How newcomers can build their credit history in Canada
As a newcomer to Canada, one of the biggest challenges you face is settling down in a new country. This can be especially difficult when the tools you need are not easily accessible. For example, getting a mortgage, financing a car purchase or applying for a loan can be made difficult when you don’t have any work experience or credit history in Canada. So what can you do to begin to build that credit history? Here are a few tips:
- Establish yourself
Finding housing and employment quickly to establish yourself will show stability to potential creditors. Avoid changing jobs and addresses frequently as it could be viewed as high risk to many creditors. Many lenders will not loan money without a minimum of two years’ work history in one organization.
Apply for services that help you build your credit
Most companies will allow you to sign up for services like internet, cable and home phone without a credit history, and paying for those services on time will help build one. However, not all bill payments are reported to the credit bureau. Be sure to inquire with the service provider when you are signing up.
- Apply for a credit card
There are two types of cards offered to newcomers in Canada, a secured credit card or an unsecured credit card. What’s the difference? Secured credit cards work like this: you pay down a deposit to the credit card company and then you borrow against that amount. The deposit will act as your credit limit. You can use your secured credit card just like a regular credit card; the only difference is that in case of default your creditor is covered by your initial deposit. You can apply for an unsecured credit card as well but these tend to come with a very low credit limit.
- Get a co-signer or joint applicant for a loan or credit card
Having a co-signer is a good way to get credit secured. Banks are more likely to provide a loan, line of credit or credit card if you have a joint applicant because it guarantees that, one way or another, the debt will be taken care of. It’s a great way to build credit provided that the co-signer has good credit and updates are sent to the credit bureaus under your name and not just the co-signer’s.
- Make sure you pay your bills on time
For any service bills, make sure you are paying them on time and in full. For credit card bills, you need to at least make the minimum payment. Doing so will help you establish a good credit history.
Once you get started, remember to keep building your credit history and making responsible choices. Read these tips to ensure you don’t accidentally kill your credit score.
Have any questions? Ask us in the comments section!