8 tips to build or rebuild your credit score

17 January 2022 by National Bank
Young lady reviewing her credit report to see how she can rebuild and improve her credit score.

A bad credit score can happen to anyone. No one is immune to bad luck or financial mistakes. The good news: everyone can take steps to rebuild and improve their credit. Here's our expert advice on how you can do it without sacrificing your lifestyle.

Why is a good credit score important?

Because your credit score (which is part of your credit report) allows lenders to assess the risk involved in a loan. This is one of the key elements that determine if you'll be able to take out a loan, and at what interest rate. It's like when you look at online reviews for a service or business you're interested in. Good reviews inspire more confidence.  

What is a good credit score? 

Your credit score is a number between 300 and 900 that changes over time. That's normal. It's like a report card in school: the higher your score, the better. Your report card shows your parents if you're a good student. Similarly, your credit score shows lenders if you're a good credit risk. In general: 

  • A score of 750 or more is considered very good.  
  • A score between 680 and 749 is good. 
  • A score between 640 and 679 is medium. 
  • A score of 639 or lower makes it difficult to access credit. The terms and conditions of your loan are likely to be stricter and less advantageous (higher rate, endorser required, etc.). 

For more information, see our article What is a Credit Score?

8 tips to improve your credit score 

1. Pay on time 

A very important factor in rebuilding your credit: always make your payments on time, no matter what amount you owe. Late payments have a negative impact on your credit score, whether you owe $30 or $1,000. The more late payments you have, the more negative the impact will be. 

How can you avoid forgetting your payments so you can rebuild your credit? Enter reminders in your calendar. 

Even better: schedule automated payments for an amount of your choice, paid when you want. 

Tip: You can also set up pre-authorized payments for your entire balance.  

For extra security: Take out overdraft protection, like a line of credit linked to the account your payments are debited from. If a payment goes through but you don't have enough funds in your account, the line of credit will cover it. N.B.: This tip can help you avoid a bad credit score due to an unforeseen event. 

Remember: To avoid affecting your credit score, you should pay your entire credit card balance before the due date. 

2. Check your credit report regularly 

Ask Equifax and TransUnion for a copy of your credit report once a year. You should request your report from both credit bureaus, since they may have different information. You can obtain your credit report for free from the Government of Canada website. However, you may have to pay a fee to consult it online. 

Consulting your credit report allows you to:  

  • Monitor changes  
  • See if your credit is in good standing 
  • Confirm that there are no errors or inconsistencies 

What if something in your credit report doesn't add up? You can request a correction. Asking for your credit report has no impact on your score. 

Good to know: For a fee, credit bureaus offer services that will alert you of any irregular activities. This can help you quickly detect if your identity is stolen.  

3. Don't carry too high a balance   

The balance on your credit card (or line of credit) should stay low compared to your limit. Along with how credit cards work, it's one of the principles you need to know when you're rebuilding your credit. 

In an ideal world, your balance should remain below 30% of the maximum granted. If you exceed 50% of the authorized amount, your score could decrease. Make sure you don't exceed the authorized limit.  

Example: Say your credit card limit is $2,000. Ideally, you shouldn't use more than $600. Exceeding $1,000 could have a negative impact on your credit score. 

Pro tip: Are you often close to the authorized limit on your credit card? Request a limit increase so that you have a larger available balance. Proportionally, $500 out of $2,000 is less than $500 out of $1,000. (Don't worry, there won't be any more math in this article!) 

4. Clean up your credit cards 

Spring cleaning your wallet allows to regularly reassess your needs and helps making better use of your credit cards. There's nothing wrong with having two credit cards, especially in case of emergencies. On the other hand, having several cards requires being careful to avoid oversights and late payments. Misuse of multiple credit cards can negatively impact your credit score. 

Did you know?

Using two cards responsibly can also improve your credit score.  

Tip:  Low interest credit cards can be an interesting option if you don't pay off your entire balance every month.  

5. Don't submit too many credit applications  

As we saw in the previous point, having too many cards is as bad as having too few. The same goes for credit applications. Make sure you don't submit too many. This applies to: 

All these credit applications have an impact. Lenders will check your credit record every time you apply for credit. If you submit too many credit applications: 

  • Lenders may think you're searching for multiple supplementary credit sources 
  • You will seem like a riskier borrower  

Lenders want to know that you can manage your debts and are able to reimburse them. Applying for credit too many times could make lenders question your repayment ability and have a negative impact on your credit.  

Buying a car? It's a good idea to check out a number of dealerships when you're shopping for a car. However, it's better to wait until you've made your choice before you authorize a credit check. Too many applications in too little time can be bad news for your credit score. 

6. Talk to an expert 

You should feel free to ask specialists for help with your financial issues, such as dealing with a bad credit score. You can work together to draw up strategies to repay your debts and improve your situation. Sometimes, just one factor or bad habit can damage your credit score. To improve it, you could: 

7. Think carefully before endorsing someone 

When you endorse a credit application, it's as if you were lending out your good credit report and credit score. This can really help a person who has bad credit (or who hasn't yet established a solid credit history) by enabling them to be approved for a loan. However, you will become responsible for their loan.  

In case of an unexpected event or if payments are made late or missed, your credit score will take a hit and you may have to repay the debt. 

8. Start early 

Sometimes the issue is not so much rebuilding your credit, but knowing how to build it in the first place. It can be beneficial to take out a credit card as soon as you reach the age of majority. Use it responsibly and make your payments on time; this will enable you to start building your credit history. 

Stay vigilant. A credit card is not the same as a debit card.  

Are you an immigrant to Canada? Banking systems and credit principles are not the same in different countries. Discover the ABCs of the Canadian banking system to learn how you can build your credit history.  

Arrived in Canada less than 5 years ago?

Learn about our bank account offer for newcomers.

What are your options for living comfortably despite a bad credit score? 

Even if you have bad credit, you still have options to realize your projects. While you're working to build (or rebuild) your credit score, you may still be able to access traditional financing. Everything depends on your credit report. Otherwise, there are other solutions. 

Second or third chance credit 

Second or third chance credit is a temporary solution offered by lenders (often outside the major banks) to allow people to access credit (such as a personal loan, car loan or mortgage).  

Note that they generally come with high interest rates. However, once your credit score improves, you can transfer the loan to a financial institution. By showing that you're able to meet your commitments, second chance credit can help you rebuild your credit record. 

Credit card options 

Some credit cards are more easily accessible for people who have a bad credit score. For example, secured cards allow you to make purchases online. If used properly, they can help you rebuild your credit score.  

How does it work? Certain credit card issuers will agree to take an amount in security that is equivalent to (or higher than) the credit granted.  

Example: To take out a credit card with an authorized limit of $500, you will have to provide at least $500 as security. This amount will be "frozen" until your credit score improves.  


There's no fixed timeline for rebuilding your credit. One year, two years, three years or more? It all depends on your situation.  It's like renovating a home: the worse the home's condition, the longer it will take to repair. Just remember that it's never too late to adopt good habits. Tell yourself that your efforts will end up paying off, and don't hesitate to ask for help. We’re here to answer your questions. 

- You asked: “How does a credit score work?”

So, I’ll explain the basics in the time it takes me to make popcorn.

A credit score is just a number but, like a bowl of popcorn, the bigger, the better.

- Bigger?

I’ll put more kernels in.


- The better the score, the less risky it is to lenders.

The number ranges from 300 to 900.

But a score of 750 and up is good.

There’s more to it than that, though.

Your report takes into consideration your score and other information when determining how much of a risk you are to lenders.


- Someone’s writing a report?

About us?


- By report, I mean a document that keeps track of your credit history and relevant personal information.

Banks, phone companies and insurers use this report to determine whether you can make a payment or not.

There are many different factors that affect your credit score.

For example, how many credit requests you make, your payment history and whether you pay your bills on time.

In fact, paying your bills regularly and before the end of the month is a very good practice to adopt.

Now let’s say I have a credit card.


And the only purchases I’ve made are:

- Week of the Zombie,

Month of the Zombie

And Lunar Month of the Zombie.


- To pay off the $60 they cost me, I’ll make 2 payments of $20 this month, and one payment next month.

Because making the minimum payment on time is crucial.


- Here’s a spooky myth:

Requesting a credit report will affect your credit score.


- False.


You can get your credit report any time without worrying about your credit score.

It’s a win-win!


- What did you win?


- A popcorn machine.

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