How to build credit as a new Canadian

April 26, 2024

KEY TAKEAWAYS:

✔ If you have recently immigrated to Canada, you have lots of options when it comes to banking and getting access to credit.

✔ You can transfer your savings to a Canadian financial institution, but your credit rating doesn’t travel with you. That’s why it’s important to know how to build and maintain a good one.

✔ Getting a credit card, personal loan or paying your bills on time will help to establish your credit rating.

If you recently immigrated to Canada, you’re probably juggling many things – finding a place to live, preparing for work, looking at schools and settling into a new community. One thing to begin to establish is your financial life. It starts with opening an account at a bank —many offer packages for newcomers that include the convenience of customer service in a wide variety of languages.

While having a bank account is a great way to establish yourself in Canada it’s just the first step. Your next goal will be to build a solid credit history that will establish your credit rating. Having a good credit rating will ensure you’re creditworthy, making it easier to borrow money when the time comes to buy a car or apply for a mortgage.

Follow these tips to help build your credit, set yourself up financially, and position yourself well for the years ahead.

Get a credit card (and use it)

Using a credit card is an excellent way to build and improve your credit score. Your bank can help you choose the type of credit card that suits your needs. There are cards with no annual fee, others have low credit limits, and some offer rewards.

Here are three important tips that will help to establish a good credit rating when it comes to having a credit card:

Use your card: If you don’t use your credit card, there’s no way for the credit rating agencies to measure your activity. You want to show them that you are responsible.

Make small purchases: Use your credit card for small items and online purchases but only spend what you can afford to pay off each month.

Never miss a payment: If you can’t pay your balance in full, make at least the minimum payment. Missing and late payments will cause your credit score to go down, not up.

If you use your card regularly and then pay the monthly bill in full and on time, you’ll be well on your way to a great credit score.

What is a credit score?

Your credit score is a number that helps financial institutions and other lenders understand the risk related to offering you credit. The higher your credit score, the better terms and interest rates will be available to you (and, larger credit amounts).

See what gets included in a credit report. Learn more.

Pay your bills on time

Properly managing your bills and expenses also helps to establish your credit rating. The key is to make sure that all the bills in your name, such as utilities, cable and internet service get paid on time. In as little as six months, you can start to develop a strong credit rating. It’s a great place to start!

Additionally, it’s important to file your annual Canadian income taxes on time and pay any balance owed before it becomes overdue. Like other bills, an overdue Canada Revenue Agency (CRA) payment will negatively affect your credit score.

Get a personal loan

If you could use some help as you start your new life in Canada, consider a personal loan. You can choose the amount and the length of the loan with payments designed to fit your budget. You’ll be able to borrow what you need when you need it, and with every on-time payment, you can establish a solid credit rating. Learn more about how borrowing to improve your credit actually works.