7 Common Credit Mistakes That Hurt Your Credit Score in Canada
(And How to Avoid Them)
Avoid the most common credit mistakes in Canada that can drop your score fast. Learn how to protect and improve your credit the smart way.
Updated Feb 17, 2026 9:01 p.m. MST · 8 min read
Written by the Capital Corner Editorial Team
If you're trying to improve your credit score in Canada, avoiding the wrong moves is just as important as building the right habits.
Many Canadians aren’t taught how credit scores actually work. But small mistakes — like missing a payment or maxing out a credit card — can drop your score quickly.
This guide explains the most common credit mistakes in Canada and exactly how to avoid them before they cost you points.
How Credit Scores Work in Canada (Quick Breakdown)
In Canada, your credit score is calculated primarily by the two major credit bureaus:
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Equifax Canada
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TransUnion Canada
While the exact formulas are proprietary, most Canadian credit scores are based on five main factors:
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Payment history (largest factor)
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Credit utilization ratio
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Length of credit history
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Types of credit used
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Recent credit inquiries (hard checks)
The first two — paying on time and keeping balances low — make up the majority of your score.
The 7 Most Common Credit Mistakes in Canada
1. Missing Even One Payment
A single payment that becomes 30 days late and gets reported can drop your credit score by 50–100 points.
Payment history is the most important factor in your score. This applies to:
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Credit cards
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Car loans
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Student loans
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Lines of credit
How to avoid it:
Set up automatic minimum payments. Even if you pay in full manually, autopay acts as insurance.
2. Using Too Much of Your Credit Limit
Your credit utilization ratio is how much of your available credit you're using.
Example:
$800 balance on a $1,000 limit = 80% utilization.
Even if you pay it off later, the reported statement balance may already show high usage.
Best practice in Canada:
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Stay under 30%
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Under 10% is ideal
High utilization signals risk to lenders.
3. Carrying a Balance to “Build Credit”
This is a myth.
You do not need to carry a balance to build credit.
If you charge $200 and pay off the full $200 before the due date, your payment history is reported the same — without paying 19–29% interest.
Interest charges do not improve your credit score.
4. Closing Your Oldest Credit Card
Length of credit history matters.
If you close your oldest account:
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Your average account age drops
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Your available credit decreases
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Your utilization ratio may increase
If the card has no annual fee, keep it open and use it occasionally.
Time improves your score — don’t reset it unnecessarily.
5. Applying for Multiple Credit Cards at Once
Each application creates a hard inquiry on your credit file.
One or two inquiries are normal.
Several within a short period can signal financial stress.
Apply for credit intentionally — not impulsively.
6. Never Checking Your Credit Report
Errors on Canadian credit reports are more common than people think.
Examples:
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Accounts that aren’t yours
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Paid collections still showing
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Incorrect late payments
You can request a free credit report from:
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Equifax Canada
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TransUnion Canada
Checking your own report counts as a soft inquiry and does not affect your score.
Make this a yearly habit.
7. Not Building Credit in Your Own Name
If all accounts are in a spouse or partner’s name, you are not building credit history for yourself.
This can cause major issues later if:
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You apply for financing alone
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You separate
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A partner passes away
Make sure at least one or two accounts are in your own name.
How This Applies to U.S. Readers
In the United States, credit scoring works similarly.
The three major bureaus are:
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Equifax
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TransUnion
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Experian
The same core principles apply:
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Pay on time
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Keep utilization low
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Avoid excessive hard inquiries
Quick Credit Protection Checklist
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Set up automatic minimum payments
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Keep balances under 30%
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Don’t close old no-fee cards
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Limit unnecessary credit applications
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Pull your free credit report annually
Frequently Asked Questions
Does closing a credit card hurt your credit score in Canada?
Yes, it can. Closing a card may shorten your credit history and increase your utilization ratio, both of which can lower your score.
Why did my credit score drop in Canada?
Common causes include:
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Higher credit utilization
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A missed payment
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A new hard inquiry
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Closing an old account
Does applying for multiple credit cards hurt your credit score?
Yes. Multiple hard inquiries in a short period can temporarily lower your score and signal higher risk to lenders.
The One Rule to Remember
If you remember nothing else:
1. Pay your bills on time and keep your balances low.
2. Those two habits protect the majority of your credit score.
