You are currently viewing 7  WAYS TO IMPROVE YOUR CREDIT SCORE


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The chances are you have a credit card. Perhaps multiple credit cards even.

In today’s increasingly cashless society, credit is essential to everyday living. A credit card comes in handy for regular purchases such as groceries and gas, and big-ticket items such as travel packages.



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Beyond credit cards, many people use credit to purchase their homes, cars, education, etc. Using credit gives us access to goods and services that would have otherwise been out of reach. Further, credit is an excellent way to increase overall spending to stimulate the economy to grow.

However, credit is a double-edged sword. When used wisely, life moves along seamlessly. On the other hand, when credit is misused, the repercussions can be financially dire. 

A good credit score is vital to your financial health. In this article we’ll look at 7 ways to improve your credit score.

7 Ways to Improve Your Credit Score

What is a Credit Score?

A credit score is a measure of how well you handle your debts and how risky it would be to lend you money.

Credit bureaus, also referred to as credit reporting agencies, calculate credit scores.

There are two credit bureaus (Equifax and TransUnion) in Canada. There is a third credit bureau, Experian, in the United States.

Credit scores vary among the credit bureaus because they each use unique and proprietary formulas. As such, you may have two (or three in the U.S.) potentially different credit scores.

A credit score is a three-digit number between 300 – 900 in Canada and 300 – 850 in the United States.

In general, a higher credit score reflects stronger creditworthiness and vice versa for a lower credit score.

Below is a general guideline of the credit score range used by lenders and credit reporting agencies:

  Canada United States
Excellent 780 – 900 800 – 850
Very Good 720 – 779 740 – 799
Good 680 – 719 670 – 739
Fair 600 – 679 580 – 669
Poor 300 – 599 300 – 579

How to get your free Credit Score


Three companies provide free credit scores in Canada, Borrowell, Credit Karma, and Mogo.

Borrowell: Gives you a credit score calculated by Equifax. They also provide free credit reports.

Credit Karma: Gives you a credit score calculated by TransUnion. They also provide free credit reports.

Mogo: Gives you a credit score calculated by Equifax.

United States

You can obtain a free credit score from Credit Sesame if you are a resident of the U.S.

These companies make money by advertising various credit cards and services to you based on your spending habits.


What is a Credit Report?

A credit report is a more comprehensive statement that reflects information regarding your credit activity.

Lenders and service providers such as cellphone and internet companies, send your information to credit bureaus.

The information may include your payment history, the dates when you obtained various credits, your credit limits, account balances, etc.

Your credit score calculation uses details from your credit report.

How to get your free credit report


You can obtain a free credit report every year from each on the credit bureaus, Equifax, and TransUnion in Canada. You can order the statement by mail, fax or telephone.  If you order by these means, the delivery of the credit report will be by mail.

You may have to pay a fee to order and access your credit report online.

United States

In the United States, the three credit bureaus (Equifax, Experian, and TransUnion) have to provide you a free credit report once every 12 months upon request. The three bureaus have set up a central website to order your annual free credit report:


When is your Credit Score Important?

A high credit score can save you money, and a low credit score can cost you a lot of money.

Several parties are allowed to access your credit report to make various financial decisions about you. These parties include:

  • Lenders (banks, credit unions, etc.): Lenders use your credit score to decide whether to lend you money or not. Further, your rating determines the interest rate that they give. A high credit score indicates lower risk, and thus a lower interest rate. The opposite would apply to a low credit score.
  • Credit card companies: It may be challenging to get approved for a credit card with poor credit history or without any credit history at all. You would also have to pay higher than typical credit card interest rates with low credit rating.
  • Employers: The main reason an employer may want to check your credit score during the hiring process is to get an idea of how you handle your responsibilities. It may be more crucial for roles involving the handling of money.
  • Landlords: Based on your credit history, landlords can determine whether you can afford to pay your rent and whether you will pay on time.
  • Car leasing companies: Your credit score is material to car leasing companies to ensure that you will make your car payments on time.
  • Mobile phone companies: Cell phone companies also check your credit report to make sure you will make your payments promptly.
  • Insurance companies: You may need a high credit rating to obtain insurance, as the providers want to make sure that you can pay the premiums on time.

How is your credit score calculated?

The short answer is that it is impossible to know as credit bureaus keep this information secret.

Different credit bureaus use different formulas. Differing formulas is the reason why you may receive varying scores from two credit reporting agencies.

However, the factors that affect your credit score are known, and you should consider them keenly.

These factors include:

  • Payment history: This is the most important credit score factor and accounts for 35% of your rating.
  • Credit Utilization: It is the percentage of used credit versus unused credit and makes 30% of your score.
  • Credit history length: This factor shows how long you have handled credit accounts, and it accounts for 15% of your rating.
  • Mix of credit: Credit mix refers to the different types of credit you currently manage, such as a mortgage, car loan, credit card, student loan, etc. It makes up 10% of your rating.
  • Number of hard inquires: A hard inquiry is performed when actively seeking credit and makes up 10% of your score.

Factors that affect your credit score

7 ways to improve your credit score


1. Use a secured credit card

A secured credit card is a type of credit card that requires a cash deposit that serves as collateral on the account.

The cash deposit is often equal to one or two times the amount of credit limit on the card. Should you fail to make a payment, the card issuer will recover the amount from your deposit.

You receive the security deposit back when you close the account and have paid all outstanding amounts.

Using a secured credit card is different from using a prepaid debit card. You do not receive any credit with a prepaid debit card, as you use your own money. The account activity on a prepaid debit card is not reported to credit bureaus and does not build a credit history.

A secured credit card is a great way to build credit if you:

  • Do not have any credit history. A secured credit card is ideal for students and new immigrants who do not have a credit history.
  • Have poor credit history. Should you have made some financial mistakes that hurt your credit rating, a secured card is an excellent way to get back in good standing.
1. Use a secured credit card


2. Pay your bills on time

As payment history carries the highest weight (35%) in your credit rating, it is critical to pay all your bills on time.

Even a single missed payment can have a substantial negative impact on your credit score.

Further, missed payments stay on your record for up to six years.

Concerning payment history, credit reporting companies will look at:

  • If you pay your bills (credit card, utilities, mortgages, etc.) on time
  • How many days you are late in making your payments
  • The frequency of making late payments
  • If you have filed for bankruptcy, had a foreclosure, or any other damaging items


TIPPay all your bills on time, including credit cards. While making the minimum payment on a credit card is accepted, you’ll end up paying high-interest rates on unpaid balances. As such, treat your credit card as a debit card and only spend what you can afford to pay back in full.

2. Pay your bills on time

3. Maintain a low credit utilization

Carefully consider credit utilization as it makes up a significant portion (30%) of your credit score.

Essentially, credit reporting companies want to see that you are not maxing out your credit. It is generally ideal for keep your credit card utilization under 30% for each credit card.

Note that it is the percentage that counts, not the actual amount used. The table below illustrates this:

  Scenario A Scenario B
Credit Card Limit $1,000 $1,000
Spend $500 $500
Payment $500 $0
Utilization $0 / $1,000 = 0% $500 / $1,000 = 50%


  • Find out when your credit card issues report payment history and make your payments before that date.
  • Have a lot of available credit. You can request an increase in your credit limit and accept any offers for credit limit increases.
  • Spread out credit use by using a few credit cards to maintain a low utilization on each card.
  • Always pay your credit card bills in full.
3. Maintain a low credit utilization


4. Keep paid-off credit cards open

The longer you have credit, the higher your credit score, as long as you have kept your account in good standing.

It is worth paying attention to your credit history’s length as it makes up 15% of your rating.

Note that your credit history length is calculated based on the average (not total) time. Therefore opening a new credit card will lower your credit score. See the table below for a practical illustration.

  Person A Person B
Credit Card No. 1 Opened 4 years ago Opened 4 years ago
Credit Card No. 2 Opened today None
Average History 4 years / 2 cards = 2 years 4 years / 1 card = 4 years


Do not close old credit cards as it can drastically lower your average credit history and wipe out years of benefits gained.

Closing credit cards also instantly lowers your available credit limit, which can increase your credit utilization percentage.


  • Store old credit cards in a secure place separately. Make sure the information relating to those the cards, such as your address, is current.  
  • Only cancel credit cards that you no longer use if they have an annual fee
4. Keep paid-off credit cards open


5. Maintain a good mix of credit

The mix of credit you have carries a much lower weight (10%) than the other credit score factors discussed so far. However, it is still useful to have this in mind if you are trying to build a high credit score.

Having a diverse portfolio of credit (mortgages, car loans, credit cards, etc.) demonstrates that you can handle more debt.

5. Maintain a good mix of debt

6. Keep your hard credit inquiries at a minimum

Lenders perform hard inquiries when determining whether to approve you for credit approval. On the other hand, soft inquiries are for informational purposes and do not relate to credit approval.

A soft inquiry can be performed by yourself or a third party, such as an employer, for purposes that do not involve obtaining credit. As such, they do not have an impact on your credit score.

On the other hand, hard inquires do impact your credit score. The more times you request new credit, the riskier you become as a borrower.

Credit bureaus allow for rate shopping when applying for loans such as mortgage. They will generally consider multiple hard inquires within a short period for the same type of credit as a single inquiry.


Shop for loans within a short time frame. Typically multiple inquiries for the same credit type within two weeks will count as one hard inquiry.

6. Keep your hard inquiries at a minimum

7. Check your credit report regularly and dispute any errors

Guess what; there can be mistakes on your credit reports. And depending on the type of error, it may have a significant negative impact on your credit rating.

Further, mistakes on your credit report can indicate that someone may be trying to steal your identity. For instance, someone trying to open a credit card or other loans in your name.


  • Check your credit reports regularly, about once a year.
  • All credit bureaus provide responsive avenues to submit credit report disputes. Submit disputes as soon as possible.
7. Check your credit report regularly and dispute any errors

If you enjoyed this article or have any questions, please leave them in the comment section below! I’d love to hear from you! Also, please feel free to share this with anyone that may benefit from it.

“Persistence guarantees that results are inevitable.” ~Paramahansa Yogananda


7 Ways to Improve Your Credit Score

Sharing is caring!



Ever feel like money just seems to slip through your fingers month after month? Our Monthly Budget Tracker will guide you to start making the most of every dollar. It’s a game changer—get it free for a limited time!

Nikki Kirimi

Nikki Kirimi is a recognized finance professional (MBA, CPA, CMA) and founder of Money World Basics. Her personal finance advice has been featured in Yahoo Finance, MSN, and Go Banking Rates.