Your credit score is an important aspect of your financial life. A high credit score can help you secure loans at lower interest rates, and it can make it easier for you to open credit cards so you can rack up cash-back rewards and airline miles.
But credit scores aren’t stagnant measures of your creditworthiness. Your credit score changes all the time—especially if you’re taking steps to pay off your debt and improve your financial situation.
Just how fast does your credit score go up in Canada, you might ask?
Everybody’s situation is slightly different, but you’ll generally find that it takes between 30 and 90 days for your credit score to go up (or down, for that matter).
However, your credit rating can change at any time in response to a number of factors and events, including making regular on-time payments and opening a new account. In this article, we’ll explore some of the reasons why your credit score might change and we’ll discuss how KOHO can help you master your creditworthiness moving forward.
How Do Credit Scores Work?
To get a solid understanding of how fast you can increase your credit score, you first need to know how credit scores actually work.
Credit scores are numeric ratings that financial institutions like banks use to decide whether or not they want to give you a loan or let you open a credit card. These scores are determined by so-called credit bureaus (Equifax and Transunion are the two bureaus in Canada) and they’re designed to show your creditworthiness using a single three-digit number.
Equifax and Transunion don’t tell us precisely how they calculate credit scores, but we do know that both bureaus source their data from a US-based company called FICO. We also know that both bureaus use similar information to create their credit scores, even if we don’t know precisely how these scores are calculated.
There are a few different factors we know that affect your credit score, including:
The age of your oldest credit line
If you carry a balance on your credit cards
Your frequency of missed payments
The total amount of debt that you have
How much of your available credit that you usually spend
Whether or not you’ve filed for bankruptcy in the past
If you’ve ever had your debt sent to collections
Again, we don’t know exactly how Equifax and Transunion use this information to create your three-digit credit score, but it’s clear that all of these factors have a major impact on how creditworthy you appear to banks and other lenders. That’s because all of this information indicates your overall level of financial responsibility so it gives financial institutions an idea of whether or not you’ll actually repay your debts.
Keep in mind that every credit bureau and reporting company uses a slightly different equation to calculate your credit score. Your score might vary by a few points from company to company, but it should be somewhat similar across the board.
How Fast Can You Realistically Raise Your Credit Score?
Now that we’re on the same page about how credit scores work, we can talk about how fast you can realistically raise your credit rating.
Your credit score can have a major impact on your financial life, especially if your credit rating is lower than you’d like it to be. Having a low score can make it difficult to get approved for loans in general and it can often lead you to have higher interest rates than your peers.
Thankfully, if you have a lower credit score, it is possible to increase your rating over time. Just how fast can you raise your score, you might wonder?
Well, it depends. The Financial Consumer Agency of Canada states that credit scores normally change within 30 to 90 days of an important credit-impacting event. A credit-impacting event can include anything from paying off your car loan to missing a payment on your credit card.
In other words, your credit journey is a marathon, not a sprint.
Any action you take right now (whether positive or negative) may not show up on your credit report for 3 months. This can make building credit a long and sometimes tedious process, especially if you were hoping to increase your score quickly.
The slow nature of the credit building process can be frustrating, but it’s important to remember that the system is actually designed this way.
Your credit score is supposed to represent your overall creditworthiness. So if you haven’t been on top of your finances in the past, a few weeks’ worth of good spending habits can’t erase everything else that’s occurred to date.
This doesn’t mean that you should give up and admit defeat if you have a credit score that’s less than ideal. Rather, the point here is that building credit is a lifelong journey that takes effort and dedication if you want to be successful over the long term.
How Many Points Can Your Credit Score Go Up In a Month?
Every single person’s credit situation is different, so it’s impossible to say with any certainty how much your credit score can increase in a single month.
As we’ve already mentioned it can take around 90 days for an update to appear on your credit score. While most credit bureaus update your report every 30 days, it’s possible that your score won’t change at all in that time period.
If you’ve taken some steps toward improving your credit score, such as paying off a large outstanding balance on your credit card, you might see your score increase between 30 and 50 points in a single month. But, more realistically, you’re unlikely to get a boost of more than 10 to 20 points on your report from month to month.
The one exception to these guidelines is if you correct an error on your credit report.
The credit reporting bureaus aren’t perfect and they make mistakes from time to time. If you notice a large error on your report (such as an incorrect note that you filed for bankruptcy a few years ago), getting this information fixed can cause your score to increase by 100 or even 200 points in a single month.
Ways to Improve Your Credit Score with KOHO
Ready to improve your credit score but don’t know how to get started? Here are 3 ways to build credit using the nifty features that come with your KOHO account.
1. Use KOHO’s Credit Building Tool
The simplest way to improve your credit score with your KOHO account is to use KOHO’s Credit Building tool.
Credit Building is a low-cost way to take out a credit line and build a stable credit history with KOHO. You can sign up in the KOHO app in just a few seconds.
Once you’re registered for Credit Building, your only tasks are to:
Keep enough money in your KOHO account to cover the cost of the tool’s small monthly fee.
Make your Credit Building payment on time and in full each month.
KOHO will then report all of your payments to Equifax on your behalf.
If you make your payments on time every month, you’ll slowly build up your creditworthiness. These regular, timely payments typically lead to an increased credit score for Credit Building users, and you can keep track of your progress in the KOHO app.
Of course, missing your Credit Building payments has the same impact as missing a payment on any other line of credit (i.e., it can cause your score to decrease). But so long as you stay on top of your monthly payments, Credit Building can be a useful way to build your score over time.
2. Set Your Bills on Auto-Pilot with your KOHO Account
Missed and late payments have a huge negative effect on your credit score while a history of making on-time payments can cause your rating to increase substantially. If you’re someone who struggles to make payments on time, setting your bills on auto-pilot can be a worthwhile strategy.
The good news? You can set up automatic withdrawals and pre-authorized debits from your KOHO account. This feature can be super helpful for automating your recurring payments, like your car insurance and hydro bills. Automatic payments reduce the risk that you’ll accidentally forget to pay off a bill and have it sent to collections, which could negatively impact your credit score over the long term.
For other types of recurring payments that aren’t yet supported by KOHO, you can still automate some of your bill-paying processes. You can use KOHO’s bill pay feature to pay off credit cards, loans, and other types of debts right from your phone.
If you have trouble remembering to make your payments, consider setting up recurring reminders each month to alert you whenever your bill is due. Once you get an alert, you can simply log into the KOHO app, pay your bill in full, and sit back as your credit score improves over time.
3. Make the Most of KOHO’s Budgeting Features
Last but not least, consider taking advantage of all the great budgeting features that your KOHO account comes with as you work to build your credit score.
Budgeting might not seem like an important aspect of building credit, but the reality is that not having a good budget is what causes many people to rely too heavily on credit in the first place.
If you’re struggling to manage your budget, you might resort to credit cards for most of your bills, which can saddle you with high-interest debt for years to come. All of that high-interest debt can be difficult to pay off, which can drag your credit rating down over time.
Having a solid budgeting plan that works for your lifestyle can help you better manage your money so that you can pay off any existing debts, build an emergency fund, and avoid taking on new debt in the future.
There are a number of great features that come with your KOHO account to help you master your money, such as KOHO Insights, the KOHO budgeting tool, and our ultimate budget template. Take some time to check out each of these features and come up with a game plan for how you can use them to take control of both your budget and your credit score.
Improving Your Credit Score: It’s a Marathon, Not a Sprint
If your credit score is lower than you want it to be, you’re probably eager to see it increase as quickly as possible. While most credit scores update every 30 to 90 days, however, any major increases in your rating will likely take a few months or years of hard work to achieve.
At the end of the day, improving your credit score is a marathon, not a sprint. Creating good money management habits that work for your life and that are easy to stick to can help you pay off your existing debts and repair your credit.
Small boosts in your credit score here and there might not seem like much right now. But maintaining those good spending habits over time with your KOHO account can help you take your credit rating to new heights in the long term.
