10 credit mistakes newcomers make (and how to avoid them)

1. Borrowing at very high cost

This is the most expensive mistake. Payday loans and some instalment lenders target people with no credit history.

• In provinces that regulate payday loans, the maximum cost is $14 per $100 borrowed, according to the Financial Consumer Agency of Canada (FCAC). That is about 365% a year.
• For other loans, FCAC says lenders may not charge more than 35% a year, including all fees.

FCAC compares the cost of borrowing $300 for 14 days:

If you need a car, compare offers carefully first. See car loans with no credit.

2 and 3. Paying late, or paying only the minimum

Paying late. Payment history is the biggest part of your score. FCAC says late or missed payments can stay on your report for up to 6 years. Missing payments can also raise your interest rate. For example, Amex says the Cobalt Card rate goes from 21.99% to 25.99% after two missed payments in 12 months, and to 29.99% after three or more.

Paying only the minimum. It avoids a late mark, but you pay interest on the rest. At 20.99%, a $1,000 balance costs about $17 to $18 in interest each month. Set up automatic payment of the full statement balance. If you cannot pay in full, FCAC says to pay at least the minimum and contact your lender right away. See how long a balance takes to clear with the credit card payoff calculator.

4. Maxing out your card

FCAC suggests using less than 30% of your total limit, even if you pay in full. Lenders may see heavy use as higher risk. On a $1,000 limit, that is $300.

New cards often have low limits, so a single big purchase can push you over. Pay part of the balance before the statement date, or ask your issuer for a higher limit after a few months of on-time payments. Never go over your limit. Some cards charge a fee for it: the Home Trust no-fee Secured Visa disclosure lists a $29 over-limit fee.

5. Applying for many cards at once

Each credit application adds a hard inquiry to your report. FCAC says too many inquiries close together can look like you urgently need credit. Inquiries stay on your file for 3 years at Equifax and 6 years at TransUnion.

Newcomers often apply at several banks in the first weeks. Choose one card first. If you shop for a car loan or mortgage, FCAC says quotes from different lenders within 2 weeks count as one inquiry. Capital One lets you check pre-approval without affecting your score; ask other issuers if they offer the same.

6 and 7. Closing your oldest card, and taking cash advances

Closing your oldest card. FCAC says closing an older account can mean losing that history and having less available credit. If the card has no annual fee, keeping it open and using it once in a while is usually cheaper.

Cash advances. FCAC says interest on a cash advance starts the day you take the money, with no grace period. The rate is often higher than for purchases. For example, Scotiabank lists 20.99% for purchases but 22.99% for cash advances on its Momentum No-Fee Visa. FCAC says the grace period also does not apply to cash-like transactions or balance transfers. Use your debit card for cash.

Already made a mistake? How to recover

Most mistakes fade with time and good habits. Steps that FCAC recommends:

• Call your lender early. If you think you will have trouble paying, contact the lender right away. Ask about a payment plan.
• Pay at least the minimum. Even while you dispute a charge, do not skip a payment.
• Get free or low-cost advice. FCAC points to accredited credit counsellors and licensed insolvency trustees. Advice from a trustee on consumer proposals and bankruptcy is typically free.
• Check that a trustee is licensed. Only a licensed insolvency trustee can help with a consumer proposal or bankruptcy. FCAC says it is illegal for a company to claim it can manage your consumer proposal or bankruptcy if it does not employ one.
• Explain your side. If a correct but unfair-looking item stays on your report, you can add a short free consumer statement.

New on-time payments start to outweigh old problems as months pass.

8. Leaving bills unpaid when you move

Phone, internet and utility accounts can appear on your credit report, according to FCAC. If you move out or leave Canada for a while and a final bill goes unpaid, it can go to a collection agency. TransUnion says collections are removed 6 years after the date you defaulted with the original creditor.

Before you move, close accounts in writing, pay the final bill and keep the receipt. Update your address with every lender. For phone contracts, see phone plans for newcomers.

9 and 10. Never checking your report, and paying for “credit repair”

Never checking your report. Newcomers are targets for identity fraud. FCAC says an account you do not recognize may mean someone applied for credit in your name. Your reports from Equifax and TransUnion are free, and checking them does not lower your score. See how to get your free credit report.

Paying for “credit repair”. FCAC warns that accurate information cannot be erased from your history, and that companies cannot guarantee results. Some push high-interest loans. Bureaus must correct real errors for free, and you can dispute them yourself. Learn other warning signs in banking scams to avoid.

Common questions

Sources

• FCAC: Payday loans
• FCAC: Personal loans
• FCAC: Improving your credit score
• FCAC: How long information stays on your credit report
• FCAC: How credit cards work
• FCAC: Checking your credit report for errors and fraud
• FCAC: Consumer alert on debt help and credit repair companies
• TransUnion Canada: Frequently asked credit questions
• American Express Canada: Cobalt Card
• Scotiabank: Compare credit cards
• Home Trust: Secured Visa (no fee) disclosure statement
• Capital One Canada: Guaranteed Secured Mastercard

Checked against these sources on October 10, 2026. Spotted something out of date? Tell us.