7. Look at debt consolidation loans

Do you have too many credit cards with balances or multiple credit accounts with high interest rates? If so, combining your debt may be a more affordable way to keep up with your monthly payments, while potentially saving some money.

A debt consolidation loan is a personal loan that’s used to pay off your existing debts and consolidate the amount into a new loan with one interest rate and one monthly payment. Debt consolidation loans in Canada can have high interest rates and fees, but you may save money depending on your current credit agreements.

One benefit of a debt consolidation loan is that you can spread out your repayment timeline over years, making your monthly payments more manageable. While this could cost you more in interest in the long run, if it makes it easier to pay off your debt, it’s worth considering.

8. Opt for a secured credit card

A credit card is one of the fastest ways to build credit. But if you’re suffering from a low credit score, you might find it difficult to get approved for a new credit card. But a secured credit card may be the answer to your frustration.

A secured credit card works differently than a traditional credit card. You need to supply a security deposit that often serves as your credit line. You can then draw on this credit line like you would with a normal credit card, and pay it off on time to build your credit back up.

It’s easier to get approved for a secured credit card, too. Generally, secured credit cards have flexible credit score requirements, and some don’t have any minimum score requirements at all.

KOHO, for example, works similarly to a secured card. It offers a prepaid card with virtual card access that lets you build credit as long as you subscribe to its Credit Building program. While you don’t need to provide a security deposit, there is a monthly charge to build your credit. KOHO might be a good option if you’re also looking for a high interest savings account with features like overdraft protection coverage.

11. Get added as an authorized user on another person’s account

If you’re finding it too difficult to apply for new credit accounts on your own, you could consider becoming an authorized user on another person’s credit account. This can help you grow your credit, as long as the account owner is responsible and pays their bills on time.

For example, if you need to have a parent with good credit who would be willing to add you to their account, becoming an authorized user will allow their good credit history to reflect on your report. But it works both ways — as an authorized user you may have access to their account. If you forget to pay a bill, you could damage your credit — and theirs.

Not every credit account allows for authorized users, but some credit cards, loans, and mortgages do.

10. Add your rent payments to your credit report

Another way to boost your credit score without doing much work is to add your rent payments to your credit profile. The only downside is, you typically have to pay a fee to set this up.

You can utilize either Rent Advantage from Borrowell for $8 a month, or FrontLobby, by Landlord Credit Bureau’s credit reporting service, for $5 per month. As long as you have a good track record of paying your rent, this could be an easy way to boost your credit score.

11. Take out a credit builder loan

If you’re struggling to build credit because you’re nervous about having access to a new credit card or loan, there’s an alternative means to build credit that Canadians often overlook: a credit builder loan.

You can get approved for a credit builder loan with a bad credit score. It’s offered by most credit unions and works a bit differently than traditional loans.

Instead of getting your loan funded at the start of the process, you’ll make payments to the credit union monthly, which will be reported to the credit bureaus in Canada. Then, once you’ve paid for the loan in full, you’ll receive access to the funds.

It’s an easy way to obtain credit without accruing debt and it’s fairly low risk. If you can no longer afford to make a payment, you’ll usually be able to cancel the loan and have the money you’ve paid refunded.

12. Monitor your credit score regularly

It’s important during your credit repair journey to check in on your credit score regularly. It’s a good idea to view your score once a month to see how you’re progressing, but at least quarterly is often enough to make sure you’re on top of any changes.

If you happen to notice an error or incorrect account on your credit report, you can report it to the credit bureaus and have it removed if it’s truly incorrect. This is called a credit dispute. You can file a credit dispute online with both Equifax and TransUnion.

If an error is found and removed from your credit report, you’ll likely see your credit score increase.

13. Be patient

It might be difficult, but it’s worth remembering that rebuilding your credit takes time. Give yourself some grace while you work on practicing the key credit-building habits — paying your bills on time and only charging what you can afford to pay off.

Once your score increases, the secret to keeping it high is to continue following the good credit hygiene tips you’ve learned to avoid debt.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

Courtney Johnston

Courtney is a professional writer, editor and financial literacy enthusiast. You can find her writing on CNET, Investopedia, The Motley Fool, Yahoo Finance, MSN and The Balance. She spends her free time exploring different cities across the globe or enjoy some downtime with her two cats and one dog.



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