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15 July 2025
Having a good credit score isn’t just about getting a rewards credit card or buying your dream home.
It’s a key that opens many doors in your financial life:
better interest rates, faster approvals, and even easier job or rental opportunities. Yet, despite its importance, it is often misunderstood.
Here are some essential tips to get started on
optimizing your credit score and making positive changes.
Meeting payment deadlines is essential: it is one of the first things that credit bureaus Equifax and TransUnion consider.
For open accounts (such as phone plans) and revolving accounts (credit cards, lines of credit, etc.), it is recommended to pay the full balance when the monthly statement arrives.
For credit cards, it is suggested not to use the card and to pay the balance the same day or the next day. You need to show credit bureaus and lenders that it is easy for you to use the credit products available to you.
For installment accounts (auto loans, personal loans, etc.), it is essential not to miss any payments. A late payment can cost between 5 to 100 points:
A 30-day late payment can result in a loss of a few points.
A 60-day late payment can result in a loss of 20 to 50 points or more, depending on your situation.
A 90-day or longer late payment can result in a loss of 50 to 100 points.
A collection entry on your credit report can have significant consequences on your financial health.
This is a note that appears when you have an unpaid account sent to a collection agency, often due to a prolonged delay or non-payment.
Sometimes unavoidable, there are two negotiation options available in this situation:
Depending on your needs, if it is financial, you may be able to negotiate a collection debt for up to 50% and request a receipt marked as the final payment.
If your priority is your credit score, you can negotiate with the collection agency to pay the full debt conditional on the removal of the collection from your credit report. If you choose this option, you must pay the debt by check and write in the “note” section of the check: “Final payment and conditional on full removal of collection from my credit report.”
A collection entry on your credit report can cost between 50 to 100 points, or more depending on circumstances. If your score was high before the entry, the impact will be greater than if it was already low. Higher debt amounts also increase the impact.
When debts accumulate, it can be tempting to think of instant solutions like bankruptcy or a consumer proposal. While these options are sometimes necessary as a last resort, it is always preferable to avoid them.
After bankruptcy or a consumer proposal, rebuilding your credit file takes time and effort. You essentially start from scratch, with limited or no credit history. Even though this may slow your projects for several years, it is entirely achievable.
It is recommended to negotiate with creditors, reevaluate your budget, or consolidate debts into a lower-interest loan. A financial advisor or credit agency can help you explore these options. A consumer proposal entry on your credit report can cost between 50 to 150 points, depending on your overall credit history and how the proposal is handled. It will remain on Equifax and TransUnion for 3 years after discharge.
A bankruptcy entry on your credit report can cost between 150 to 300 points, depending on your overall credit history and score before filing. It will remain on Equifax for 6 years and TransUnion for 7 years after discharge. A second bankruptcy will remain on both bureaus for 14 years after discharge.
When it comes to credit, paying on time is not enough. The amount you use relative to your credit limit — called the utilization rate — also plays a key role in your credit score. It is recommended not to exceed 30% of the total limit of your credit cards and/or lines of credit. For example, for a card with a $1,000 limit, it is advised not to exceed a $300 balance to maintain a good utilization rate.
The lower your utilization rate, the better your chances of an optimal credit score. High utilization can give the impression that you rely heavily on credit, even if you pay on time. Conversely, using a small portion of your credit shows lenders that you manage your finances well. It is a good sign of reliability for future loan or mortgage applications. Additionally, keeping a low balance gives you more flexibility in case of emergencies and helps avoid unnecessary interest charges. Exceeding your credit card limit can cost between 10 to 50 points, or more, depending on your entire credit report.
Using credit is good. But managing it wisely is even better!
Applying for a credit card, loan, or financing may seem trivial, but each application leaves a trace on your credit report. And it’s not without consequences. When you apply for credit, the lender checks your report. Each inquiry lowers your credit score, especially if multiple applications are made in a short period. Too many recent inquiries can signal financial distress or desperation for credit. Lenders may see this as a risk and hesitate to approve you.
Before applying, make sure you really need it. Compare options without always going through an official application, or opt for soft inquiries (like prequalification checks), which do not affect your score.
It is advised not to exceed 5 inquiries in 12 months, as more than 5 can result in a 25-point drop and/or up to 10% of your credit score.
Improving your credit score is not a matter of
luck — it’s a matter of habits. By keeping balances low, paying on time, limiting credit applications, and avoiding negative credit events, you lay the right foundation. These are simple yet significant actions that can make all the difference when it comes time to buy a home, a car, or simply breathe financially.
Take care of your credit today, and it will take care of your projects tomorrow.
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