How to Build Credit
One common misunderstanding about credit is that having no credit rating is the same as having good credit. That’s not how credit scoring works. If you’ve made the decision to avoid using credit altogether, you may be debt-free, but you’ve limited the options for your future self. If you’re wondering how to build credit, it’s easier than you might think.
Get a Secured Card
If you’ve got no credit history or a bad credit score, getting a secured card can be a solid option. With a secured card, you deposit security funds to your account. It demonstrates to card providers that you’re serious about establishing a solid credit history. Generally speaking, the amount you deposit typically corresponds with the credit limit you’re given.
We’re fans of the Home Trust Secured Visa, as it gives you absolute control over your spending while building your credit rating. Designed to work like a debit card, you simply load money onto the card before using it so there’s never any risk that you’ll ever spend more than what you’ve loaded onto it. Another great option is the Refresh Financial Secured Card. Refresh Financial reports your responsible use to the credit bureaus which helps you build a credit history. Read more about the best cards for bad credit.
Get (and Pay Back) a Personal Loan
One way to build a positive credit rating is to take out a personal loan and make regular, on-time payments. Refresh Financial offers a product called the Credit Builder Loan for loans of up to $25,000. Unlike a traditional loan, the loan amount goes into a secure account at a financial institution. As you make payments—all of which help build your credit history—you receive the money.
Canadian financial technology company MyMarble.ca takes a more directed, bespoke approach to credit. When you sign up with its tool, Score-Up, you receive an evaluation and advice on how to reach your credit target. The subscription fee starts at $49.99 and every payment is reported directly to the credit bureaus so your score is positively impacted simply by using the service.
Tips on How to Improve Your Credit Score
Starting from scratch is one thing, but what if you already have a credit score that’s low? Getting your rating back on track can be a challenge, particularly if you’re carrying outstanding debt, but it’s not impossible.
Get a Low-Interest Credit Card
For the debt-averse, this might seem like a bad idea, but responsible credit card use—meaning that you pay it off on time and in full each and every month—is a great way to build up a good credit score. When searching for which card to get, you might be stuck with slim pickings if your credit score is in the dumpster or you’re carrying high-interest credit card debt. If you’re anxious about racking up interest charges, you might try a low-interest credit card. These cards offer much lower interest rates than traditional ones (that typically charge 19% or higher) — making any outstanding debt more manageable and easier to pay down. And ultimately, that smooth move will help you boost your credit score!
One of the best options is the HSBC +Rewards™ Mastercard®. It offers a low-interest rate of 11.9% on purchases, balance transfers, and cash advances — one of the lowest in Canada. Plus, you’ll earn rewards for every eligible purchase charged to the card, and you can take advantage of the welcome offer: new Cardholders who apply by August 17, 2020 earn 10,000 Points* (a $50 travel value!) plus get a full annual fee rebate for the first year* ($25 value).
*This offer is only available to residents of Canada other than the province of Quebec. (Quebec residents eligible for separate offer)
Get a Balance Transfer Credit Card
The first step to boosting your credit score is to pay off your debt. Carrying outstanding debt is a sure-fire way to suppress your credit score so prioritize debt repayment before other expenses. If you carry substantial credit card debt, your best bet is to move it to a balance transfer credit card with a low (or no!) interest rate. Not only does this help in consolidating your bills, but it will also dramatically reduce the amount of interest you’ll pay.
The CIBC Select Visa* Card is one of the best of the bunch. As a welcome offer, it offers a 0% interest rate for up to 10 months on balance transfers, with a 1% transfer fee.† Plus, you’ll get a first-year annual fee rebate, so signing up won’t cost you a thing.† After the promo period expires, you’ll get a low-interest rate of 13.99% on purchases and cash advances.† It’s ideal for consolidating your debt onto one card and reducing your interest payments.
Get Automated Advice
Adding MyMarble.ca to the mix can help, as it offers a service called Score-Up — “smart” consultation software that can help you achieve your desired credit score fast. This online tool uses a computer algorithm to analyze your credit score and then tells you what action to take to increase your credit score as quickly as possible. It will even tell you which days to make purchases and which days to make payments in order to boost your credit score to the max. If you follow its advice and act responsibly, you could see an increase in your score in as little as 3 months.
Get Into a Credit-Boosting Program
If you’re currently in consumer proposals (which is like bankruptcy), all is not lost. Fast-Track is a credit building program from MyMarble.ca designed to help you out of your obligations while raising your credit score. Through a structured loan plus advice, Fast-Track offers lower interest rates and even incentivizes you with a 4% bonus if you pay off your debt within two years.
How to Rebuild Your Credit Score Fast
Rebuilding your credit score is a task that can take time. The credit bureaus receive information from many sources and some of them, like your utilities or credit card providers, bill monthly. That said, it can take up to 90 days for a new product (like a credit card or loan, perhaps from an online platform like Loans Canada) to show up in your account. But what if you don’t have time to wait? If you’re looking into applying for a mortgage or getting a car loan you might not want to wait for the choice and better interest rates that come with a high credit score. If you have a pressing reason to get a better credit score, there are actions you can take.
Before anything else, you need to do the following:
- Review your credit report. You can get it for free at Borrowell. Note: the request does not affect your score. If there are errors, reach out to your creditors to have your account updated.
- Tweak your credit utilization. One thing that impacts your credit rating is the percentage of your available credit in use. Make sure you’re carrying a low debt load and resist maxing out your cards. If your credit utilization is high, consider getting a limit increase. If this isn’t available to you, another strategy is to become an authorized user on someone else’s account. For example, a trusted family member or friend may add your name to their credit card account, thus increasing the amount of credit available to you and lowering your utilization rate. Just be sure you don’t spend against this credit!
- Avoid actions that trigger credit checks. One of the most common is new card applications. If you’re thinking about changing your cards (like transferring to a low-interest product), don’t test drive. Keep your number of applications to a minimum.
- Make an offer. Did you know that you can offer your creditors a partial payment on your debt? If you negotiate well, you just might be able to settle an outstanding debt.
Perhaps you have done all these things and your score is still lower than you’d like. This is when you might seek assistance from a company like MyMarble.ca. With Score-Up, you have the benefit of expert advice and counselling to get your score up, fast. It’s the only solution in Canada that leverages a combination point deduction, credit monitoring, and budgeting technology to significantly improve your credit score in as little as 3 months.
Frequently Asked Questions About How To Improve Your Credit Score
Your credit score is one of the most important factors when it comes time to apply for a mortgage, make a big purchase like a car, or take out a personal loan. A better score will not only broaden your choices but also give you access to lower interest rates. Whether you’re just starting out and building your credit or repairing a score that’s gone wrong, taking these steps towards a healthier credit rating is a gift to your financial future.
Insurance coverage(s) included with CIBC credit cards are underwritten by Royal & Sun Alliance Insurance Company of Canada. You may contact the insurer at 1 866 363-3338 in Canada and the U.S or collect from elsewhere at 905 403-3338 or visit cibccentre.rsagroup.ca. Some insurance coverage(s) require purchase(s), common carrier fares, accommodations and other trip costs to be charged to the card to activate coverage. Other conditions may apply. For important information regarding coverage, eligibility requirements, benefits, pre-existing health/medical conditions, limitations and exclusions, see cibc.com/ca/credit-card/agreements-insurance.html and the insurance certificate(s) in your card package.