Introduction
When you are paying rent on a monthly basis you may be missing out on a great financial opportunity—building your credit history. Many renters don’t realize that their payments can be used to improve their credit history, just like a mortgage or a car loan. In Canada, an excellent credit score is a crucial requirement to obtain loans, credit card offers with better terms and even to stage future apartment rentals.
Okay, but how do you use your rent payments to get credit? Let’s dive in!
Why Your Credit Score Matters
A credit score is a three-digit score of your financial responsibility. In Canada, credit scores generally cover a range of 300 to 900 with higher scores denoting higher creditworthiness.
A good credit score can help you:
Secure loans with lower interest rates
Get approved for premium credit cards
Rent apartments without extra deposits
Finance major purchases like cars and homes
However, if your credit score is poor, you could experience higher interest rates, loan approvals, or even no ability to get an apartment.
How to Build Your Credit Score in Canada
If you’re wondering how to build credit in Canada, here are the best ways to do it:.
- Report Your Rent Payments
Many people ask, “Can I improve my credit score with rent? The answer is YES!
In Canada there are a number of services such as Rent Advantage (Equifax), and Borrowell, that permit users to report rent payments to credit reporting companies. Rent, as an ongoing payment, allows it to contribute to the development of a sound payment history, which is an important component of your credit score.
- Use a Credit Card Responsibly
As for having not obtained a credit card yet, obtaining a credit card is a good option for building credit. Look for credit cards to build credit, such as secured credit cards or student credit cards.
Tips for using a credit card wisely:
Maintain a low credit utilization (less than 30% of your limit).
Always pay your bill on time
Avoid maxing out your credit card
- Pay Bills on Time
Your payment history makes up 35% of your credit score. Late payments for utility bills, cell phone bills or credit cards can damage your credit score. Establish automatic payments in order to never miss a payment date.
- Diversify Your Credit Mix
Credit bureaus in Canada also take credit types into consideration. Having a combination of credit cards, installment loans and lines of credit can, over time, lead to an improvement of your score.
- Avoid Hard Credit Inquiries
Every time you apply for a new credit product, an inquiry (hard inquiry) is initiated on your report. Too many hard inquiries during a short time can decrease version score. Rather, space out credit applications, and check your score using soft inquiries which do not harm your credit.
- Keep Old Credit Accounts Open
Your credit history length impacts your score. On the subject of credit history, it is preferable to retain an aged credit card with a clean payment track record.
How Long Does It Take to Build Credit?
Building a good credit score doesn’t happen overnight. If you’re starting from scratch, it can take 3 to 6 months to establish a basic score and 12 to 24 months to reach a strong rating (700+.
If you’re wondering “How to get a 700 credit score in 30 days?—the reality is that it takes consistent efforts over time. Nevertheless, they can be improved by making a repayment, following payments on due dates, and doing not request new credit checks.
Best Way to Build Credit Quickly
If you’re looking for the fastest way to build credit, follow these steps:.
Report your rent payments to credit bureaus
Leverage secure credit card and clear the balance in full.
Keep credit utilization low (under 30%)
Avoid applying for multiple new credit accounts
Pay all bills on time
It is important to occasionally review your credit report for mistakes, and to dispute any errors.
FAQs on Credit Building in Canada
- What is a good FICO® score in Canada?A good FICO® score is generally considered to be 660 or above. A score above 760 is considered excellent.
- How do I build my credit score faster?The best way to build credit quickly is by making on-time payments, keeping your credit utilization low, and reporting rent payments.
- So I can build my credit score without a credit card, right?Yes! You can declare rent payments, draw down a small personal loan, or engage with a credit-building service such as KOHO or Borrowell.
- How long does it take to build a 700 credit score?For most people, it can take 6 months to 2 years, depending on your financial habits.
- How to get a 100% credit score?A perfect 900 credit score is rare, but maintaining low debt, on-time payments, and a long credit history can get you close!
Conclusion
If you’re still paying rent without benefits, now is the time to change that. By disclosing your rental payments, maintaining good credit card credit, you are on your way to steadily developing a good credit score in Canada.
Start today and let your rent work for you!
