In 2016, 21.6% of Canadians were immigrants, and 1,212,075 immigrants came to Canada between 2011 and 2016, according to StatsCan. New immigrants have to start all over and face many challenges upon arrival in Canada. They might need to navigate college or university systems, find a job, find a home, apply for any relevant social support, and of course, start building their credit.
Immigrants face challenges when it comes to accessing credit. Because credit history or credit scores do not follow immigrants from country to country, they must start from scratch once they come to Canada. The good news is that starting to build credit from scratch is much easier than recovering from bad credit, and Canada has many loan and credit options that cater to Canadian immigrants.
If you’re unsure if you have a credit score in Canada, you can check yours for free using Loans Canada’s Compare Hub.
There are many types of credit-building products to help new immigrants build their credit in Canada. Let’s take a look:
Unlike unsecured credit cards, secured credit cards have security deposits to back them up. In the event that the borrower cannot pay their bill, the security deposit covers the credit used. These credit cards are a popular choice for newcomers to Canada, as the security deposit allows enough trust from the creditor to overlook the lack of credit history.
If you’re looking to start building your Canadian credit history, finding a secured credit card that meets your needs should be your first step. Once you have your card, use it to purchase important necessities like groceries, or set up a recurring bill payment. Our number one piece of advice is to make sure the credit card provider reports your payment to the credit bureaus, this is how you will build your credit history.
Designed to help people establish their credit, credit builder loans do not provide money upfront to the borrower. With this type of loan, borrowers actually make regular payments to fund the loan themselves. These payments are then reported to the credit bureau, creating a history of payment to help establish credit. It’s important to note that credit builder loans tend to have higher interest rates and fees.
A credit builder loan should not be your first option for building a credit history. However, it can be a good option for consumers who already have a secured credit card and are looking for additional ways to build credit.
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There are also specific loans available for new immigrants to Canada.
The federal government of Canada offers loans to immigrants through their Immigration Loans Program (ILP). Specifically, this program offers immigrants three kinds of loans:
This type of loan is meant to cover the costs associated with transportation for immigrants and their families from their home country to Canada.
Eligible expenses include:
For a more detailed list of eligible transportation expenses, please visit the Government of Canada website.
Ineligible expenses include:
For a more detailed list of ineligible transportation expenses, please visit the Government of Canada website.
New immigrants must book their travel with the assistance of the International Organization for Migration (IOM) to be eligible for this loan. If an individual books the travel on their own, they will not be eligible.
The assistance loan is meant to help immigrants cover the costs of initial resettlement, like basic needs and employment costs. Here are some examples of eligible expenses for this loan.
Basic needs:
Employment needs:
Need extra cash, try applying for a bad credit loan.
The RPRF loan is meant to assist immigrants in covering the cost of RPRF when seeking permanent residence for themselves or their families. For more information about RPRF loans, visit the Canadian government’s RPRF webpage.
Note: All loans offered by the ILP are only available to eligible immigrants. For more information on eligibility, please visit the Canadian government’s ILP eligibility webpage.
To apply for an ILP, visit the Canadian government’s ILP application form.
Private lenders offer loans without as strict criteria requirements as banks normally have. For example, in exchange for a higher interest rate, a private lender may overlook a Canadian immigrant’s lack of credit history and approve a loan more quickly. There are a variety of loans that individuals can seek from private lenders, including:
Private lenders base their approval on the overall financial health of the borrower rather than their credit score and history. Some factors private lenders consider include:
Despite the higher costs, private lenders may act as a good stepping stone for immigrants in preparation for better loan options as they ease into Canadian life.
Thinking of moving to Canada. Check out what documents you need to move to Canada.
Many banks in Canada offer newcomers programs designed to help immigrants access to credit. Let’s take a look at some of them.
The CIBC Auto Finance Newcomers Program allows newcomers to purchase a car with no credit history required, from a participating car dealership. Eligible borrowers can pay the cost back over the course of 5 years or less by making weekly, bi-weekly, or monthly payments.
TD offers a variety of programs designed to help newcomers settle into their Canadian financial life with ease, including chequing accounts with no fees for 6 months, flexible mortgages for individuals with no credit history, secured credit cards, and more.
RBC offers a variety of products for newcomers to Canada, including car loans and mortgages with no credit history required, preferred interest rates for investments, no fees for chequing accounts, and free international money transfers, for a limited time.
Despite the financial, social and emotional challenges associated with immigrating to a new country, there are many resolutions for newcomers who are looking to build their Canadian credit history. New immigrants have many options offered by the Canadian federal government, banks, and private lenders to help establish their credit and access loans. If you’re a new Canadian looking for a loan or other financial assistance, Loans Canada is here.
Interest that is earned by an individual, but not yet received. Or, interest that is owed, but not yet paid. Interest is typically earned or payable after a certain period of time, such as a month or a year, which is why it can accrue. The interest rate you pay over a full year in exchange for borrowing. An APR is expressed annually but is typically charged monthly. You can determine the total monthly interest you’ll pay on debt by multiplying the borrowed amount by the APR and then dividing by 12. Anything that has financial value is considered an asset. In order to reap the benefits of an asset, you must also own it as an individual or business. When it comes to debt, usually only real estate, jewellry, vehicles, and investments are considered assets. An individual or entity that takes something (for example money or equipment) with the intention of returning it to the original owner. When the borrower it taking out a loan, there is usually an agreement involved and applicable interest. A cash withdrawal from a credit card. Cash advances are a very expensive form of financing as the interest rate on the borrowed amount is higher and there is often a flat fee. In addition, interest becomes effective immediately after you withdraw the cash, instead of after the balance due date. An individual who shares an obligation of something that was borrowed with one or more people. All co-borrowers listed on an agreement are fully responsible for repaying the obligation. Any asset that is used to secure debt. In the event that the borrower defaults on the loan, the lender has the right to seize the asset and sell it to cover the owed amount. Collateral is also commonly referred to as security. An individual who agrees to make your loan payments and otherwise be responsible for your debt in the event that you default on the loan. Using a cosigner is a popular option for individuals who have trouble securing debt on their own. All of the costs a borrower incurs when borrowing an asset or money. Examples of borrowing costs include legal fees, interest, loan origination fees and penalties. An individual or entity that owes a sum of money to a creditor. Failure to pay the minimum payment on a loan or account on or before the agreed-upon payment date. Delinquency is typically categorized in 30, 60, 90 or 120 days since lenders typically have monthly payment cycles. Delinquent accounts may eventually turn into defaulted accounts. An individual who relies on another individual for financial support. Usually, this refers to a family member, common-law partner or spouse who is unable to financially support themselves. The market value of an asset you own less the amount still owed (including any additional fees to sell or repay debts) on the loan used to purchase the asset if any. Equity increases when you pay down the debt as well as when the value of the asset increases. Equity can be calculated at any point in time and is also referred to as lendable value or net value. A payment schedule that breaks up an owed amount of money into several equal amounts, otherwise known as installments, which are paid over an agreed period of time. An amount of money that is borrowed by one entity from another with the expectation that the amount will be paid back. Interest is typically applied on the owed amount. The ratio of what amount was borrowed to purchase an asset in relation to the market value of that asset. The formula would be: the total amount borrowed for the purchase divided by the total selling price of the asset. The borrowed amount can differ from the selling price if the individual makes a down payment, for example. In general, the lower the LTV, the more favourable the terms of the financing will be. A short term, small loan that a borrower promises to repay on their next pay day. Payday loans are known to be an expensive and risky form of financing that makes it challenging for the borrower to repay and manage. The period of time over which a borrower is obligated to make a payment. Payment periods could be weekly, bi-weekly or monthly, sometimes even longer. The prime rate advertised by a lender is typically based on the Bank of Canada’s interest rate that is set each night, which may change at any time. The total remaining balance of a loan, without considering interest and other fees. A loan that is secured by an asset known as collateral or security. In the event that the borrower defaults on the loan, the lender has the right to seize the asset securing the loan and sell it to repay the owed amount. This type of loan bears less risk for the lender, but more risk for the borrower. A loan that is not secured by an asset known as collateral or security. In the event that the borrower defaults on the loan, the lender will not have the opportunity to seize the collateral or security to repay the owed amount. This type of loan bears more risk for the lender, but less risk for the borrower. Loan Glossary
Terms
Accrued Interest Annual Percentage Rate (APR) Assets Borrower Cash Advance Co-Borrower Collateral Cosigner Cost of Borrowing Debtor Delinquency Dependent Equity Installments Loan Loan-to-Value Ratio (LTV) Payday Loans Payment Period Prime Rate Principal Balance Secured Loan Unsecured Loan
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Chrissy is a Toronto-based communications advisor. With an English degree from the University of Toronto and editing courses under her belt from Ryerson University, she has continued her lifelong passion for writing and editing. In addition to working for Loans Canada on a variety of financial topics, Chrissy has a few years of resume writing and editing under her belt, and takes great pleasure in helping people find work that fits with their experience and passions. When she isn't working, you can find her practicing yoga, hanging out with her dog, reading up on financial and real estate news, or planning her next trip abroad.
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