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Building Your Credit History

how to build credit in canada

As a newcomer you will have to build a new credit history in Canada. Credit cards are one of the most effective ways to build a Canadian credit history. Credit cards can be used as a form of identification when renting an apartment or a car or signing up for a new cell phone. A good credit history and rating will also help you when you’re making a significant purchase, such as a car, home or when starting a new business.

Using credit and making regular payments on time will help you establish a good credit history. Some helpful tips include:

  • Pay your bills in full and on time. Or at least pay the minimum amount shown on your statement.
  • Don't go over the limit on your credit card. The higher your balance, the more it affects your credit score.
  • Don't apply for credit too often, and borrow only what you need and what you can afford.
  • Use a credit card wisely.
  • Pay off your debts as quickly as possible.

Your credit file is like a financial report card. It tracks how much money you borrow, and how quickly you pay it back. Every month when you

borrow money, use your credit card or pay bills, information about your financial transactions is sent to a credit-reporting agency. The agency uses this information to come up with your credit rating.

Your credit rating contains a number and a letter. The number - between 0 and 9 - shows how fast you pay your bills. "1" means you pay your bills within 30 days of billing date and you've had no more than one late payment, while "9" means a bad debt, for example, a debt been placed with a collection agency.

In Canada, there are two main credit reporting agencies, also known as Credit Bureaus. These private agencies collect information about borrowers from other credit grantors.

International Credit Reports

Canadian credit-reporting agencies such as Equifax or TransUnion, only collect information from creditors about consumers' financial experiences in Canada. Despite this, financial institutions may be willing to recognize your earlier credit history outside of Canada. This may involve, for example, requesting a copy of your credit report from the credit-reporting agency in the other country. You may want to consider bringing in a copy of your credit report form your home country (if available) and present it with your credit and loan application.

Category: Credit

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