New to Canada? Follow These 5 Steps to Build Credit Fast
By: Lucy Zemljic on October 23, 2014
Canada has long been known as a “cultural mosaic”, and for good reason. Walk through the streets of Toronto, Vancouver or even Halifax and the diversity is easy to see. According to Statistics Canada, one in every five of us was born in another country!
Unfortunately, StatsCan also reveals that four years after moving to Canada, one in ten immigrants still has financial concerns. One of the most important things that new Canadians can do in order to secure their financial future is build their credit rating. Many immigrants are surprised to find out that their overseas credit history is no good in Canada – they’ve got to start from scratch. The good news? There are plenty of things an immigrant can do to start building Canadian credit – here are five key steps that new Canadians can take in order to start bettering their financial futures right away.
Step 1 – Open a Bank Account
The very first thing a new Canadian can do to start building credit is get a bank account. All you have to do to get started is make your way to a local bank branch and ask for assistance – a representative will help you open an account that best suits your needs. Plus, many Canadian banks have multilingual staff, so you can get assistance in your language of choice.
You’ll need two pieces of identification to get started, one of which has to have a photo, like a valid passport or a driver’s licence. When you open up your account, start building trust with your bank by depositing your salary once you start working and making payments from the account each month.
Step 2 – Get a Credit Card
After you open up your bank account, it’s a good idea to get your first credit card. Credit cards are one of the easiest and most effective ways to build credit in Canada. The sooner you get your first card, the sooner you can start proving that you’re capable and trustworthy with credit.
Go with secured
Your best bet for a first Canadian credit card is a secured one – you don’t need a credit history to get a secured credit card, and it offers all the same benefits as a regular card. The only difference is that you’ll have to deposit some money with the issuer right away, in case you default on your balance. The advantage? Your repayment habits will be reported to Canadian credit bureaus, so you’ll be well on your way to building that crucial credit history.
Some solid secured credit card choices include the Home Trust Secured VISA and the Home Trust Secured No-Fee VISA, which you can find on our site.With these cards,your credit limit is set at the amount of your deposit, so the more money you put down, the higher your credit limit. If you put down a $500 deposit, your credit limit is $500. If you put down $1,000, your limit will be $1,000 – it’s that simple.
Start using your card wisely
Once you get your first card, start using it – carefully. Make small purchases, then pay them off in full. Pay your balance consistently: this means paying your credit card balance off on time, every month. If you can’t pay off the full amount of your balance, make the minimum payment. The best thing you can do, however, is pay off more than the minimum or pay the entire balance.
When it comes time to purchase your first Canadian cell phone, or rent your first apartment or car, you can also use your credit card as identification. Pretty handy, isn’t it?
Step 3 – Understand Your Credit Score
When you’re learning about credit in Canada, you’re bound to come across the term “credit score” time and time again. Your credit score is a numerical measure based on analysis of your credit files, and represents your creditworthiness, and the risk you represent to a lender. It’s calculated using factors like your payment habits, how much credit you're using each month, and the length of your credit history.
But how do you get that all-important good credit score? You guessed it: pay your bills on time, including cellphone, cable, utilities, rent and of course, your credit card bill.
Step 4 – Check Your Credit Score
After a while of building credit in Canada, you’ll want to check up on your score. It’s important to know what your credit score is, so it’s a good idea to eventually request a copy from one of two agencies.
There are two main credit reporting agencies (also known as credit bureaus) in Canada – Equifax Canada Inc. and TransUnion of Canada. These are private agencies that collect information about all credit borrowers, and keep a record of your credit history. You can contact these bureaus directly using the information below:
Step 5 – Get Different Types of Credit
A credit card isn’t the only way to build credit in Canada. To help build your credit history faster, you can apply for small loans from your bank, then pay them off on time. You can also get financing for big items, like cars. Auto loans are great way to build credit – just be sure to make your payments regularly.
As a new Canadian building credit from scratch, it will most likely take you about 18 months to develop a solid credit score. That may seem like a long time, but the wait is well worth it – afterwards, if you’ve followed these five steps, you’ll be well on your way to good Canadian credit!
