Your credit score affects almost everything in your financial life. Whether you’re buying your first home, adding to your rental property portfolio, or just trying to get better interest rates, your credit score matters.
Here’s what most people don’t know: you can damage your credit score even if you never miss a payment. And you can boost it without paying off a single dollar of debt.
Let me explain how this all works.
Check Your Credit Report First
Before you do anything else, pull your credit report. You can’t fix problems you don’t know exist.
I learned this the hard way. When I applied for my first mortgage, I got declined. I was shocked. I had never missed a payment on anything. Turns out, someone had opened a Best Buy credit card in my name, maxed it out, and never paid it. I had no idea until that moment.
Once I disputed it with Equifax, they removed it immediately. My score jumped, and I got my mortgage approved.
How to Get Your Credit Report
Equifax Canada gives you one free credit report every year. Just visit their website and request it. You can also pay for monthly monitoring if you want regular updates and alerts.
If you find something that isn’t yours, fill out their dispute form. They’ll investigate, and if the debt isn’t actually yours, they’ll remove it. Your score can jump instantly.
Book Your Strategy CallWhat Actually Determines Your Credit Score
Most people think credit scores are just about paying bills on time. That’s only part of it. Credit bureaus look at five different factors:
1. Payment History
This is whether you pay your bills on time or have late payments. Pretty straightforward.
2. Credit Utilization (30% of Your Score)
This is how much credit you’re using compared to what’s available. If you have $10,000 in total credit limits and you’re using $7,000, that’s 70% utilization. This factor is huge.
3. Age of Credit Accounts
Older accounts help your score. They show you’ve been managing credit responsibly for a long time.
4. Credit Mix
Bureaus want to see different types of credit. Credit cards, lines of credit, car loans, mortgages, even cell phone bills. People behave differently with different types of credit, so having a mix gives a better picture.
5. New Credit Inquiries (10% of Your Score)
Every time a lender checks your credit, it’s recorded. Too many checks in a short time hurts your score.
Here’s the kicker: your credit report spans seven years. That late payment from five years ago? Still on there, still affecting your score.
The Credit Utilization Secret
Credit utilization is one of the biggest factors in your score, but most people misunderstand how it’s calculated.
Not all debt counts toward utilization. Your mortgage, car loan, and student loans don’t really factor in. These are installment loans with fixed payments.
What matters is revolving credit: credit cards and lines of credit.
The Magic Number: 30%
Keep your total credit utilization under 30% of your available limits. If you have $10,000 in total credit limits, keep your balances under $3,000.
Between 30-70%? Your score will still improve as you pay down debt, just slower.
Above 70%? Your score can actually drop month after month, even if you never miss a payment. I’ve seen it happen to clients who were perfect with payments but had high balances.
Never Close Old Credit Cards
This might sound backwards, but closing credit cards hurts your score.
When you close a card, you lose that available credit. Your utilization percentage on remaining cards goes up instantly. You also lose the age of that account, which drops your average account age.
Instead of closing cards you don’t use, lock them in a safe. The open account with available credit helps your score, even if you never touch it.
My Favorite Trick: The Credit Limit Increase
This is the fastest way to boost your score if your utilization is high.
Call your credit card company. Tell them you’ve been a customer for X years, you’ve paid on time, and you’d like a credit limit increase.
Here’s the math: Say you have a $5,000 limit with a $3,000 balance. That’s 60% utilization. If they increase your limit to $8,000, you now have 37.5% utilization with the same balance. Your score jumps without you paying anything.
The Trade-Off
They’ll need to check your credit to approve the increase. But here’s why it’s worth it:
- Credit utilization = 30% of your score
- Credit inquiries = 10% of your score
The benefit outweighs the cost.
Important Warning
If the first credit card company says no, stop. Don’t call five different companies. You’ll just rack up credit checks with no benefit.
And don’t spend the new available credit. The whole point is to lower your utilization ratio.
Not All Credit Cards Are Equal
Lenders view credit cards differently based on who issued them.
Cards from Capital One and MBNA? They have credit repair programs and approve almost anyone. So having one doesn’t impress lenders much.
Cards from TD, RBC, Scotiabank, BMO, or CIBC? These banks have stricter requirements. Having one shows you met higher standards.
If you only have alternative lender cards, try to get a bank card if you can qualify. It’ll boost how lenders see you.
Why Work With a Mortgage Broker
If you shop for mortgages on your own, you might apply at three different banks. That’s three credit checks.
A mortgage broker checks your credit once, then shops your file to dozens of lenders. You get more options with fewer credit inquiries.
Same thing with car loans. Find the car first, then apply for financing at one dealership that can access multiple lenders.
Consider Debt Consolidation
If you’re carrying credit card debt at 20% interest, a consolidation loan might help.
Banks offer consolidation loans at 7-12% interest. You use the loan to pay off all your credit cards, then make one monthly payment on the consolidation loan.
How It Helps Your Credit
Your credit cards now show zero balances. Your utilization drops to almost nothing. Your score can jump significantly.
Plus, you’re paying way less interest, so more of your payment goes to principal. You’ll get out of debt faster.
Consolidation loans have fixed terms of one to seven years. You’ll know exactly when you’ll be debt-free.
Why a Higher Credit Score Matters
Better interest rates on everything. Even 0.5% less on a mortgage saves thousands of dollars.
Higher borrowing capacity. If your score is above 680, lenders allow higher debt ratios. You can qualify for bigger mortgages. This matters if you’re building a rental property portfolio.
More job opportunities. Some employers check credit reports. If they’re choosing between two equal candidates, credit history can be the deciding factor.
More lending options. Poor credit limits you to subprime lenders with worse terms.
The Bottom Line
Building credit takes time because your report spans seven years. But you can see improvements quickly if you focus on the right things.
Check your credit report for errors. Keep utilization under 30%. Don’t close old cards. Consider asking for limit increases if your utilization is high.
And remember: you can hurt your credit even with perfect payments if your utilization is too high. Credit scoring is more complex than most people realize.
Start with your free annual credit report from Equifax. See where you stand. Then pick one or two strategies from this article and get to work.
Book Your Strategy CallFrequently Asked Questions
You can get one free credit report per year from Equifax Canada. At minimum, check it annually. If you’re planning to apply for a mortgage or other major loan soon, check it a few months before so you have time to fix any errors.
Keep your total credit utilization under 30% of your available limits for the best results. Between 30-70% will still help your score as you pay down debt, but above 70% can actually hurt your score even if you never miss payments.
No. Closing old credit cards reduces your total available credit, which increases your utilization percentage. It also removes an account with positive age. Instead, lock unused cards in a safe. The open account helps your score even if you never use it.
It requires a credit check, which has a small negative impact. But credit utilization accounts for 30% of your score while inquiries only account for 10%. If the increase lowers your utilization significantly, the benefit outweighs the cost.
Credit reports in Canada span seven years. Late payments, collections, and other negative items will remain on your report for up to seven years from the date of the activity.
No. Credit utilization focuses on revolving credit like credit cards and lines of credit. Installment loans like mortgages, car loans, and student loans don’t significantly impact your utilization calculation.
A mortgage broker checks your credit once and then shops your file to multiple lenders. If you apply at banks individually, each one checks your credit. Multiple inquiries in a short time hurt your score and signal desperation to lenders.
No. Cards from major banks like TD, RBC, Scotiabank, BMO, and CIBC carry more weight because they have stricter approval requirements. Cards from Capital One or MBNA are viewed less favorably because they approve people with weaker credit.
