Newcomer to Canada? Here are some tips to help you build your credit
You may have an expectation that your credit will follow you everywhere, even overseas; you may expect that your good credit history in your home country has followed you so far. This is unfortunately not the case! When you immigrate to Canada, when it comes to your credit, you have to start from scratch.
The bank account
One of the first things you should do is open a bank account. This will be the foundation on which you will build your new credit history. To this end, you will need at least two forms of identification, of which at least one must have a photo. The regulation requires each bank to make sure to have certain types of specific identification of registered to your file before being able to treat your request. For this reason, you will likely be asked to have your primary identification obtained in Canada. That being said, your foreign passport will probably serve as a secondary identification.
Once your checking account is open, it would be a good idea to open a savings account: this is a tool to demonstrate to your chosen financial institution that you are able to save and, once it contains a good reserve of funds and that you contribute actively and regularly, you will have demonstrated to your bank that you have the necessary capital to adapt to the bad circumstances. This will be the first step towards the goal of establishing yourself as a low risk client. It is a good idea to continue to develop your portfolio with the same institution because a bank with which you have a well-established record will be more likely to want to extend the credit you are looking for when you will need it.
The path to good credit
To take advantage of your fresh start in your financial life, it is important to know what are the best methods to build good credit. Once your bank accounts open, the next step is to get a line of credit, such as a credit card. So, think of trying to get:
- A secured credit card
- A store credit card
- A line of credit from a bank
A secured credit card is one of the easiest forms of credit to obtain without help. A financial institution such as your bank can offer you a secured credit card with your own capital. It works just like any other credit card, but you basically borrow from yourself. If you are trying to get another kind of credit, you may be asked for a co-signer, but you will be able to build your credit even faster! With this method, by making your full payments before the due date, you will build a favorable credit report in a period of approximately 18 months. This one will only become more favorable as you maintain your good payment habits.
The components of credit
In Canada, the Financial Consumer Agency of Canada (FCAC) administers the regulations for credit bureaus. They give you a credit rating that ranges from a very low rating around 300 and a phenomenal rating around 900. Individuals with a rating below 650 will find it very difficult to get any form of credit that you can expect. he is. A rating above 680 will greatly facilitate your credit. With so many different ratings, what are the factors that contribute to this assessment in Canada?
- Your payment history
- Your existing debt
- The credit that has already been extended to you
- Recent credit surveys
In order to establish a favorable credit history, it is important to always make payments before their due dates in order to establish your payment history. You will be expected to have an existing debt, but it is not so important that adding an additional line of credit will hurt your ability to keep your payments. You should always have less than 50% of your unused credit available. If a new line of credit takes you above this threshold, you may be denied. That being said, being a holder of established lines of credit can demonstrate that you are a good risk for financial institutions. It is important to note that while a very low credit scare, very little to your overall credit rating, several consecutive surveys may indicate that you are looking for credit in a desperate way.
Keep in mind that your credit rating is a tool to help financial institutions assess your risk by borrowing money. By putting in place healthy payment habits, you can build a strong financial life in Canada, allowing you to take important life steps, like buying your first home, without worries. Once the foundation of your financial success is established, consider diversifying your financial life with additional investments and savings accounts for a secure future.