When refugees settle in Canada, they’re often doing so after experiencing times of extreme hardship, like war, persecution or years spent in refugee camps. Afterwards, they may need some help settling into a new home, which is true whether you’ve been granted protection from the Canadian government or resettled from overseas.
While the government offers many services to make their transition to Canada easier, refugees also have to build credit histories if they want access to credit during their settlement. Building credit can help refugees gain access to affordable credit products and help them finance necessary purchases such as a car.
Ways To Build Credit As A Resettled Refugee
No matter where you live, having a good credit history is necessary in order to qualify for credit in the future. Don’t worry, as a resettled refugee and permanent resident of Canada, there are some easy products that you can use to build credit, including:
Secured Credit Cards
A secured credit card gives you access to credit in exchange for a security deposit (equal to your credit limit). Secured credit cards are a great option as approval is guaranteed so long as you can provide the minimum security deposit. Credit, income and debt have no impact on your eligibility.
Once you get a secured credit card, you can use it to make purchases like a regular credit card. Your lender will then report your repayments to one or both of Canada’s credit bureaus; TransUnion and Equifax. Making responsible payments will help you build a positive payment history which should help you build better credit.
Once you’ve built your credit, you can switch to a regular credit card. To cancel your current card simply contact your provider and make sure you’ve paid off any balance on your card. Once you cancel the card, your deposit will be returned.
Best Secured Credit Cards
|Annual Fee||Interest Rates||Min. Deposit|
|Refresh Financial Secured Visa||$12.95||17.99%||$200||Learn More|
|Neo Secured Card||$0||19.99% – 24.99%||$50||Learn More|
|Plastk Secured Visa Credit Card||$48 (+$6 monthly fee)||17.99%||$300||Learn More|
|Capital One Guaranteed Secured Mastercard||$59||19.8%||$75||Learn More|
Cell Phone Payments
Many cell phone providers will offer you a service plan, even if you don’t have a credit history. This makes it an easy option to build credit as many cell phone providers also report your bill payments to Equifax and/or TransUnion. For this to work, you’ll need to sign up for a monthly post-payment plan (rather than a prepaid plan).
Do note, that not all cell phone providers report bill payments, so be sure to ask your provider if they report payments before signing up for their service.
|Fido||Fido reports payments to Equifax and TransUnion after each billing cycle.|
|Koodo||Koodo reports payments to Equifax and TransUnion after each billing cycle|
|Telus||Telus reports payments to Equifax and TransUnion periodically|
|Rogers||Rogers reports payments to Equifax and TransUnion after each billing cycle.|
|Bell||Bell may or may not report your payment activity to the credit bureaus.|
While rent payments are largely unreported, you can have your rent payments reported to Equifax through the Landlord Credit Bureau (LCB). The LCB is a platform that allows landlords to report a tenant’s rent payment to the credit bureau. Both you and your landlord must create accounts with the LCB in order to report your rent payments, so be sure to ask your landlord if they’re willing to do so before signing a lease.
You can also have your rent payments reported to the credit bureaus by using your credit card to pay your rent. While most landlords don’t have the capability to process your credit card payment, you can use third-party platforms like Plastique and RentMoola. Using your credit card will not only help you build your payment history but you can also earn points through your credit card.
|Fee||Types of Credit Card||Types of Credit Card|
|RentMoola||0.99 – 3.99%||Visa, Mastercard, Amex, Union Pay|
|Plastiq||1%-2.85%||Visa, Mastercard, Amex, Discover, Diners club|
A car loan lets you finance a vehicle and build credit at the same time. In this case, you’ll borrow a specific amount of money, use it to buy a car and repay your debt in installments. The lender then reports those payments to the credit bureaus.
Getting a car loan is often possible even if you have bad or no credit as the loan is secured against the car. However, do note, that lenders and auto dealers that approve clients with bad or limited credit normally charge higher interest rates and fees.
Bank Products Designed For Newcomers To Canada
Whether you’re a new immigrant or a resettled refugee, there are many banks and lenders that offer credit products that are exclusively designed for new Canadian residents, such as special credit cards, loans and car financing plans.
To access those products, you’ll usually have to sign up for a basic banking package that features a free or low-cost chequing account (another good financial tool for resettled refugees).
|Mortgages For Newcomers||Learn More|
|Loans For Newcomers||Learn More|
|Credit Cards For Newcomers||Learn More|
|Newcomers Guide To Canada||Learn More|
More Tips For Building Good Credit As A Resettled Refugee
If you’re planning on using credit products as a new Canadian resident, there are a number of important steps you should remember to take, including but not limited to:
- Monitor Your Credit – Every Canadian can request one free copy of their credit report a year from Equifax and TransUnion (other copies cost a small fee). Many third-party companies also offer free credit monitoring but may not show a totally accurate version of your credit scores. Either way, monitoring your credit report is the best way to spot errors, track your payment history and maintain good credit.
- Pay Your Bills Responsibly – If you pay credit-related bills on time and in full, your credit scores may rise and improve your credit history. Unfortunately, the opposite occurs when your bills are late, incomplete or missed. While paying your minimum monthly credit card balances saves you from penalties, it means more interest will be added to your debt and isn’t a great habit for your credit.
- Limit Your Credit Applications – It’s not good to apply for a lot of credit at once either. Not only can this put you in bad debt, but your credit scores may also drop each time a potential lender checks your credit (this is known as a hard inquiry). Since most activity stays on your credit report for years, some lenders may also see multiple credit applications on your history and decide that you’re too risky to approve.
Can You Get A Loan As A Refugee?
Yes, if you’re a permanent resident of Canada, you can qualify for the same kinds of loans as Canadians. That said, the government will not consider refugees who are claiming asylum as “protected” persons or grant them permanent resident status until their claim is accepted by the Immigration and Refugee Board of Canada (IRB).
Once your asylum is approved, the IRB will send you a formal document or letter that proves your citizenship. Both of these documents can be used as proof of residency:
- Confirmation of Permanent Residence – If you’re a protected person who has been chosen in a foreign country and resettled in Canada as a refugee, you’ll get this type of document, along with your Permanent Resident Card shortly after.
- Verification of Status – If the government considers you a protected person due to a positive Pre-Removal Risk Assessment, you’ll obtain this document instead.
Unless you’re a protected person and permanent resident, it could be really tough to qualify for a loan in Canada, because most lenders won’t take applicants who are considered risky. The reasoning behind this choice is due to the possibility that they will suddenly leave the country and default on their payments.
What’s the difference between refugees and immigrants?
How long do I have to wait before I can use my credit history?
How can I obtain my credit report?
Does the government offer support for refugees?
Trying To Build Your Credit History As A Refugee?
It’s definitely not an easy task but building a good credit history is essential if you plan on applying for a credit card, loan, line of credit or mortgage in Canada. To do so, you’ll need to obtain the status of a protected person first. Contact the federal government for more information about our country’s refugee protection and financial programs today.
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