Your credit score plays a pivotal role in shaping your financial future. When you apply for credit cards or loans, lenders rely on it to assess your creditworthiness, which is essentially a reflection of how responsibly you’ve managed credit in the past.
Maintaining an excellent credit history opens doors to better interest rates, while poor or non-existent credit can lead to loan rejections. While credit-building isn’t an overnight transformation, it’s essential to get started on the journey.
Credit-building apps can be your valuable companions in improving your credit score gradually. Although they won’t work miracles, they provide the tools and guidance necessary to bolster your creditworthiness over time.
Here are some of the top credit-building apps and websites in Canada for 2023:
KOHO offers one of the best credit-building solutions in Canada. Alongside their free cash back prepaid card, the KOHO Prepaid Mastercard, they offer the optional KOHO Credit Builder service for $10 per month.
As a cardholder, you can earn up to 5% cash back on your purchases. Subscribing to the KOHO Credit Building product grants you a credit line, and each monthly subscription fee payment is reported to a credit bureau. This aids in constructing a strong credit history and improving your credit score. The KOHO app also allows you to monitor your credit score, updated monthly.
Borrowell was the first company in Canada to offer free access to Equifax credit scores. They provide various financial products, including Credit Building and Rent Advantage.
This product has a 36-month term, with a $10 monthly fee reported to Equifax. After 36 months, you receive $240 back in savings.
This service reports your rent payments to Equifax without requiring your landlord’s approval. It comes with a $5 monthly subscription fee.
Chexy is a Toronto-based rent payments platform founded in 2022, offering a credit-building service for Canadian tenants. The Credit Builder add-on costs $9.99 per month and enables users to boost their credit score through timely rent payments.
Equifax is one of the major credit bureaus in Canada. They offer free access to your credit report and credit score, updated monthly. While Equifax doesn’t directly help you build credit, it provides valuable insights into your credit history and allows you to identify and correct errors that may negatively impact your score.
TransUnion is another major credit bureau in Canada, providing free access to your credit report but charging a fee to view your credit score. Monitoring your credit report through TransUnion can help you rectify errors and detect potential identity fraud.
Credit Karma, much like Borrowell, provides free credit scores and reports from TransUnion. While it doesn’t directly assist with credit-building, it offers a helpful tool for monitoring your credit.
YNAB is a personal budgeting app designed to help you take control of your finances. It helps you pay bills on time, save for the future, and manage your expenses effectively.
Mint is a free budget tracker that links all your financial accounts in one place, making it easy to monitor your financial health. It allows you to create customizable budgets, track spending, and calculate your net worth.
Credit builder loans offer a unique approach to building credit by holding your loan in a savings account or Guaranteed Investment Certificate (GIC). You make fixed installment payments, and these payments are reported to credit bureaus, contributing to your credit history. Top credit builder loans and sites in Canada include Refresh Financial, Loans Canada, and LoanConnect.
Loans Canada is a platform for accessing various types of loans, including credit builder loans. They also provide access to free credit score checks.
LoanConnect is a platform that allows you to compare loan offerings from multiple lenders.
Mogo offers a financial app for iOS and Android devices, providing free access to your Equifax credit score when you sign up for their prepaid card. While Mogo doesn’t include credit reports, it helps you manage your credit use and offers identity fraud protection.
Refresh Financial’s Credit Builder Program offers a credit builder loan at a 19.99% Annual Percentage Rate (APR). You make fixed payments, which are reported to TransUnion and Equifax, contributing to your credit history. At the end of the term, you receive your ‘savings’ less fees.
When opting for a credit builder loan, consider the following factors:
If a credit builder loan isn’t your preferred option, consider these alternatives:
Credit history is a record of your past credit usage over time. When you apply for a credit card or loan, the credit card company or lender examines your credit report to determine your creditworthiness. This report contains information about your credit accounts, their duration, types of accounts, and your credit utilization.
A credit score, ranging from 300 to 900, is calculated based on this information. A higher credit score makes it easier to qualify for loans.
Credit-building apps like KOHO can be beneficial if you have limited or no credit history and can’t qualify for a regular credit card. However, it’s crucial to explore other options, such as secured credit cards, before committing to a credit-building app. Remember that improving your credit score is a gradual process, and consistently demonstrating responsible credit habits is key to achieving and maintaining a good credit score.
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