A good credit score in Canada is a must for new immigrants who arrive here to have a better life. Newcomers who seek qualifications for interest rates, loans, and mortgages will need to rely on a good credit score. Hence, they must first own a credit card to create a credit history. Read ahead to learn more about obtaining a good credit score and creating a credit history.
Those looking to immigrate to Canada can access the Express Entry pathway for their convenience.
A good credit score in Canada- the details
When an individual applies for a loan from a bank or simply borrows money from a lender, some of their information becomes available to a credit bureau. Gradually, the credit bureau also becomes aware of other information. This information could be concerned with their bill payments, details of any missed payments, or outstanding debts. Moreover, all these factors lead to the score calculation in the form of a three-digit value. This numeric value determines their potential to repay the loans, and this is a part of the credit rating report.
Credit scores have the following ranges:
- 300- The starting point or the least score.
- 750- This is the beneficial middle number which will enable newcomers to be eligible for a standard loan.
- 900- It is going to be the highest score, and this is taken by the one with an excellent credit score record.
When a score is at the highest level, it makes it easier for banks to provide loans to eligible newcomers. However, a score lower than 750 will make it challenging for newcomers to acquire a loan or credit card. Furthermore, they might get a lower credit limit and the interest rates will be really high.
Additionally, newcomers must note that most banks provide a credit card at the time when they open their newcomer account. This is the beginning for them to start creating a good credit history.
Credit Card report- defining the rules
Credit bureaus have formulated specific rules about who can view an individual’s credit report and the process of its usage. They must note that banks, financial institutions, credit unions, retailers, landlords, employers, mobile phone and insurance companies, credit card, and car leasing companies. These businesses often access credit reports to enable them to take lending decisions.
Usually, the concerned individuals are supposed to give their consent to such businesses or individuals to obtain their credit report.
However, specific provinces like Prince Edward Island, Nova Scotia, and Saskatchewan will only verbally inform the person about viewing their credit report. Conversely, other Canadian provinces will need their written permission to be able to view their report.
Additionally, certain provincial laws permit government representatives like judges or police to view their credit reports.
A good credit score in Canada- the complete process
It is so crucial for newcomers to have a good credit score in Canada, and there are numerous tips to create a great credit history. Have a look at these tips in detail:
- Timely payments and paying the full month’s balance– There are situations when lenders request credit owners to view their history through their previous bill payments. The previous timely payments can help a newcomer to have better prospects of paying on time in the future as well. Newcomers who are just beginning to create a credit history must pay off their bills on time and even complete their balance bills for each month. This way, they will be able to avoid any credit card debts.
- Wise usage of credit cards– It is vital that newcomers don’t exceed their credit card limits, and it is better that they use only what they can return. If suppose, they exceed the authorized limit on their credit, they will get a lower credit score for that. Hence, they must restrict their usage to 35 percent of total card in every billing cycle. Also, this will include all credit products, such as lines of credit, and credit cards from banks, lenders, and loans, etc. Exceeding the credit card limit each month will put you in the category of higher risk according to banks.
- Putting restrictions on credit applications or credit checks– Post settling in Canada, newcomers will often apply for credit repeatedly. Also, lenders or financial firms will, time and again, need to check their credit and view the report. This will further create an enquiry into their credit report as they will access the report at the credit bureau.
Credit checks
Credit checks are primarily of two types:
- Hard Hits– Credit checks like these can lower their credit score and show up in their credit report. Those inquiries will be visible to anyone who looks at their credit record. Applications for a credit card or mortgage, some rental applications, and some job applications are examples. Lenders can assume that the newcomers are desperately seeking credit. They might even think that they’re attempting to live above their means if their credit report contains an excessive number of credit checks.
- Soft Hits– Only they can see these credit checks, even if they are included in their credit report. The individual’s credit score won’t be impacted by these checks. Examples include seeking one’s personal credit report and companies requesting their credit score for data update, in the case of an existing account.
These individuals can ensure to limit the credit checks for their reports through the following ways:
- Restrict the number of times the newcomers apply for credit.
- Shopping for a mortgage or car loan implies that individuals must get separate quotes from lenders within two weeks. Also, the inquiries will form into a single one for their credit score.
- It will be vital to apply for credit when needed.
Once the newcomer obtains their credit report, they must report the inaccuracies. This also implies that they must check for the following things:
- Checking the credit card and loan account errors. For instance, even after timely payment, the report shows a delay in payment.
- Any error in terms of personal information such as inaccurate address or date of birth.
- Listed accounts that the individual didn’t access lately as this could be a sign of theft.
- Irrelevant negative comments about their accounts that have prolonged their time limit on the report.
A good credit score in Canada- the process of checking the credit score
For immigrants, getting their first Canadian credit card takes at least a few weeks to a month, and it takes a few more months of credit transactions to build credit history.
1. Through credit bureaus: Newcomers can obtain their credit report from either EQUIFAX or TransUnion, the two main credit rating agencies in Canada. On the individual websites, there are comprehensive instructions on how to get the report. Their credit score may vary slightly among credit bureaus because various organizations may take different criteria into account when determining the score. Their credit report is referred to as “credit file disclosure” by Equifax and “consumer disclosure” by TransUnion.
2. Select Banks– The Royal Bank of Canada (RBC) offers free access to Internet banking, where customers with an account can examine their credit scores at any time.
3. Third-Party Companies– Some businesses promise to provide them with the credit score without charge. To view the score, some people may require them to register for a premium service. Before giving a business your information, they must be careful to complete their homework. For more information on how their personal information will be used and stored, they must read the terms of use and privacy policy. Find out, for instance, if their data will be sold to a third party. Individuals can get unsolicited offers for goods and services. Con artists might offer free credit ratings in an effort to obtain personal and financial details.
Obtaining a credit report in Canada
Newcomers might obtain a virtual or physical credit report; however, they’ll be able to obtain the virtual copy soon but the physical copy only a little later. Ordering the report online from either TransUnion or Equifax will need them to pay a fee.
Conclusion
Since the report’s creation, positive information has been on file in a newcomer’s credit report permanently. Negative details, such as missed payments or defaults, often remain on their credit report for six years. Some information, however, might be retained for a shorter or longer amount of time.
