Building a Good Credit Score

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I write about debt a lot. It’s not that I particularly enjoy writing about debt, it’s unfortunately just a subject that many people can relate to– Canadians have record debt levels after all. We get so focused on debt, that sometimes we forget about other things, such as having a good credit score.

Credit is probably the reason we got into debt in the first place, so it’s understandable if we’ve been avoiding credit while paying down debts. It’s also not just those in debt who’re avoiding credit, many of us have switched to cash only to help keep our budgets balanced. It doesn’t matter what situation we’re in, it’s important to try and maintain a good credit score.

The main reason we want to have a good credit score is because the majority of us are eventually going to need a major loan. There’s no chance we’ll be approved for a mortgage or line of credit unless we have a good credit score.

Understanding our credit score

We’re assigned a credit score based on our credit history and our standing really falls into 5 different categories.

Very Good

The best way to build a good credit score is to use our credit cards on a regular basis and pay our bills on time. Technically speaking, we don’t need to pay off your full balance every month to get a good credit score, but obviously we want to avoid the insane interest charges.

Using our cards regularly doesn’t even mean every day or 3 times a week. Credit bureaus just want to see that we’re using credit responsibly, so even if we’re  making just one purchase a month and paying it off immediately, that looks good in their eyes. Some of us falsely assume that just having a credit card is enough, that’s simply not the case. We do need to make regular transactions so the credit bureaus see the activity on our accounts.

The majority of Canadians have a credit score over 600, so there’s no real need to obsess over what our exact credit score number is. What does matter the most is not missing payments. Our creditors might forgive one missed payment, assuming it was an honest mistake, but miss 2 payments and our credit score will take a major hit.

[icon name=”share”] Related: Does applying for a credit card affect your credit score?

good credit score

Using credit effectively

Building a good credit is based on a few different factors and one of those factors is our credit utilization. For example, let’s take 2 people with credit cards that both have a $5,000 limit. Person A carries a balance of $4,500 until his/her statement arrives and immediately pays off the full balance. Person B, on the other hand has a balance of just $500 but only makes the minimum payment.

In this scenario Person A has a utilization of 90% ($4,500/$5,000), while Person B has a utilization of 10% ($500/$5,000). As weird as it sounds, Person B will probably have a higher credit score than Person A because they have a lower credit utilization ratio.  Now this doesn’t mean you should carry a balance, just understand credit bureaus have to gauge risk and generally speaking people with a high utilization ratio are more likely to default, hence the lower score. If we’re similar to Person A, it may be worth our while to increase our credit limit or to apply for another card.

Another easy way to increase our credit score is to have more than one card. Having one card used to be enough, but now credit bureaus want to see how we manage the credit available to us. Even though I stated that credit bureaus like to see activity, we might not have to use all our cards. If one of our cards is older and we’ve since applied for a newer and better card, then it’s okay to simply “retire” that old card. Don’t cancel that old card, simply keep it in a box and use your new card, the credit bureaus like to see a long history so it’s worth keeping some old cards “active.”

Final word

Despite what we may have heard, carrying a balance is not necessary to get a good credit score. Credit bureaus don’t care if we make full payments or minimum payments. As long as we make our payments in full and on time, we’ll be fine– plus we won’t have to pay any interest charges.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Joe on September 25, 2015 at 12:07 AM

    Nice read Barry. Most of us never really think about our credit score until we actually need credit. One thing I got in the habit of doing is writing the different companies (Equifax ect.) and requesting a FREE copy of our credit scores once a year. Take care.

    • Barry Choi on September 25, 2015 at 1:02 AM

      Hey Joe,

      Yes getting a free credit report once a year is good practice. It doesn’t show you your exact credit score # but at least you’ll know what cards have been opened under your name.

  2. Susan on August 31, 2018 at 9:13 PM

    In this scenario Person A has a utilization of 90% ($4,500/$5,000), while Person B has a utilization of 10% ($500/$5,000). As weird as it sounds, Person B will probably have a higher credit score than Person A because they have a lower credit utilization ratio

    And this is the why modern credit scores are stupid and useless. In the scenario where someone doesn’t use credit and has actual money in the bank, that person would have trouble getting a mortgage even though they are the better risk. Lies lies and statistics (I believe that is the quote).

    • Barry Choi on September 1, 2018 at 8:13 AM


      I agree that the way credit scores are calculated is quite dated and needs an updated. Unfortunately, I don’t we’ll ever see any changes.

  3. Susan on September 1, 2018 at 12:22 PM

    Yesterday we were at Scotiabank to set up m 18 yo son with a bank account & Visa debit card because the university he is going to is a Scotiabank campus. To avoid interbank charges for ATM withdrawals we wanted to have an account he can use for cash. Then they started to offer him a Visa card. I said “we don’t do credit cards” and he said this will help build his credit rating. I get that but 1) at 18 a credit card and away from home translates to spending too much money and 2) he has plenty of time to build a credit rating once he is closer to graduating. The Scotiabank guy looked at us like we are aliens.

  4. […] you can imagine, Borrowell’s credit coach is built to help you understand and improve your credit score. When you’re logged in, you can instantly see how your credit score compares to other Canadians […]

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