How to Build Your Credit Score As a Newcomer to Canada
Sep 20, 2024
Written by
Written by
Brianna Harrison (Credit Card & Travel Writer)
Brianna Harrison (Credit Card & Travel Writer)
Table of contents
Title
Title
Title
Building a strong credit score is essential for financial success in Canada, especially as a newcomer. While you can transfer savings and assets to a Canadian bank, you can’t transfer your credit score–which means you’re essentially starting at zero.
In this article, we’ll guide you through what you need to know about credit scores in Canada, including how they work, how to establish credit in Canada, and just how long it will take (hint–just a few months!).
New to Canada and just getting started? Here are the best bank accounts for newcomers to Canada.
What is a Credit Score in Canada?
Depending on where you’re from, the idea of a credit score may be completely new to you. Some countries, like the U.S. and Australia, have a credit scoring system, while others don’t.
A credit score in Canada is a three-digit number calculated by the credit bureaus. It tells lenders how well you’ve managed your credit in the past and assesses your likelihood of repaying future debt.
Credit scores are calculated based on several factors, including payment history, length of credit history, types of credit, and how much credit you use.
You can check your credit score with your bank, but you’ll get a more accurate reading by checking your credit report with the main credit bureaus – Equifax and TransUnion.
Everyone in Canada has a credit score between 300 and 900. The higher the number, the better your credit score. Here’s a breakdown of the credit score ranges and how they affect your likelihood of being approved for loans, credit cards, and the like:
Poor (300-579): It’s difficult to get a loan or credit card, and if you do, interest rates will be higher.
Fair (580-669): While it is possible to get approved for a loan or credit card, you’re seen as a subprime borrower and may have trouble qualifying for new credit.
Good (670-739): You will get approved for most credit cards and loans, as you are seen as an acceptable, low-risk borrower. Loan terms will be better, meaning lower interest rates and higher credit limits.
Very good (740-799): If you’re in this range, you have a good credit history and are seen as a very low-risk borrower. You will have an easier time being approved for additional credit with competitive rates, such as lower interest and higher-tier rewards credit cards.
Excellent (800-850): This is the best possible credit range. If you have an excellent credit score, you are viewed as extremely low-risk and are almost guaranteed approval for any credit product.
In other words:
Higher scores = better interest rates, higher approval odds, and access to premium products.
Lower scores = limited borrowing options, higher interest rates, or the need for secured credit.
Why is Your Credit Score Important?
Banks, lenders, and even landlords can run a credit check on you at any time. Your credit score is one of the most important factors in determining whether you will be approved for a credit card, loan, rental property, or mortgage.
Your credit score demonstrates your financial responsibility, essentially, how good you are at borrowing money and paying it back on time. With good credit, you can get lower interest rate loans, which makes large purchases more affordable. You can also get approved for better credit cards that allow you to earn rewards on everyday purchases.
In addition, a good credit score can reassure a landlord that you have a positive history of paying your rent and other bills on time, putting you ahead of those with lower credit scores and making you stand out in your rental application.
How to Build a Credit Score in Canada
If you’ve just arrived in Canada, you’ll need to know how to establish a credit score. As a newcomer, you essentially start from scratch. You have no credit history, or a credit score of 0. While that may sound alarming, there are multiple ways you can quickly build your credit and get it up to a good or even great number.
Here are some top tips on how to build credit in Canada as a newcomer:
Open a Bank Account
One of the first steps you should take when arriving in Canada (or even before!) is opening a newcomer bank account. Now, if you're reading this, you might already have one, but if you don't, get on it. You can open a chequing account and get a debit card, even if you have no credit score. Some even allow you to open a savings account and apply for your first credit card through them.
Plus, many financial institutions have special offers like no-fee accounts and unlimited free transactions. Who needs banking fees on top of moving to a brand-new country?
Photo by Etienne Martin on Unsplash
Get a Secured Credit Card
There’s a low chance you’ll get approved for a typical credit card with no credit history in Canada. However, you can get a secured credit card, which does not require a credit check or history.
Secured credit cards for newcomers to Canada require money upfront as a security deposit, which will typically be your credit limit. For example, if you put a deposit of $500, your credit limit will be $500, and you cannot spend more than that.
Using a secured credit card responsibly and paying off your balance on time and in full every month will contribute to a good credit score. As your credit history improves, you will eventually be able to qualify for better, unsecured credit cards with higher credit limits.
Report Rent Payments
Did you know that you can report your rent payments to the credit bureaus as another way to increase your credit score? As a first-time renter in Canada, this is a great way to build credit and a positive rental history, making you more attractive to both lenders and future potential landlords.
To do this, you’ll need to opt into a credit-building service that reports your monthly rent payments. You can use a few rent reporting services, including Chexy’s Credit Builder and Borrowell’s Rent Advantage.
How do they compare, and which ranks best?
Borrowell Rent Advantage costs $59 to upload up to two years’ rent history. They have a money-back guarantee–if your credit score doesn’t increase, they’ll refund you. You can also sign up for current rent reporting, which costs $8 per month.
Chexy’s Credit Builder feature is completely free to opt-into, and does not require much landlord participation. Your rent payments will automatically be reported to Equifax each month. You can even use a debit card to pay your rent if you don’t have a Canadian credit card yet! Plus, you can earn rewards like cashback and points at the same time.
With Chexy, your rent payments automatically come out of your account a few days before rent is due, which means that you’ll never have to worry about paying rent on a specific date–it will be done for you. As a result, your credit score will automatically start to improve.
Plus, you can use Chexy to earn rewards like cashback, free flights, and more. Chexy is the clear winner here!
Get a Monthly Phone Plan
Getting a phone plan is often one of the first steps newcomers take to get established in Canada, as we all need a cell phone to stay connected. Most Canadian phone providers will report timely monthly bill payments to the credit bureaus, thus increasing your credit score over time.
Keep in mind that you’ll need to have a monthly phone plan for this to work, and you’ll need to never miss a payment to build your credit score fast.
Pay Your Bills in Full Every Month
Just like your phone bill, you’ll need to pay all your other bills in full and on time to build your credit score. Every bill payment, whether it’s manually paid or a recurring payment, influences your credit score. If you miss a payment or don’t pay your bills in full, it’s a surefire way to put a dent in your credit history.
Check Your Credit Report Often
Credit scores change, and you’ll get a new report about once every month. It’s especially important to keep an eye on your credit report to see any dips or increases. Detailed credit reports can also tell you the main factors contributing to your credit score, and they can even give you tips on how to improve.
If you see any inaccuracies on your credit report, report them by filing a dispute with Equifax or TransUnion.
How Long Does It Take to Build Credit?
It can take a minimum of 3 to 6 months to generate your first credit report. You can get a base-level credit score in about six months, as you’ll have built up enough credit history by paying your monthly bills, rent, and having good money management.
The minimum requirements to generate a FICO credit score are:
Having at least one account that’s been open for 6 months or more, and
At least one account that has been reported to the credit bureaus within the past 6 months.
Let’s say you arrived in Canada in January, got a phone plan, and started paying a few bills. You’ll need to wait at least until June to get an accurate credit score reading.
What is a FICO credit score in Canada?
FICO is the scoring model used by Equifax and TransUnion to determine your credit score. It predicts credit risk assessment and is based on five main factors: your payment history, credit utilization, account history, public records, and credit inquiries.
As a newcomer to Canada, you can benefit from renting with Chexy. Use your debit or credit card to pay your rent and build your credit score while doing so. Plus, you can earn some sweet rewards (like Scene+ points or cashback), depending on which card you use.
Subscribe to our newsletter below for up-to-date credit card, travel, and rental content.
Building a strong credit score is essential for financial success in Canada, especially as a newcomer. While you can transfer savings and assets to a Canadian bank, you can’t transfer your credit score–which means you’re essentially starting at zero.
In this article, we’ll guide you through what you need to know about credit scores in Canada, including how they work, how to establish credit in Canada, and just how long it will take (hint–just a few months!).
New to Canada and just getting started? Here are the best bank accounts for newcomers to Canada.
What is a Credit Score in Canada?
Depending on where you’re from, the idea of a credit score may be completely new to you. Some countries, like the U.S. and Australia, have a credit scoring system, while others don’t.
A credit score in Canada is a three-digit number calculated by the credit bureaus. It tells lenders how well you’ve managed your credit in the past and assesses your likelihood of repaying future debt.
Credit scores are calculated based on several factors, including payment history, length of credit history, types of credit, and how much credit you use.
You can check your credit score with your bank, but you’ll get a more accurate reading by checking your credit report with the main credit bureaus – Equifax and TransUnion.
Everyone in Canada has a credit score between 300 and 900. The higher the number, the better your credit score. Here’s a breakdown of the credit score ranges and how they affect your likelihood of being approved for loans, credit cards, and the like:
Poor (300-579): It’s difficult to get a loan or credit card, and if you do, interest rates will be higher.
Fair (580-669): While it is possible to get approved for a loan or credit card, you’re seen as a subprime borrower and may have trouble qualifying for new credit.
Good (670-739): You will get approved for most credit cards and loans, as you are seen as an acceptable, low-risk borrower. Loan terms will be better, meaning lower interest rates and higher credit limits.
Very good (740-799): If you’re in this range, you have a good credit history and are seen as a very low-risk borrower. You will have an easier time being approved for additional credit with competitive rates, such as lower interest and higher-tier rewards credit cards.
Excellent (800-850): This is the best possible credit range. If you have an excellent credit score, you are viewed as extremely low-risk and are almost guaranteed approval for any credit product.
In other words:
Higher scores = better interest rates, higher approval odds, and access to premium products.
Lower scores = limited borrowing options, higher interest rates, or the need for secured credit.
Why is Your Credit Score Important?
Banks, lenders, and even landlords can run a credit check on you at any time. Your credit score is one of the most important factors in determining whether you will be approved for a credit card, loan, rental property, or mortgage.
Your credit score demonstrates your financial responsibility, essentially, how good you are at borrowing money and paying it back on time. With good credit, you can get lower interest rate loans, which makes large purchases more affordable. You can also get approved for better credit cards that allow you to earn rewards on everyday purchases.
In addition, a good credit score can reassure a landlord that you have a positive history of paying your rent and other bills on time, putting you ahead of those with lower credit scores and making you stand out in your rental application.
How to Build a Credit Score in Canada
If you’ve just arrived in Canada, you’ll need to know how to establish a credit score. As a newcomer, you essentially start from scratch. You have no credit history, or a credit score of 0. While that may sound alarming, there are multiple ways you can quickly build your credit and get it up to a good or even great number.
Here are some top tips on how to build credit in Canada as a newcomer:
Open a Bank Account
One of the first steps you should take when arriving in Canada (or even before!) is opening a newcomer bank account. Now, if you're reading this, you might already have one, but if you don't, get on it. You can open a chequing account and get a debit card, even if you have no credit score. Some even allow you to open a savings account and apply for your first credit card through them.
Plus, many financial institutions have special offers like no-fee accounts and unlimited free transactions. Who needs banking fees on top of moving to a brand-new country?
Photo by Etienne Martin on Unsplash
Get a Secured Credit Card
There’s a low chance you’ll get approved for a typical credit card with no credit history in Canada. However, you can get a secured credit card, which does not require a credit check or history.
Secured credit cards for newcomers to Canada require money upfront as a security deposit, which will typically be your credit limit. For example, if you put a deposit of $500, your credit limit will be $500, and you cannot spend more than that.
Using a secured credit card responsibly and paying off your balance on time and in full every month will contribute to a good credit score. As your credit history improves, you will eventually be able to qualify for better, unsecured credit cards with higher credit limits.
Report Rent Payments
Did you know that you can report your rent payments to the credit bureaus as another way to increase your credit score? As a first-time renter in Canada, this is a great way to build credit and a positive rental history, making you more attractive to both lenders and future potential landlords.
To do this, you’ll need to opt into a credit-building service that reports your monthly rent payments. You can use a few rent reporting services, including Chexy’s Credit Builder and Borrowell’s Rent Advantage.
How do they compare, and which ranks best?
Borrowell Rent Advantage costs $59 to upload up to two years’ rent history. They have a money-back guarantee–if your credit score doesn’t increase, they’ll refund you. You can also sign up for current rent reporting, which costs $8 per month.
Chexy’s Credit Builder feature is completely free to opt-into, and does not require much landlord participation. Your rent payments will automatically be reported to Equifax each month. You can even use a debit card to pay your rent if you don’t have a Canadian credit card yet! Plus, you can earn rewards like cashback and points at the same time.
With Chexy, your rent payments automatically come out of your account a few days before rent is due, which means that you’ll never have to worry about paying rent on a specific date–it will be done for you. As a result, your credit score will automatically start to improve.
Plus, you can use Chexy to earn rewards like cashback, free flights, and more. Chexy is the clear winner here!
Get a Monthly Phone Plan
Getting a phone plan is often one of the first steps newcomers take to get established in Canada, as we all need a cell phone to stay connected. Most Canadian phone providers will report timely monthly bill payments to the credit bureaus, thus increasing your credit score over time.
Keep in mind that you’ll need to have a monthly phone plan for this to work, and you’ll need to never miss a payment to build your credit score fast.
Pay Your Bills in Full Every Month
Just like your phone bill, you’ll need to pay all your other bills in full and on time to build your credit score. Every bill payment, whether it’s manually paid or a recurring payment, influences your credit score. If you miss a payment or don’t pay your bills in full, it’s a surefire way to put a dent in your credit history.
Check Your Credit Report Often
Credit scores change, and you’ll get a new report about once every month. It’s especially important to keep an eye on your credit report to see any dips or increases. Detailed credit reports can also tell you the main factors contributing to your credit score, and they can even give you tips on how to improve.
If you see any inaccuracies on your credit report, report them by filing a dispute with Equifax or TransUnion.
How Long Does It Take to Build Credit?
It can take a minimum of 3 to 6 months to generate your first credit report. You can get a base-level credit score in about six months, as you’ll have built up enough credit history by paying your monthly bills, rent, and having good money management.
The minimum requirements to generate a FICO credit score are:
Having at least one account that’s been open for 6 months or more, and
At least one account that has been reported to the credit bureaus within the past 6 months.
Let’s say you arrived in Canada in January, got a phone plan, and started paying a few bills. You’ll need to wait at least until June to get an accurate credit score reading.
What is a FICO credit score in Canada?
FICO is the scoring model used by Equifax and TransUnion to determine your credit score. It predicts credit risk assessment and is based on five main factors: your payment history, credit utilization, account history, public records, and credit inquiries.
As a newcomer to Canada, you can benefit from renting with Chexy. Use your debit or credit card to pay your rent and build your credit score while doing so. Plus, you can earn some sweet rewards (like Scene+ points or cashback), depending on which card you use.
Subscribe to our newsletter below for up-to-date credit card, travel, and rental content.