How to build credit: Grow your credit profile in Canada

If you’re applying for an apartment or car loan and have no credit score or history, the lender may not approve your application. This situation is common for young Canadians, students, newcomers to Canada, or anyone rebuilding after a financial setback, like job loss or becoming single. The good news: with the right financial habits and tools, you can start creating a positive credit history. 

That history—reflected in your credit score and credit reports—helps Canadian lenders assess your financial reliability and can influence future loan approvals or interest rates.

Here, you’ll learn practical steps to help build your credit score, understand how credit works, and take control of your financial path with confidence.

3 ways to start building credit from scratch

Do you have a limited or no credit history? Establishing responsible habits and using the right tools can help you build credit over time. These four ways are a good place to start for responsible borrowing and create a positive credit history. Be consistent with these habits over time, and you’ll see that reflected in your credit score.

1. Get a secured credit card

A secured credit card is similar to a regular credit card, but you need to put some money toward “securing” the card. Essentially, the security funds determine your credit limit. The credit card company reports your bill payments to Equifax and TransUnion®, Canada’s two credit bureaus. That is what helps build your credit history when you use the card responsibly.

Making purchases with the card and paying it in full each month helps establish a credit history and supports responsible borrowing. While it won’t boost your score overnight, it may strengthen your credit profile in the long run.

Get started with the Secured Neo Mastercard®, as Neo Financial reports payments regularly to both credit bureaus. Learn more about Neo Financial’s credit cards to find the option that best fits your credit-building goals.

2. Apply for a credit-builder loan

A credit-builder loan is a type of instalment loan where the funds are held in a secure account and released only after you’ve made all required monthly payments. Think of it like a layaway plan for money and credit. Once prepaid, the money is released to you. While credit-builder loans don’t offer immediate access to funds, they can help strengthen your credit profile through steady, on-time repayments.

(Note: Neo Financial does not currently offer credit-builder loans, but they can be a helpful tool.) If you’re considering where to get an instalment loan, understanding the differences between credit unions versus banks in Canada can help you choose the right lender for your needs.

3. Sign up for a starter credit card 

Unsecured credit cards, meaning no funds are needed to open the credit account, are ideal for small purchases and are new-to-credit-friendly. They typically require no annual fee and have low credit limits, ranging between $500 and $5,000. 

Avoid high balances and missing payments to protect your credit score. Consistent, responsible credit card use may help you qualify for a higher credit limit over time, as you prove your creditworthiness. And eventually, you can apply for premium financial products like the Neo World Elite® Mastercard, which offers enhanced rewards and exclusive perks for those with strong credit, like 5% cash back on grocery purchases and travel insurance.

What are the long-term benefits of a strong credit profile?

A strong credit profile shows you’re good at managing finances and helps build trust with lenders, landlords, and even certain employers, such as those in accounting or the financial industry. Although establishing strong credit does take time and consistency, the long-term benefits can be significant for you. Here's what good credit may lead to:

• Easier access to loans, mortgages, and vehicle financing
• Low interest rates and more favourable terms
• Increased approval odds for rentals and some job applications in certain fields

A strong credit score, supported by a solid history of responsible use, can help you qualify for premium cards like the Neo World Mastercard®, which rewards your everyday spending with enhanced cashback and perks.

Note that while strong credit doesn’t guarantee any outcome, it often builds financial trust with lenders and sets up financial security by improving your access to credit. It can lead to more borrowing options, lower costs, and greater flexibility when handling both planned and unexpected expenses. Having better credit helps you qualify for lower interest rates, access a wider range of financial products, and manage both planned and unexpected expenses with greater confidence. (Find out the costs of not paying your minimum credit card payment.)

Tips for improving your credit score through credit applications

Did you know that applying for credit can immediately impact your credit score? So be smart with your applications. 

Space out hard inquiries 

Every time you apply for credit, it triggers a hard inquiry on your credit report, which can slightly reduce your credit score. If you’re shopping around for a mortgage or auto loan for the best interest rates, try to submit all applications for that same type of credit within a 14- to 45-day period. When grouped together within that window, credit scoring models may treat them as a single inquiry rather than multiple ones.

This applies only to the same type of loan. If you're applying for different credit types, like a credit card, car loan, or line of credit, space out applications to reduce the impact on your score.

For major life events like moving, starting school, or buying a home, plan ahead. Apply only for what you need and give your credit time to recover between applications.

Avoid unnecessary credit applications

Applying for credit you don’t need can hurt more than help, especially if it doesn’t align with your financial goals. Being selective with applications supports responsible borrowing and helps maintain good credit habits over time.

Use alternative credit data when available

In Canada, services that allow reporting of monthly rent payments to credit bureaus are emerging. However, not all lenders accept utilities, phone bills, streaming services, and insurance payments as part of their credit evaluation. It remains most effective when combined with traditional credit-building habits, such as using a credit card or making loan payments on time. 

Best practices for establishing strong credit habits

Once your credit history is established, the next step is consistency. Turn these behaviours into habits, and you will improve your credit score over time.

• Make on-time payments every month: Set up auto-pay and reminders to ensure you’re always on time. Just a single late payment can significantly harm your credit score, so staying on track is crucial. 
• Keep credit utilization low: Utilization refers to the percentage of your credit limit that you use. Staying below 30% signals financial responsibility, while high usage may indicate credit risk.
• Monitor your credit report regularly: Check your credit reports from Equifax® and TransUnion® at least once a year. Look for errors, outdated information, and fraudulent activity that could harm your score.
• Avoid excessive new credit applications: Each new application for credit creates a hard inquiry and makes your credit history appear newer, both of which can negatively affect your credit score.

Apply for credit only when needed so that credit bureaus will see that you’re measured and intentional in your borrowing decisions.

For credit-building tips you can use right away, explore these fast credit score improvement tips.

Mistakes to avoid when building credit

Aside from the above good habits, avoiding these common blunders is also crucial in building a strong credit profile. 

• Missed/late payments: Missing payments is one of the quickest ways to damage your credit score. One late payment can affect your credit rating.
• Carrying high balances: High debt levels raise your credit utilization ratio, which is the percentage of the available credit that you’re using. This can signal risk to lenders, even if you plan to pay it off later. Keeping your credit card balance under 30% of your limit shows responsible use of revolving credit. This doesn't apply to installment loans like car loans or mortgages, which are assessed differently.
• Closing old accounts: A long credit history gives valuable info to lenders, like how long you can maintain a credit card, that you paid off a loan, and more. Keep old, fee-free credit cards open to show stability and build a solid track record.
• Applying for too much credit at once: Avoid making multiple applications for credit within 30 to 90 days because it can trigger several hard inquiries, which might make you appear high-risk to lenders. 

How long does it take to build a credit profile in Canada?

Want to build your credit history in Canada fast? Know that it is a gradual process, and it doesn’t happen overnight. For most people in Canada, achieving real progress in their score requires being responsible with credit consistently.

It’s possible to generate a credit score within three to six months of reported activity, such as using a credit card or making regular loan payments. Achieving a strong credit score of 700 or higher can often take a year or two of consistent on-time payments and low credit utilization. 

Remain patient, review your credit reports at least once a year for accuracy, and celebrate small wins such as making on-time payments or keeping your credit utilization low. Every step brings you closer to your financial goals.

Tools and resources to help you build credit

Getting started with building and managing your credit doesn’t have to be overwhelming. These tools can help you stay organized, monitor your credit, and make more informed financial decisions.

• Credit monitoring app: Tools like the Neo Financial Credit Monitor help you track your credit report and receive alerts on changes.
• Financial literacy platforms: Websites such as FCAC (Government of Canada) and Credit Canada offer free educational resources.
• Smart Credit and Money Tools: Neo Financial allows you to check your credit score (not a hard check, remember), track your spending and watch your savings, all with personalized insights, and set up your account in minutes. It’s designed for mobile use and built to support your ongoing financial growth.

Take control of your credit profile with Neo Financial

Neo Financial offers credit products designed to help you establish, rebuild, and manage your credit profile over time, whether you’re starting from scratch or recovering from past financial setbacks. Plus, you can do it all digitally, using your phone with our app or your computer with our website. 

The Secured Neo Mastercard® is a flexible credit card for those looking to establish a credit profile. And you don’t need a high credit score to apply. Since bill payments on the card are reported to Canada’s two major credit bureaus, the card itself serves as a practical tool for creating a positive credit history.

Neo Financial offers credit card options with no annual fees, giving you flexibility based on your financial goals. For those just starting out, the Secured Neo Mastercard® has a small monthly fee, but includes key features designed to help you build credit over time. 

You can also add additional cardholders to eligible Neo Financial credit cards, which may help family members build their own credit history. If you use a Neo Cash account, you can even invite someone to become a joint account holder, making it easy to manage shared savings goals.

With Neo Financial, you can get access to helpful features like:

• Credit score tracking
• Real-time transaction alerts

These features are built to support responsible credit use and promote steady progress toward stronger financial stability, rather than quick fixes. It’s designed with a clean, easy-to-navigate interface, whether you’re using the app or the website. This helps you stay informed about your financial situation, stay in control, and set up financial security for the future.

Take your first step toward building better credit. Get started with Neo Financial's credit-building tools today.

Key takeaways

• Using secured credit cards and credit-builder loans, along with maintaining low credit utilization and making payments on time, can help build your credit profile steadily over time.
• Avoid risky credit behaviours—like missed payments, high balances, or frequent credit applications—to protect and strengthen your credit profile.
• Use digital tools like those from Neo Financial to track your credit score, stay informed about your accounts, and manage your money wisely over time.
• Avoid missed payments, high balances, or frequent credit applications to protect and strengthen your credit profile.

Frequently asked questions (FAQs)

How soon can I get a credit score after opening my first account?

You may receive a credit score update within three to six months after reporting activity to the credit bureaus. With responsible habits like using your credit card for small purchases and paying it off on time, your initial score typically falls in the mid-600s, though it can vary depending on your overall credit behaviour.

What’s the fastest way to build credit?

Use a secured credit card, pay the bill on time, and keep your credit utilization rate low. These three habits can help strengthen your credit profile.

Should I get a loan just to build credit?

There are two answers: 

• Yes, a credit-builder loan may be helpful, provided it aligns with your financial goals and ability to make the payments. 
• No, if the loan will add unnecessary debt and strain your finances. Instead of helping to build your credit profile, it could have a negative impact.

Can rent and utility payments help establish credit?

Yes, if you have access to services that share your payments with credit bureaus. Not all lenders accept this information. If you do use a rent-reporting service, know that you should also look at having a secured credit card or credit-builder loan.

How can I build credit without going into debt?

Use a credit card for small purchases, such as a cup of coffee, groceries, a streaming subscription, or a tank of gas, and pay them off in full every month, and never carry a balance. This approach means you avoid paying interest and it helps you build your credit history.

What’s the best way to establish credit as a young adult?

Establish credit with a secured card and explore student credit products.

How often should I check my credit score while building it?

Aim to check your credit score monthly or quarterly using a tool like Neo Financial’s credit score monitoring.

This article provides information and is not intended to provide any personalized tax, investment, financial, or legal advice. You are encouraged to seek professional advice before making financial decisions.

The Neo Mastercard, Neo World Mastercard®, Neo World Elite® Mastercard and Neo Money™ card are issued by Neo Financial™ pursuant to license by Mastercard International Incorporated.

Credit score monitoring is provided by TransUnion and is only available to customers who have subscribed to the Premium perk.