Canada welcomes immigrants.

For most new arrivals the credit rating systems is confusing.  Just because we use individual credit ratings in Canada doesn’t mean that the whole world conforms!  Many new immigrants have never come across this tool before.

What is a credit rating? It is a point system that measures your risk to the lender, or the likelihood that the lender will be able to get both their principal loaned plus interest from you on agreed terms.

Without a credit rating you will not be able to get a credit card, vehicle financing or home financing.  It takes time to establish a credit rating, usually a period of three years is a good estimate.

Building a credit rating should be one of the foremost objectives of every new arrival in Canada.

Here are a few useful tips on how to do so.

The easiest place to start is to get:

·         A department store credit card (as they come with a 30% interest rate, they are easy to qualify for) – get it, use it and pay it in full every month.  Keeping a balance on these is the best way to get “bad credit” and we don’t want to go there.

·         Get a secured credit card.  TD is one of the easiest banks to deal with when it comes to immigrants and financial arrangements.  With a secured credit card you will need to put on deposit with the bank the exact amount that they issue on a credit card.  Usually the secured amount is released after a one year period – it is not released automatically, so remember to visit your bank branch to get the release!  Use the credit card regularly and pay it off on a monthly basis. Six months of using credit cards will surely get your credit off to a good start.

·         Make sure you have some bills to your name – eg., phone and utility bills.  Bill payments are tracked and reported to the credit bureaus.  It is important to make bill payments on time.  If you are 30 days late, it starts hurting your credit rating and if you are consistently 60 days or more late – your credit rating will plummet, and you might as well forget all about owning a home.

·         Pay your bills with your credit cards and keep the cards clean.

·         Next get an unsecured credit line – the maximum you can apply for is 25,000.  I recommend starting with something small such as $10,000.  Now it gets interesting.  Now you start a cycle where your salary or wages go into your bank account and from there they are deposited to the credit line; the credit line is used to pay off the credit cards, the credit cards are used to pay all your bills. This cycle accelerates the building of your credit rating.

·         Follow this cycle for one year and the banks will be offering up credit arrangements to you on a platter.  You will be in a position to obtain a mortagage at favorable terms in less than two years.

Good luck!

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