Get a free, no obligation personal loan quote with rates as low as 6.99%
Get Started You can apply with no effect to your credit score

Sponsored by

Fairstone logo

For this blog, we’ve teamed up with our partners at Fairstone.

The amount of debt you have plays a role in your credit score, but it’s not the only thing that affects it. Credit utilization, payment history, and credit inquiries are all factors that can impact your credit score.

We asked our partners at Fairstone to provide some tips on how to rebuild your credit while you’re in debt.

Keep your credit card balance below 25% of your limit

Even if you’re making payments on time, carrying a high balance on your credit card can negatively affect your credit score. What exactly do we mean by a ‘high’ balance? As a general rule, using anything more than 25% of your available credit limit can hurt your credit score.

You can request a limit increase to lower your credit utilization, but if you’re denied an increase, or you’re struggling to pay down your balance, consider consolidating credit card debt to make it more manageable to pay off.

Limit credit card purchases to a few set expenses a month

Another way to lower your credit utilization is to only put a few set expenses each month on your credit card (and make sure these expenses use less than 25% of your limit). This will help increase your credit score, and ensure the amount you have to pay off each month is predictable and manageable, which will also positively impact your payment history.

Setup automatic payments to make bill payments on time

Some people are surprised to hear that your balance and payment history on regular bills like phone, TV, and internet are reported to the credit bureau. Whether you’re carrying debt or not, missed or late bill payments can reflect poorly on your credit score. We suggest setting up automated payments to avoid missing a payment; over time this can help improve your payment history and your credit score.

Combine multiple bills into one monthly payment with a consolidation loan

Are you struggling to manage multiple debts and payment deadlines? A debt consolidation loan allows you to combine multiple bills into one payment. By only having one payment to worry about, you’re more likely to make payments on time. Not only will this help your credit improve, but making regular payments will also help you pay off debt faster.

Keep credit inquiries to a minimum

A credit inquiry can be anything from applying for loan or mortgage to filling out an application to rent an apartment. If you’re looking to improve your credit score, you should wait three to six months between inquiries, as more than that can reflect poorly on your credit score.

When you want to avoid credit inquiries, beware of certain situations where you may not expect a credit check, like shopping for a car. If you go to a car lot just to look around, the salesperson may ask you for your information and could end up doing a hard credit check, even if you weren’t planning on making a purchase. Make sure to always ask whether someone is doing a hard credit check before handing over identification and/or your social insurance number.

Remember that paying off debt isn’t the only solution for improving your credit score. It’s also important to consider other factors that affect your credit score, like payment history, credit utilization, and credit inquiries, in order to set yourself up for a better financial future.

Looking for more information on credit? Click here to read Fairstone’s article on how credit scores work.

Fairstone avatar on Loans Canada
Fairstone

Fairstone Financial is a leading alternative lender in Canada, they have been helping Canadians since 1923. Their mission is to provide Canadians, with fair to good credit, with an affordable alternative to payday loans.

More From This Author

Special Offers

More From Our Experts

https://loanscanada.ca/wp-content/uploads/2023/09/GlobeMailTopCompanies2023-1.png
Loans Canada places No. 228 on The Globe and Mail’s fifth-annual ranking of Canada’s Top Growing Companies.

By Caitlin Wood, BA
Published on September 29, 2023

Loans Canada is excited to announce it has made it onto the Globe and Mail’s Top Growing Companies list for the second year in a row.

https://loanscanada.ca/wp-content/uploads/2023/09/Finder-Awards.png
Finder Awards Finalists: Personal Loans Customer Satisfaction Awards 2023

By Priyanka Correia, BComm

Loans Canada is happy to announce it received the finalist award in the Best Personal Loan Search Platform category.

https://loanscanada.ca/wp-content/uploads/2016/12/caution-1.jpg
Beware of Fraudulent Lenders Impersonating Loans Canada

By Caitlin Wood, BA

A note to our clients about fraudulent lending practices and illegal upfront fees.

https://loanscanada.ca/wp-content/uploads/2021/04/T1213.png
The T1213 Form Explained

By Corrina Murdoch

The names of specific tax forms in Canada can be confusing, like the T1213 tax form. What is it and do you need to file this year?

https://loanscanada.ca/wp-content/uploads/2022/03/How-To-File-A-Notice-Of-Objection-To-Dispute-Your-Tax-Return.png
Filing A Notice Of Objection To Dispute A Tax Return

By Corrina Murdoch

Do you disagree with your notice of assessment? Find out how to file a CRA notice of objection and have the issue resolved.

https://loanscanada.ca/wp-content/uploads/2022/01/Notice-Of-Assessment.png
What Is A Notice Of Assessment?

By Corrina Murdoch

A Notice of Assessment is the government’s evaluation of your income tax return. After you file your taxes each year, the CRA sends you an NOA.

https://loanscanada.ca/wp-content/uploads/2024/03/Canada-tax-reviews.png
Canada Tax Reviews

By Lisa Rennie

Wondering if you have any unclaimed cash with the CRA? Canada Tax Reviews can help you recover unclaimed tax credits from previous years.

https://loanscanada.ca/wp-content/uploads/2024/03/Nyble-vs-bree.png
Nyble vs. Bree: Which One Is Better?

By Lisa Rennie

Bree and Nyble make great alternatives to expensive payday loans. If you're short on cash, these services can help cover you.

Recognized As One Of Canada's Top Growing Companies

Loans Canada, the country's original loan comparison platform, is proud to be recognized as one of Canada's fastest growing companies by The Globe and Mail!

Read More

Why choose Loans Canada?

Apply Once &
Get Multiple Offers
Save Time
And Money
Get Your Free
Credit Score
Free
Service
Expert Tips
And Advice
Exclusive
Offers

Build Credit For Just $10/Month

With KOHO's prepaid card you can build a better credit score for just $10/month.

Koho Prepaid Credit Card