How to build a credit history from scratch in Canada [2022]

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If you’ve just dropped out of school or college, you’ll eventually need a credit card, car loan or other form of loan. This takes some planning as a credit history evolves over time. Knowing how to build a credit history can help your finances in many ways.

It is not possible to quickly create a credit history. It consists of credit usage and payments made over time. A typical credit report is only updated every 30 days or so and we’re talking months and years to build a good credit score, not days or weeks.

how your credit score is calculated

What you can do is start building a credit history right away even if you don’t have any plans for a car loan or other type of loan for a while.

Here’s how to build a credit history from scratch.

Get a phone contract in your name

A telephone contract is seen as a credit as part of the cost of the telephone is spread over the duration of the contract. If your parents have always paid for your phone, now would be a good time to get one in your name.

It will cost you per month but will also help build a credit history. Make sure you set automatic payments and make sure you always pay on time and you are on your way.

Get a credit card

If you are over 18, you can apply for a credit card. Whether or not you do it is entirely up to you, but using a credit card is by far the easiest way to build a credit history. There are a couple of rules though.

Don’t go crazy and maximize your credit limit now: Use your credit card sensibly. Use it for gas or just for regular purchases.

Pay it back in full every month: Credit cards are an expensive loan, but if you pay your balance in full every month, they’re cheap. Get into the habit of spending only what you can afford and pay it back when you get paid and you should be good.

Set up automatic credit card payments: If you forget to pay your credit card for a month, having an automatic minimum payment will ensure you don’t miss a payment. Failure to pay seriously damages your credit history, so avoid it at all costs!

Advice for renters

If you rent your home, some landlords are willing to add a note to your credit file mentioning regular payments. Utilities can also enter entries depending on how you pay your bills. Both can help build a credit history as long as you always make payments on time, all the time.

A credit history is a summary of your financial transactions over the course of a lifetime. It takes time to build and only starts when you start accessing credit. Do it right and you will quickly build a good credit score and be ready for when you need a car loan or other type of loan.

We hope this article will help you understand how to build credit history. For more ways to boost your credit score, please Click here or Contact us for further help!

This article was published by: Michelle Paletta by title: How to build a credit history from scratch in Canada [2022]

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