How to rebuild your credit score

Rebuilding your credit score is simple, but it takes some time and commitment.

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If you find yourself with a bad credit score, rebuilding it is important if you plan to get credit and affordable financing in the future. Fortunately, rebuilding your credit is not particularly difficult – however it does take time, some money and plenty of effort.

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Name Product Starting price Trial period Price per month Credit scores Credit monitoring Credit reports Update frequency
Credit Verify
7 days

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How to rebuild your credit score

There are a variety of ways to improve your credit score including:

  • Review your credit report. Obtain a free copy of your credit report and make sure it’s accurate. Check for any errors – and report them to the credit bureau – as they’ll likely be bringing down your score.
  • Pay your bills on time and in full. Paying your bills on time is one of the best ways to increase your credit score. Paying them in full can help you build up your score even more, showing lenders you’re responsible with credit.
  • Reduce your existing debt. Pay down your debt in order to increase your credit utilization ratio. This essentially means you’ve got access to more credit, but are only using a portion of it. Try to get your ratio under 30% to increase your credit score.
  • Avoid closing old accounts. The length of time that you have credit accounts open affects your credit score. The longer you have accounts open, the better your score will be.
  • Avoid applying for new credit products – unless you’re going to be responsible. Every time you apply for a new credit product, a lender typically does a “hard pull” on your credit report in order to check your score and credit rating. Each time this happens, your score drops a few points. However, if you’re going to apply for a new product to help increase your score (and your credit utilization ratio), you’ll need to pay back the balance on time and in full to ensure you actually help your score – and not hurt it.

Can you rebuild your credit with a secured credit card?

One of the cheapest ways to increase your credit score is to use a secured credit card. These products usually come with a small monthly or annual fee and a small credit limit, however these cards can help increase your credit score – as long as you pay back your balance on time and in full.

Lenders that offer secured credit cards typically report your on time payments to the credit bureaus, which can help you build up your score over a period of time.

Compare secured credit cards

Name Product Required Deposit Purchase Interest Rate Cash Advance Rate Annual Fee Reward
Refresh Financial Secured Credit Card
$200 - $10,000
Take advantage of a low annual fee, with no credit check and guaranteed approval once you secure your credit card with some funds.
Take advantage of a low annual fee, with guaranteed approval and no credit check.

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Can you rebuild your credit with a credit builder loan?

Using a credit builder loan can be an effective way of increasing your credit score and rebuilding your financial health. While some credit builder loans have high interest rates, it’s possible to find rates and terms that are competitive – but watch out for any one-time administration or legal fees.

Lenders that offer credit builder loans will report your payments to the credit bureaus, which can help you almost immediately start improving your credit score – as long as you make on-time payments.

Compare credit builder loans

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score
Marble Fast-Track Loan
19.99% – 24.99%
36-84 months
Legal and admin fees of $700 - $1,500 (based on size of loan)
Marble Financial offer credit builder loans in amounts from $2,500 to $15,000. Improve your financial health within 36 months. This loan is strictly for borrowers exiting a consumer proposal.
Refresh Financial Cash Secured Savings Loan
9.47% - 20.07%. Varies by loan size.
3-5 years
Origination fee: $250 - $2,000 depending on loan size
No funds are provided by Refresh upfront. Instead, funds are placed into a secured account to be accessed later. Your payments are reported to the credit bureaus, potentially impacting your credit score.

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Can you rebuild your credit with a payday loan?

Short term lenders follow less stringent lending criteria, which is why they provide loans to individuals with poor or bad credit scores. When you take out a short term loan to improve your credit score, you’ll have to repay it on time in order to achieve your goal. Upon successful repayment of your loan, you can expect your lender to report your timely repayments to the major credit bureaus: Equifax and TransUnion.

While short term loans give you the ability to repair your credit rating to some extent, they can also greatly damage your score if you don’t make your repayments on time. You’ll also need to take out repeat loans since it’s going to be a long process to rebuild your score. This also means its going to be an expensive process in the short term – and probably not worth it.

⚠️ Warning: be cautious with short-term loans

If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call Credit Counselling Canada on 1800 007 007. It's open from 8:00am to 5pm, Monday to Friday. When comparing short-term loans, ensure you take into consideration all fees, charges and interest to understand how much your loan might cost in total.

Alternatives to short-term loans

Consider these alternatives before applying for a payday loan:

  • Use online Government resources. The Financial Consumer Agency of Canada website demonstrates how small amount loans work – and suggests alternative options that may help you.
  • Payment plans. Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan or receive an extension on your due date if you’re behind on payments.
  • Contact your creditors. Speak with creditors about extending the due date of your payment, or working out a new payment plan that works for both of you. Seek personal loans elsewhere. Consider a small personal loan from a bank or a credit union. You may qualify for a loan with much lower interest rates than those offered by payday loan companies.
  • Pay with credit card. Consider paying with your credit card to cover your emergency bills or payments. This is not a long term solution, as you’ll need to pay off the balance as soon as possible, but it’s an alternative to a short term loan with high – and immediate – interest rates.

Compare payday loans

Check the websites of any lenders you’re interested in to confirm they operate in your province or territory of residence.

Name Product Max. Loan Amount Serviced Provinces/Territories Turnaround Time Loan Term Interest Rate
Cash Money Payday Loan
Nova Scotia
New Brunswick
British Columbia
Within 2 hours with INTERAC e-Transfer® if approved
12-14 days. Varies by Province
Varies by Province
Apply for your first $300 payday loan at a $20 borrowing cost (excludes Alberta, Manitoba, New Brunswick or Saskatchewan applicants).

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How loans and credit cards can help

You can potentially rebuild your credit using a secured credit card or a short term loan, provided you play your cards right. There are risks involved with both options and you have to be certain you’re going to make your repayments on time and in full. Before applying for a secured card or loan, find out if the lender will:

  • Offer credit education. Find out if the lender offers education into managing money and budgeting, so you can learn about the factors that actually affect your credit score and how you’ve gotten yourself here in the first place.
  • Report repayments to the credit bureaus. Not all lenders will report timely (or untimely) repayments to the credit bureaus. Consider speaking to your lender about the reason you’re taking out the secured card or loan so that you can increase your credit score by making timely repayments that the credit bureaus will actually find out about.

    Bottom line

    Rebuilding your credit score will take a lot of time and effort – but the end result will be well worth it. You’ll be eligible for many more credit products – and with much more competitive rates and terms – which can help you reach your goals, whether that’s buying a home, purchasing a new car or applying for a premium credit card.

    Frequently asked questions

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