I'm New To Canada - Tips on Building Your Credit History

I'm New to Canada - Tips on Building Your Credit History

Last updated on August 5, 2018 Views: 4479 Comments: 11

If you’re one of the 250,000 people who immigrated to Canada this year, welcome! Aside from acclimating yourself to a new country, home, and job, you’ll also quickly realize the benefits of building a credit history with a strong credit score.

Whether you’re looking to lease a car, buy a home, get a cell phone, or get a credit card, your going to want to start building a credit history right away to get access to lending products at the best rates available. Here are a few tips to help you get started:

  1. Apply for an unsecured credit card: Apply for a Canadian credit card as soon as possible. Many of the big banks offer new immigrants a credit card with a low line of credit as part of their initial banking package, such as Royal Bank’s “Welcome to Canada” package or Scotia’s “Start Right” program.  Once you get your credit card, start using it right away.
  2. Apply for a secured credit card if need be.  A secured credit card requires you to put money on deposit with the credit card issuer as collateral in the event you default on your credit card balance. Not every person will be eligible for an unsecured credit card without a credit history, this is especially true of older adults. Also, if you’re looking for a credit card with a larger line of credit, you’re best bet may be a secured credit card. The advantage of using a secured credit card, over a debit card, is that your repayment habits will be reported to the credit bureaus, allowing you to build that all important credit history.
  3. Apply for a mobile phone. Some phone carriers, like Telus, specifically state that no credit history is required to get an account, and that they will report your post-paid subscription to the credit bureaus. While you may be tempted to get a pre-paid plan, a post-paid plan will help you build a credit history.
  4. Pay your credit card bill on time. Whether paying the minimum or more, make your credit card bill payments on or before the due date. 35% of your credit score is based on payment history. If you’re late, even by an hour, your credit history will be negatively impacted. Paying on time does not mean paying your entire balance. Paying on time means paying at least the monthly minimum payment, which is shown on your credit card statement. Understand how long you have after receiving your credit card bill to make your payment, called your grace period. It’s usually around 21 days. To help you pay on time, you can set-up automatic monthly payments through your bank account.
  5. Pay off your balance in full each month. While carrying a balance and making your payments on time will help your credit history more than paying in full each month, we would never recommend carrying a balance just to build your score. Using your credit card and paying it off every month will help build your credit score as well, just not as fast. But it’s a better strategy than paying excessive interest charges just to build a credit history.
  6. Get different types of credit. The credit bureaus love people with different sources of credit. So if you can manage to get a credit card, cell phone, or car loan (usually with a large deposit), it will help you build a credit history with a strong score that much faster.

Financial institutions will usually start using your credit history after it’s been established in good standing for a period of 18 months. But several other factors will be considered as well, including your savings history, net worth, income and ability to provide a security deposit, such as a down payment on a mortgage. These strategies should go a long way towards establishing a Canadian credit history for new immigrants.

Article comments

Keith says:

I just got off the phone with TransUnion, asking why my credit score has not moved from 637 in two years now since I moved back to Canada. I have two credit cards: RBC for $7500 (started at $2500 then it increased to $4500 then to $7500) and a CapitalOne for $1000.

Their reply: I need to stop paying my cards off in full and let balance sit on them to pay interest. I find that answer ridiculous. They also said I should get a third card and a car loan; when I already own a car paid in full (cash) and really don’t want a third credit card. This entire system is BS!

I do use ~25-30% of my two cards each month (on purpose) as that is what i heard was recommended. It makes no difference, my score won’t budge even with never having a delinquent payment, very few hard inquiries (3 in past 6 years, two of them being to get these two cards) and nothing else bad from any service on my history.

Any advice ? The TransUnion lady told me the US is more lenient and perhaps I should move there LOL…

The GreedyRates Team says:

Hey Keith,

Nice to hear from you. It sounds like TransUnion might have given you good advice but verbalized it in a confusing way. It’s true that carrying a balance—utilizing your credit—is good for your credit score, but there is a certain way to do it correctly, and this is what TransUnion was describing to you on the phone.

Essentially, you can choose to pay your monthly bill in one of three ways. The first way is to pay the minimum, which won’t affect your credit but will rack up interest charges. The second way is to pay off your purchases as you go, like if you were to buy a $500 home stereo system and then immediately go online after the purchase and pay it off in full. The third way (and the healthiest for your credit) would be to let that stereo purchase sit on your balance until the end of the month, and then pay your full statement when it comes due.

If you let your credit card charges collect until the end of the month and wait for the bank to tell you what you owe, then you’re effectively utilizing your credit and will therefore see a bump in your score. TransUnion does not mean that they want you to carry a balance month-to-month, because this would cost you money in the form of interest. If this doesn’t apply to you, or doesn’t make sense, let us know. Thanks!

The GreedyRates Team

Klas says:

We arrived in Canada late March and have had credit cards (that we pay in full) since then. At what time can I check my credit score? I guess that there will be a delay until the data is available and the benefit of paying the full credit card bill will impact any score there is.

GreedyRates says:

Hey Klas, welcome to Canada and the GreedyRates comments section as well!

Your family has now been in Canada for a little over 4 months. While some say it takes as little as 6 months to establish your credit, the information over at http://canadianimmigrant.ca/money/establishing-credit-in-canada indicates that some may wait up to 18 months. However, there’s a lot you can do in the meantime to improve your financial standing here.

There will be a delay at first, but you’re right: with responsible financial habits, that score will be better once it’s published. Banks are equipped to handle customers in your situation, and can help you get started. Best of luck!

GreedyRates Staff

dong says:

does not paying toll on time on a toll bridge count as bad for credit? as often times it comes in the mailbox late.

GreedyRates says:

Hi Dong,

That’s a great question and we’re not sure of the answer. It may depend on the bridge. No organization is required to report derogatory payments to the credit bureaus. Theorhetically, you could have one toll bridge / road report, while another does not. Does anyone know of any bridges that do report late payments to the bureaus?

GreedyRates Staff

Shawn Christopher says:

Okay I’m new to this whole credit thing and was wondering if someone can verify or
just tell me if there’s something wrong in how I see things .

So I ended up saving up about 15,000$ in the bank from work ..
And would like to start building my credit …
So I opened an account with TD .. to get a 1000$ secured credit card …
And they offered TFSA … a savings account that the 1000$ will go into
until they unsecure it and give it back …
And I guess I’ll get contributing to mutual funds or whatever .
And a basic checking account with 3000$
I really I wish I can find a way for my money to make something …
I wanted to put my money to good use …
Tangerine ? CIBC ? Vancity …
Mutual Funds ? Stocks ? TFSA ?
Is TD right place .. Have to start somewhere .

Don’t know but I ended up going to Vancity to see what they can do
also have Scotia bank ..

Anyway ..
If I have the secured visa ..
and I charge 850 … pay it down to 550 before the due date ..
Then it’s charged 300 .. then pay it down to 5$ so the 5$ can get interest ..
And do that each month that will bump my credit score .

Does that sound about right ?
The utilization is down to 30% and paid down to less than 10% …
So it shows use … utilization … and paid off each month …
But still leaving 5$ so they can get paid .

GreedyRates says:

Hi Shawn,

There is no need to carry a balance or pay your credit card off early. Ideally, pay off your entire balance before the due date. That way you get the bank lending you money interest free during the grace period, while you earn interest. Secondly, you are still carrying a balance when the bank let’s you borrow money during the grace period – there is no need to REVOLVE the balance and accrue interest. You get just as much credit for carrying a balance during the grace period as you do thereafter.

Hope that helps,

GreedyRates Staff

Val says:

If you don’t pay your statement balance in full does the interest get charged on ALL the remaining balance or just the statement balance from before?

GreedyRates says:

Hi Val,

This policy may vary by bank. However, MANY Canadian banks now charge interest on the ENTIRE balance of the previous billing cycle if you make anything less than a full payment. For example, if you billed $1,000 on day one of your billing cycle and at time of payment you paid $900, you would be charged interest on the entire $1,000, from the time of your purchase to the time of your payment. This is a relatively new methodology applied by the banks. Previously they only charged interest on the unpaid portion of the balance i.e. the $100. The lesson? Pay down your balance every month.


GreedyRates Staff

Lola says:

Telus Mobility does not “specifically state” that no credit history is required. Telus Mobility does a credit check for all post-paid mobile phone plans, and will require a $200 to $1000 security deposit if the customer has no credit history.