In Ontario’s competitive rental and housing markets, having good credit is essential. From beating out rental applicants to qualifying for a mortgage or loan, to landing a government job, healthy credit is a must. If your credit score is lagging, your best bet is to take some time and effort to give it a boost to open the doors to financial opportunities.
What Is A Credit Score?
Your credit score is a crucial three-digit number that plays a key role in determining whether or not you’d be able to secure credit and loan products in Ontario and Canada, in general. If your credit score is less than 650, you’ll find it tough to get approved for car loans, mortgages, personal loans, and even cell phone contracts in Ontario.
If your credit score is currently suffering, you’d be well-advised to pursue credit improvement in order to get that number back to where it could be. Doing so will make your financial life easier in Ontario and will help you secure financial products in the future.
Do You Have Good Credit? Check It For Free Here
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What Does It Mean If You Have A 450 Credit Score?
A credit score of 450 falls within the ‘poor’ credit score range. This can create roadblocks in various aspects of life, as lenders will view you as a risky borrower and may hesitate to approve your loan applications. Moreover, even if you can get approved for financing with poor credit, you’ll likely be charged much higher interest rates to offset the lender’s risk.
Poor credit can also impact other aspects of your life, including securing a rental or a job. It may also lead to higher insurance premiums as some insurers use credit scores to set premium rates.
What Does It Mean If You Have An 800 Credit Score?
An 800 credit score is considered ‘excellent’, and can open the doors to various financial products at the lowest rates and best terms. With a score this high, you can benefit from the following low interest rate, high approval rates and higher loan amounts.
Similarly, with a credit score of 800, you’ll be eligible for top-tier rewards cards with luxury perks.
| How Does Your Credit Score Compare To Others In Ontario? A recent study by Borrowell shows that the average Canadian credit score was 672, which is classified as ‘good’ credit. |
How Do You Improve Your Credit?
Building credit in Ontario can be a time-consuming process that requires plenty of dedication and a little sacrifice. Here are some strategies and programs to consider to improve your credit in Ontario.
Develop Good Credit Habits
Several factors play a key role in your credit score. Developing and maintaining healthy credit habits, like the following, can help you repair your credit score:
- Timely Payments: Making on-time payments is the most important thing you can do to improve your credit score. Payment history makes up roughly 35% of your credit score calculations, so make an effort to meet due dates. If need be, consider automating your payments or setting reminders each month to ensure you never miss a due date.
- Credit Utilization: Keeping your credit utilization ratio under 30% will help improve your credit score. This refers to your outstanding balance on your credit card relative to your credit limit.
- Keeping Old Accounts Open: Another factor that contributes to your credit score is the age of your accounts. Generally speaking, old accounts are better for your credit score. Consider leaving old accounts open, even if you’re not using them.
- Limiting Credit Applications: Every time you apply for a new loan or credit account, lenders in Ontario will be pulling your credit report to see your credit, which will make your credit score dip, even if just temporarily. For this reason, resist the urge to apply for too many loans within a short time frame.
Take Out A Secured Credit Card
If you have bad credit and can’t get approved for a traditional credit card, a secured credit card may be worth considering. They’re much easier to get approved for in Ontario, and simply require collateral, which means there is less risk for the creditor.
With a secured credit card, you would be required to make a deposit for a certain amount, which then becomes your credit limit. You are only able to spend as much as you’ve deposited. Once you’re approved, you can continue to spend against the card and make timely payments every month, which can help you to build good credit and eventually be able to take advantage of many loan products in Ontario that requires good credit.
| Annual Fee | Purchase Interest Rates | Min. Deposit | |
 Secured Neo Mastercard | $5/monthly | – 19.99% – 29.99% – QC: 19.99% – 24.99% | $50 |
 Secured Tims® Mastercard | $0 | – 20.99% – 26.99% – QC: 20.99% – 24.99% | $50 |
 Home Trust Secured Visa Card | 0$ or $59 | – 19.99% (no annual fee) – 14.90% (with annual fee) | $500 |
 Vancity enviro™ Secured Visa* card | $0 – $395 | 11.25% or 19.50 % | $500 |
Use Credit Building Services
A credit building program helps consumers establish or improve their credit score by reporting consistent, on-time payments to the credit bureaus. A few good examples of such programs include the following:
- Chexy: Chexy allows renters to use their rent payments to build credit by allowing them to pay their rent using their credit cards.
- Nyble: Nyble offers a small no-interest credit line and credit-building tools to help consumers improve their score without a credit check.
- KOHO Cover: This program offers an interest-free cash advance of up to $250, available through a paid subscription bundle that also includes financial guidance and a free credit report.
- Spring Financial – The Foundation: The Foundation is a 12-month credit-building program that reports payments to credit bureaus while helping users save up to $750.
Consider Credit Repair Services
Many services are available in Canada that specialize in helping consumers repair their credit and strengthen their overall financial health. Credit repair services work by reviewing your credit report for any inaccuracies that may be lowering your score unfairly.
With the help of a trained professional, your credit history will be fully assessed, followed by a personalized action plan. The goal is to improve your credit and help you develop and maintain healthier financial habits.
That said, these services come with a price, depending on whether you use a software or hire a professional company. To avoid this price tag, you can always tackle credit repair actions yourself, including contacting the credit bureaus, having mistakes on your credit report fixed, consistently paying down your debt, and developing smarter spending habits.
Learn more: Credit Repair
Do Cell-Phone Bills Help Build Credit?
Many cell phone providers in Canada report customer payment activity to at least one of the major credit bureaus. As a result, your monthly phone bills can show up on your credit report and impact your credit score.
Whether your score is positively or negatively affected depends on how you manage your payments. Making on-time payments can be good for our score, while late payments can do the opposite.
If you pay your cell phone bill using a credit card, that’s another way that your credit score may be impacted. Again, timely payments can help boost your credit score, while late credit card payments can hurt your score.
Learn more: Does Paying Your Phone Bill Build Credit In Canada?
Do You Really Need Good Credit?
Having good credit can come in really handy in multiple ways, including the following:
- Buying A Home: Good credit is typically required to secure a mortgage with a traditional lender. Not only will you have an easier time getting approved, but you’ll be charged a lower rate, helping you save money over the loan term.
- Buying A Car: Car loans typically require a credit check. If you have good credit, the lender may be more willing to approve your loan application and charge you a lower interest rate, making your loan more affordable.
- Getting A Rental: Some landlords conduct credit checks as part of the tenant screening process. They may be more likely to choose you over other applicants if you have good credit, as this signifies a higher likelihood that you’ll make your rent payments on time.
- Landing A Job: Some employers, such as those in the financial industry, may want to see your credit score as part of the application process. A higher credit score is indicative of responsible financial behaviour, which is essential when it comes to a job dealing with finances.
- Taking Out A Loan: Whether you’re applying for a personal loan, car loan, mortgage, or any other type of loan, good credit comes in handy. A higher score increases your chances of loan approval with favourable terms.
- Getting A Credit Card: Traditional credit cards typically require good credit for approval. Plus, a higher score can mean a higher credit limit, which increases your borrowing and spending power.
| What are my credit card options if I have bad credit? If you have bad credit, you’ll likely have trouble getting a traditional unsecured credit card. Instead, your options may be limited to secured or prepaid cards. Learn more: Can You Get A Credit Card With A Poor Credit History? |
How Are Credit Scores Calculated?
Credit scores are calculated using specific types of information on your credit report, including the following:
- Payment History. Payment history makes up the biggest component of your credit score, accounting for roughly 35% of your score’s calculation. This refers to whether you pay bills on time. Missed or late payments hurt your score most, while on-time payments help your score.
- Credit Utilization. This refers to how much of your available credit you use, and makes up about 30% of your credit score. A lower ratio is better.
- Age Of Credit History. How long your credit accounts have been open matters when it comes to your credit score. Longer histories are better, and make up about 15% of your credit score.
- Credit Mix. Having a variety of credit types, like credit cards, loans, and mortgages, is a good thing for your credit score. Your credit mix makes up about 10% of your credit.
- New Credit/Inquiries. Applying for new credit typically involves hard credit checks, which can lower your score. This component makes up about 10% of your credit score.
| What Information is on Your Credit Report? Here is some of the information that your credit report will contain: – Personal information such as your full name, date of birth, address and employer(s). – Information about your credit accounts and their transactions – Cell phone accounts – Internet services accounts – Black marks – Public records – Accounts in collections – Credit requests (“hard inquiries”) – Notes about fraud or identity verification. |
| Note: You likely have more than one credit score. This is because some lenders may only report to one credit bureau, while others may report to another bureau. Plus, different scoring models can result in different credit scores. |
Tips On Managing Your Credit
It’s best to adopt good financial habits and behaviour to improve your credit score and maintain it at a healthy level. Here are a few tips to properly manage your credit:
- Speak With A Credit Counsellor: If you have bad credit, reach out to a credit counselling agency, which can provide the support and guidance needed to make all the right moves for credit improvement in Ontario. Credit counsellors will teach you what you need to do to improve your credit score. They may also help you negotiate with your creditors to reduce your debt load or lower the interest rate to make paying off your outstanding balances easier and quicker.
- Find Lenders That Offer Soft Credit Checks During Pre-Application: When a creditor in Ontario pulls your credit report after you apply for a loan, this is referred to as a “hard pull.” It can cause a temporary dip in your credit score. On the other hand, a “soft pull” is when a consumer pulls their own credit report and does not cause any decrease in credit score.
- Monitor Your Credit: It’s recommended that you pull your credit report at least once a year to give you the opportunity to scan it for any inaccuracies that may be pulling your score down. If you notice any errors, have them fixed right away to give your score a bump.
Need Help With Credit Improvement in Ontario?
Improving your credit score certainly takes some due diligence on your part. But sometimes, it can be overwhelming and even confusing. If you need some help with credit improvement in Ontario, get in touch with the pros at Loans Canada today to discover all the products and programs available to give your score a boost.
