No Debt Does Not Mean Good Credit

No debt is bad credit in Canada

Is my credit good when I don’t have any debt?

Some individuals think that having no credit is good. Having debt that exceeds credit limits, leading into a large amount of money due to creditors, can bring about stress and reflect poorly on your credit report. However, being credit-free can sometimes have a negative impact on how your financial situation appears to creditors. Without a history of credit, lenders can’t prove if you’re a responsible borrower or not. Having debt doesn’t show how financially stable you are. What matters is that you have debt while being able to manage it efficiently. By doing so, you’ll have a better chance of being approved for a loan in the future.

If you currently don’t have any credit, it’s never too late to obtain it. Having a good mix of credit, both revolving and installment, will enhance how your credit score looks to lenders if you’re thinking about applying for a loan down the road. Here are three routes you can take to build a respectable credit score while remaining debt-free.

  • 1. Obtain a Prepaid or Low-Limit Credit Card

    Credit cards can be difficult to monitor as they are a type of revolving credit that often have high limits. High interest rates and added fees are factors of credit cards that should be considered when trying to manage this credit, as charges can add up over time and sometimes make it more difficult to make monthly, on-time payments. If you’ve never owned a credit card before, it’s a good idea to go for either a prepaid card or one with lower limits. Using prepaid or low-limit credit cards can be a great introduction to how to responsibly manage credit for someone who has never done it before, as it’s common for a person to max out their credit card and struggle to pay it off, which looks bad on a credit score. If reasonable charges for expenses are made consistently and paid in full each month, a person with no borrowing history will be able to build up their credit score quickly. Keeping purchases to under 15 per cent of the limit is also beneficial to incrementally raising your score.

  • 2. Finance a Bigger Loan

    Financing a car loan, mortgage or student loan is a good way to show creditors that you’re capable of paying back big-ticket items. These forms of loans are different than credit card loans, as fixed payments are made monthly and the money isn’t attainable once it’s been paid off. Canada Drives is a respectable auto loan company that has been working with Canadians all across the country since 2010. Canada Drives helps people with both no and low credit find auto financing that fits within their lifestyle and budget. As auto loans are a form of installment credit and some lenders will work with people who don’t have any credit history, this kind of loan can be a great addition to a person’s credit history. If payments are made on-time and in full every month, financing a car is a great way to build credit if you’re starting from zero and want a path towards overall credit strength.

  • 3. Credit Solution Programs

    Signing up for a credit solution program is an option for Canadians who might want help managing regular payments. A credit rebuilding routine by a third-party is often a seamless way of taking the stress out of financial management, especially if it’s your first time dealing with credit. Instead of a self-administered credit card, there are financial credit rebuilding services and products available with expertise that continuously assesses and evaluates a consumer’s credit score on the path to recovery.

Whether you choose any of these ways, starting to establish credit if you don’t have any can sometimes take time as creditors need to view proof that you’ll be able to pay back the loan responsibly. When applying for credit for the first time, documents related to employment history, past residences and utility receipts can help expedite an approval. Furthermore, applying with co-signer if you have zero credit is a great way to increase your chances of approval, as lenders will feel more confident about approving you for a loan. Credit is a part of life that has a big impact on your financial situation. If you can manage it effectively you will definitely reap the positive benefits of it.


Canada Auto Experts works for several Canadians every day, ensuring that they get good quality vehicles easy and simple, regardless of their credit score. Getting approved for a car loan with bad credit can take numerous days, and even weeks, but Canada Auto Experts’ dealer partners work efficiently to get applicants the best vehicle and financing options fast. If you are in search for an affordable vehicle in Canada and want to rebuild your credit, get approved today with our online car loan application! Call 1-855-550-5565 to talk to a car specialist today.