How to Build Credit in Canada from Scratch

Is your credit history in Canada less than stellar or nonexistent? Rebuild your credit from scratch! Learn how to build credit in Canada step-by-step.


Is your credit score below 650? If yes, then you have bad credit. With this score, it’s challenging to secure a loan at a good interest rate. The same goes for renting a vehicle or a house, and even prospective employers can deny you a job.


How to Build Credit in Canada from Scratch

This is why you need to focus on rebuilding your credit. And if you just moved to Canada from, say, the U.S., your American credit isn’t going to move over with you. You must build a new credit history from scratch. So, how do you do it?

Here’s how to build credit in Canada.

Open a Credit Card Account 

If you’ve no credit history, the first step is to open a credit card account. Once your account is active, credit bureaus will automatically pick up your details.

You’re probably wondering, “Who’s going to approve me for a credit card when I have no credit history?”

Well, this is where secured credit cards come in handy. All you have to do is pay a security deposit to the credit card company of your choice. The deposit will determine your credit limit.

If you’ve no preferred provider, check out these top selections.

Now that you’re a credit-active consumer in Canada, be sure to settle your balances on time. Payment history is a big indicator for lenders and creditors.

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2. How to Open a Bank Account Without Losing Your Money: A First Timer's Guide

Check Your Credit Report for Errors

It’s not uncommon to find an error on your credit report. Some errors can have a negative impact on your credit score. For instance, if an account you closed a couple of months ago is still marked open or active, or if you’ve always paid your loans on time but one instance is marked “late,” your credit score is probably going to take a hit. Also check for errors in your personal information, such as incorrect date of birth or misspelled name.

If there’s an error, file a dispute with the credit agency that issued the report. Equifax and TransUnion are the primary credit agencies in Canada.



Pay Off Loans in Default

If you skip paying an installment loan for a couple of months, it will go into collection. It’s never good news for your credit score when this happens.

The only ways to solve this is to pay off the outstanding debt or work out an alternative repayment agreement with your lender. Either way, the collection account will stay on your report for some years, but the older it gets the lesser it will affect your score.

Maintain Low Credit Card Balances

A mistake most credit consumers inadvertently make is having high credit utilization rates. This is the amount of credit used versus your credit limit.



If you have a credit limit of $1,000, for example, and you spend $800, your utilization is 80 percent. This is extremely high, and it could be an indication of financial pressure or indiscipline. As a result, your credit score will slide.

Maintaining low credit card balances and, consequently, low utilization rates is an effective credit-building strategy. As a rule of thumb, keep it below 30 percent.


How to Build Credit in Canada Simplified

When you’ve got bad credit or no credit all, aiming for a score of 650 or higher can seem like a tall challenge. But with this guide on how to build credit in Canada, you’re now in a stronger position to do it with ease.

Keep tabs on our blog for more tips and insights.

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