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How to improve your credit score during the pandemic

A credit score shows lenders how you manage your finances and how likely you are to pay back your debts on time. Having a high credit score can help you access favourable interest rates on loans and other credit products, which can reduce borrowing costs. We’ve teamed up with Smarter Loans to teach Canadians how to improve their credit amidst the ongoing pandemic.

What credit score should you be aiming for?

A credit score is a three-digit number ranging from 300-900, with 900 being the highest credit score someone can achieve. Credit scores ranging from 660-749 are considered “good”, but if you want to be in the “excellent” category, you need a score of 760 or higher.

Even if you’re facing a reduced income or job instability, building your credit score during the pandemic is doable by following these six steps:

1. Understand your cash flow

During the pandemic, many people have seen changes to their income and cash flow. Unemployment in Canada is the worst it’s been since June 1936. Millions of Canadians have experienced a layoff or reduced hours, especially in the tourism, transportation and retail industries. If you’re one of the millions of Canadians who have experienced a dip in income, it’s time to reassess your personal cash flow.

Cash flow is how much money comes in, how much money goes out, and when. Understanding personal cash flow is essential for paying bills on time – and bill payments are one of the factors that affect your credit score. If your paycheck doesn’t align with your bill payments, and you don’t have enough cash in your account to pay your bills, you could face Not Sufficient Funds (NSF) charges to your bank account and see impacts your credit score over time.

A quick online search can bring up spreadsheets that you can use to understand, manage and optimize your cash flow. One way to improve your personal cash flow is to set up automatic payments with your service providers. It’s a good idea to set up automatic payments on the day you’re paid. This way your bills will always be paid on time before you’re tempted to spend the money elsewhere, which can actually help improve your credit score.

2. Create sinking funds

Sinking funds are accounts that help you set money aside for a specific purpose. You can have multiple sinking funds which helps you save money for travel, bills, hobbies, gifts, renovations or whatever else you have in mind. Having a specific fund for your bills can help you avoid late or missed payments that damage your credit score, even when you experience an unexpected expense or change in cash flow.

Tip: When you are creating multiple sinking funds, find a bank that offers free or low-cost accounts to reduce any additional expenses.

3. Keep your credit utilization ratio under 30%

Another factor that affects your credit score is your credit utilization ratio – the amount of credit you’re using divided by the amount of credit you have available. A credit utilization over 30% (for example, owing more than $300 on a credit card with a $1000 limit) will result in a negative impact to your credit score. Consistently using all of your credit can signal to lenders that you’re likely living above your means, even if you’re paying the balance off each month.

To lower your credit utilization, you should focus on paying down your balances so you’re below the 30% threshold. If it’s available to you, another option is to increase your credit limit. Just make sure you don’t consistently max out your higher limit or else your credit utilization will increase again.

4. Reduce expenses

When experiencing a reduced income, it’s a good idea to cut out subscriptions and expenses. This is especially important if these services are charged to your credit card every month, contributing to a higher credit utilization ratio.

Ask yourself:

  • Can I lower my cell phone bill?
  • Can I cancel a streaming service?
  • Am I still paying for a gym membership I no longer use?

Anything you can cut out will allow for more wiggle room in your budget, making it more likely you’ll have enough money to pay your bills on time each month.

5. Don’t apply for new credit unless it’s absolutely necessary

Every time you apply for a new credit card, mortgage or loan, lenders will check your credit score. This “hard-check”, also known as a hard credit inquiry, lets lenders know that you were recently looking into new credit. Multiple inquiries in a small timeframe (for example, within six months) can negatively impact your credit score since it signals credit-seeking behaviour. When you are trying to build up your score, avoid applying for multiple credit cards and other loans.

6. Hold on to your older credit cards

Your credit history is another factor that affects your credit score. It might seem like a good idea to cancel cards you aren’t using, but demonstrating that you’ve had access to credit for a long period of time can actually help your credit score. Since they can technically improve your credit score, credit cards without an annual fee may be worth holding on to (but a card with an expensive fee could be worth getting rid of).


To improve your credit score, you need to demonstrate responsible credit behaviour, such as paying your bills on time and using less than 30% of your available credit. When facing a reduced income as a result of the pandemic, you may need to reassess your expenses to ensure you’re able to manage your cash flow – and your credit – responsibly.

For more information about building your credit score and what impacts your credit over time, check out this guide to credit scores in Canada.