New to Canada? Here are some tips to build your credit

By Caitlin in Credit
New to Canada? Here are some tips to build your credit

Credit is one of those things that you would think follows you everywhere. This is an incorrect assumption. When immigrating to Canada you are presented with a clean slate, and the task of entirely rebuilding your credit.

The bank account

One of the first things you should do is to open a bank account for yourself. It’s a solid foundation from which to launch your credit endeavors. You will need at least two types of identification with at least one photo ID present. Each bank has to follow a specific set of rules for allowable forms of identification. Many banks require primary identification to have been obtained in Canada, though a foreign passport is usually accepted as a secondary form.

Your next order of business is to open a savings account, to prove you can save. Banks appreciate the ability to save because it makes you less risky. When you can demonstrate an active and well-stocked savings account, you demonstrate you have the financial padding to offset negative circumstances.

As you further develop your relationship with your chosen bank, it will open up further credit avenues for you. Any bank you have an established relationship with is more likely to extend credit to you in the future, just because they know you.

The road to good credit

Making the most of your blank slate in Canada means knowing what builds your credit. After acquiring your bank account, obtaining a line of credit is one of the best ways to build your new financial life. A credit card is one of the best ways to accomplish this.

After your bank account is established, consider getting a:

  • Secured credit card
  • Store card
  • Bank line of credit

Obtaining a secured credit card is one of the easiest lines of credit to obtain on your own. A financial institution, such as your bank will offer you a credit card backed up by your own capital. It works like any other credit card, except you are essentially borrowing from yourself. Any other type of credit may require you to have a cosigner, but is faster at establishing your credit score.

It will take you approximately 18 months to build a good credit score, or at least the basis of a good foundation. However, the longer you maintain it, the better it reflects on your overall report.

The anatomy of credit

In Canada, the Financial Consumer Agency of Canada holds the keys to your credit score. Your credit score ranges from a low score of 300 to the stellar score of 900. Those with a score falling below 650 will have trouble acquiring lines of credit. A score of 680 and above will make building your credit much easier. So, what goes into a credit score in Canada?

Your credit score is a compilation of your:

  • Payment history
  • Outstanding debt
  • Established credit
  • Recent inquiries

In order to establish a good looking credit report you will want to make timely payments on your open accounts in order to establish your payment history. You will be expected to have some outstanding debt, but not so much that adding another line of credit will negatively impact your ability to pay it off. You should always have under 50 percent of your available credit utilized. If a new line of credit were to put you over that amount, you may be declined. However, possessing established, and even paid off lines of credit demonstrates you are a good risk for financial intuitions to make. Recent inquiries play a lesser role in damaging your credit score, though; too many indicates you are desperate for credit.

Other factors that weigh on your credit report include how long you have been employed, and whether you rent or own your vehicle and primary residence.

Going forward

Remember that your credit report is a way for lending institutions to evaluate your risk. By taking the steps to build a solid financial life in Canada, you prepare yourself for accessing life’s larger milestones, such as buying a home. Once your basis for financial success is secured, consider diversifying your financial life by establishing investments and savings accounts for a solid financial future.


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