Golden rules of credit

Regardless of your credit situation, following these rules can help you build and maintain a stronger credit standing:

1. Make all your payments on time, regardless of the type of debt. Making timely payments will help you establish a positive payment history on your credit file and help prove to lenders that you can handle credit. Missing payments will do the opposite. If you are falling behind on your payments, then try calling the lender to see if you can come to an arrangement to prevent further damage to your credit.
2. Don’t use too much of your revolving credit. Revolving credit allows you to use credit as needed (up to the credit limit) over an extended time frame, including credit cards and lines of credit. If you have either or both products, then it is recommended that you don’t use more than 35% of the credit limit¹. For example: if you have one credit card with a $1,000 limit, try and keep the balance at $350 or less.
3. Don’t apply for credit too often. When you apply for credit, a lender will do an inquiry on your credit file. This inquiry will slightly lower your credit score and appear on your credit file for all other lenders to see that you are looking for credit. Applying for credit too frequently may hurt your score significantly and show lenders that you are frequently trying to find new credit. Consider waiting until you are certain that you will be approved before applying for credit. You can do this by monitoring your credit with one of the major credit bureaus, or by using free options such as Credit Karma or Borrowell.
4. Have a mix of active tradelines on your credit file. A tradeline is an industry term to describe an account on your credit report. In order to build and maintain credit, you will need to have some active loans and credit cards. Each time you take out a new loan or credit card, a new tradeline is added to your credit report showing information about the creditor and your debt, including your payment history. Lenders like to see both revolving credit (e.g., credit cards, lines of credit), and installment credit (e.g., personal loans, auto loans) on a potential borrower's file². Making timely payments on multiple types of credit will help prove to lenders that you are capable of taking on these financial responsibilities in the future. Equifax and TransUnion are the two main credit bureaus in Canada. For more information on how credit and your credit score work, please visit:
   https://www.equifax.com/personal/education/
   https://www.transunion.ca/build-credit#

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¹ https://www.consumer.equifax.ca/personal/education/credit-score/credit-mix/
² https://www.canada.ca/en/financial-consumer-agency/services/credit-reports-score/improve-credit-score.html