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BDO Scarborough

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Scarborough, Ontario
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Are Your Credit Cards Helping or Hurting Your Credit Score?

Now that you can access credit with a tap and through your smartphone, credit cards have become more ubiquitous than ever in Canada. In 2016, 89 per cent of Canadian adults already had at least one card, averaging 2.2 per person. Does this use of credit cards relate to an understanding of your credit score, though?

Surveys have shown that the relationship might be shaky. A 2018 Capital One study found that only four in 10 Canadians knew their credit score. A year earlier, a TransUnion survey found that 39 per cent are unsure of why making more than minimum payments on debt, like credit cards, would be beneficial.

Your credit score is an important number. It impacts your borrowing power, like the ability to get a used car loan or a mortgage, and can affect possible debt relief plans. Because so many Canadians have credit cards, a great starting point for understanding your score is understanding how your credit card use can affect it.

Here are three tips to use for smarter card use:

  • Don’t close your oldest credit card. Part of a strong credit score is a long credit history. Closing your oldest card account shortens that history, and could categorize you as a riskier lender.
  • Keep cards active, but use them for small or recurring payments. If you have a card you don’t want to use — maybe the rewards have fallen out of favour or you are trying to reduce the temptation of debt — it’s a good idea to find small uses for it. Use it a few times a month for small purchases, like a coffee or lunch, or charge monthly recurring payments like Netflix or Hulu to the card.
  • Learn more about the 30 per cent rule of credit utilization. If you have to carry balances on your cards (and remember, this comes with interest penalties), remember not to exceed the 30 per cent credit utilization ratio. Otherwise, you’re doing damage to your credit score.

To learn more about how your credit card decisions can affect your score, listen to this podcast featuring advice from BDO Licensed Insolvency Trustees (LITs). They also dig deeper into the topic of credit scores, with advice on how and when to check your credit report and how parents can introduce their teens to credit.

If you want to get involved in the conversation, share your advice on social media by using the hashtags #CreditScore or #PersonalFinance.



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