Building Credit when You’re a Newcomer to Canada
Building credit when you’re a newcomer to Canada can take time. Fact is, most newcomers will need a Canadian credit history to be approved for major purchases such as a mortgage. Similarly, most banks in Canada will require you to have a good credit history before they will give you a credit card. Despite having many years of good credit history with worldwide credit products, such as products from VISA and MasterCard, you may struggle to get a credit card or mortgage in Canada right away.
How long does it take to establish credit?
Building good credit is a process that takes time. Just remember, slow and steady is the best approach to establishing a good credit history. For instance, each time you ask for a loan or new credit product, your credit report will be reviewed. Multiple inquiries on your report in a short period could be a red flag to creditors — it suggests that you may taking on credit too hastily, so it’s important to space out inquiries. Opening too many accounts could also affect your credit score, so it’s best to be selective and open one account at a time.
Putting an exact time on how long it will take is difficult; depending on a person’s financial situation, and whether they have good payment habits, it might take anywhere from 6 months to a few years to establish good credit.
What if you have a bruised credit history?
Recovering from bruised credit is possible. To begin with, actions like paying your bills and credit cards on time can help. On the other hand, missing bill payments or maxing out your credit card(s) will hurt.
Ultimately, having bruised credit can affect your employment prospects, as many employers check credit reports before making a job offer. Similarly, bruised credit can affect your ability to secure a safe place to rent, as many landlords refuse to rent to people with poor credit. Likewise, it can hurt your ability to obtain the best interest rates for major purchases such as a car or a mortgage.
What are the steps to establishing/rebuilding your credit?
Establishing or rebuilding credit takes time, dedication and persistence to prove to lenders that you are a trustworthy consumer. If you are recovering from a bankruptcy or consumers proposal, it is going to feel like having to start from scratch.
While there is no quick fix, there are solutions. Here are a handful of ways people can rebuild their credit in Canada.
- Open a Secured Credit Card – where you put down an upfront security deposit equal or higher than the card limit, and diligently pay it off on time
- Play by the Rules – keep accounts in good standing, and 30 percent below the card limit
- Go Slow, Start Small and Have Patience – while establishing good financial literacy habits
- Limit Your Credit Inquiries – two many credit products in a short timespan raises flags
- Hang Onto Longstanding Accounts – especially those in good standing which help increase the average age of a persons accounts
- Get Help – speaking with a certified and accredited non-profit credit counsellor from Credit Counselling Canada can help. Here’s more on how to find a counsellor near you.