Building Credit with a Credit Card: Tips and Strategies from NerdWallet Canada

Are you looking to improve your credit score and build a strong credit history? Using a credit card responsibly can be one of the most effective ways to achieve this goal. According to NerdWallet’s 2024 Canadian Consumer Credit Card report, nearly 3 in 4 Canadians are interested in improving their credit score.

Credit cards work by allowing you to borrow money from your card issuer with the promise to repay the funds within a specific timeframe. Your credit card usage is reported to credit bureaus, showcasing your financial responsibility and ability to handle credit.

To use a credit card to build credit, it’s essential to use it responsibly. This means making regular purchases and paying off your full balance by the due date each month. Aim to keep your credit utilization ratio below 30% by using less than 30% of your available credit.

Choosing the right credit card is also crucial. Secured credit cards, unsecured credit cards, student cards, and newcomer cards all offer different benefits and may be suitable for different individuals based on their financial situation.

Understanding the terms and conditions of your credit card is key to being a responsible borrower. Review your credit limit, interest rate, fees, billing cycle, grace period, due date, and minimum payment to ensure you can manage your card effectively.

Once you start building your credit history, you can monitor your progress by checking your credit score with Canada’s major credit reporting agencies, Equifax and TransUnion. They offer free credit reports and paid subscription services for daily access to credit scores.

By following these tips and using your credit card wisely, you can strengthen your credit score and improve your financial standing.