>New to Canada?

Credit and New Canadians: Building a strong credit profile from day one

New Canadians face a wealth of challenges in moving to this country. Simply settling in and arranging many of the things we take for granted – renting an apartment, arranging a mortgage on a house, buying a car, opening a bank account – can be difficult.

Even if an individual has a top credit rating in their country of origin (even if that country is the United States or another country with a similar banking and credit system), it's likely not recognized in Canada.

Many new Canadians are assigned a low (or no!) credit rating, because it appears they have no recognizable credit history. It's kind of like being 18 all over again.

If you are a new Canadian, here are a few things you should know about your credit profile:

Your credit report tells your credit history. Almost every Canadian over the age of 18 has a credit report; it lists when you borrowed money, if you paid it back on time, how much you owe, how many credit cards you have, and so on.

Your credit report is used to determine your credit score. Both are used by bankers and other lenders to determine whether you can own a house, use a credit card, lease a car or even land a job.

Credit has become key to daily life in Canada. This is why it is so important to have a strong credit report. And you, as a new Canadian, are starting fresh. Now is the chance to do it right.

Building a new credit history takes time. The way the laws stand today, your credit history from your home country will not be recognized, in most cases. Be patient.

In the meantime, you may have to rent rather than buy. If you are permitted to take out a mortgage on a house or lease a car, you may have a higher interest rate than a Canadian with a long credit history.

Some tips:

  • As you set up your utilities, keep in mind that utility companies may pass unpaid bills to a collections agency. If the collections agency reports the item, it will show up as a negative mark on your credit report and stay there for several years. You must pay every bill on time, every month. Each positive step you take will be a step towards a solid credit rating.

  • Do not apply for credit too often; this may negatively affect your credit score.

  • You may obtain a “secured credit card.” This requires a cash deposit, but it is still a credit card that will show up on your credit report. Stay up to date on all your payments.

  • Ask around. Some banks may have the capacity, and be willing, to look at your records from your home country and take them into account.

  • If you do have savings, some institutions may offer you a mortgage if you can pay a considerable (30% or more) down payment.

  • If you have a family member in Canada with a good credit rating, he or she may be able to co-sign a loan for you.

Canadians may look at their consumer disclosures, for free, once a year. As you build your credit history, you should examine your file much more often than that! This is also a good habit to adopt in order to prevent identity theft or fraud.

You may order your credit report from Equifax, Canada's top credit bureau, here.

 

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