How to Build Your Credit History as a New Canadian Immigrant

The phrase credit history might be new to some of you as it was for me when I first relocated to Canada, but not to worry, by the end of this post, you will have a complete understanding of what credit history means, bow to build one and the importance of having a good credit history.

So what exactly is credit history? A friend once told me “show me your credit score and I’ll tell you who you are.” This was funny at the time but giving it a second thought, that is what several Canadian institutions judge you based on. Your credit history is basically a report of your financial situation and decisions. Do you pay back your loans on time? Do you pay your bills on time? Are you in debt? Your credit history is able to answer all these questions. Canada has a system where all your payment history including your smallest bills can be summed up to a report and used as a yardstick to measure how responsible you are with money.

Having a good credit history gives you a good credit score which generally makes life easier for you. You will be eligible for a mortgage if you decide to take one, landlords will be more willing to rent their houses to you, you can get study loans, choose a good power provider in some provinces and you are generally seen as a responsible and trustworthy person. In Canada, your credit scores generally range from 300 to 900. The higher the score, the better. If you have scores between 800 and 900, your credit score is excellent.

However, as a new immigrant, you start or with no or new credit history which can make things a bit difficult for you at first like finding a place to rent, taking a car loan, etc. Fret not because there are ways you could build your credit score regardless. Here are some tips to help you grow your credit score by building a good credit history.

Apply for a Credit Card as Soon as Possible: With a credit card, you can spend from your credit card and refund the card on your due date monthly. These transactions are proof that you are responsible enough to pay back loans. If done for a period of time without defaulting on payment on the due date, it will impact your credit score positively.

Pay Your Bills in Time: Whether it’s your power bill, house rent, credit card refund or even phone bill, make sure it is paid in time every month. These payments reflecting in time help increase your credit score over time. If your credit card payment is late by even an hour, this can affect your credit history negatively. If you can’t trust yourself to remember your credit card due date, you can set up an automatic payment so that it is paid from your account monthly.

Go Easy on Your Credit Card Limit: It isn’t a good idea to always max out your credit card limit as this can impact your credit score negatively. For example, if you have a limit of $2000, you should try not to use up more than 70% of it. And of course withdrawing cash from your credit card is a complete no no! If you do, you will be faced with ridiculous interest rates you will have to pay.

However, several other factors will be considered as well, such as your savings history, net worth, income and ability to provide a security deposit, such as a down payment on a mortgage, etc., but as a newbie, this is a good place to start. You should begin seeing results between 6 months to one year of adopting these good financial habits.