This article was produced in partnership with HSBC Canada.
If you’ve recently moved to Canada (or if you’re planning a move in the future), you know there are many many new bits of information to understand when you arrive. Your credit score is one component that is crucial to your long-term success in Canada.
Give us five minutes of your time and we’ll teach you everything you need to know about credit scores as a newcomer to Canada!
#1 — What is a credit score in Canada?
In Canada, your credit score refers to a three-digit number, usually between 300 and 900, that indicates your “creditworthiness.” In other words, it’s a kind of report card on how good you are at managing debt and financial responsibility.
Your credit score will be used by lenders and others to determine whether or not you qualify for certain types of loans or other purchases. Your credit score impacts your ability to qualify for major credit-based purchases, like buying a new home through a mortgage, or purchasing a new car through a lease or an automobile loan. In each of these scenarios, your credit score helps the lender assess the risk of you defaulting on your loans or failing to make your required payments.
Additionally, your credit score is sometimes used to assess eligibility for smaller things, like a contract-based monthly cell (mobile) phone plan or a lease for renting an apartment. Again, your credit score is used to determine the likelihood that you’ll make your monthly payments.
#2 — How your credit score is determined in Canada
As a resident of Canada, you will automatically begin building a credit history once you start using credit in the country. Your credit history is the financial record of how you manage this credit (loans, debt, required payments, etc.). Your credit history also accounts for things like credit utilization (your used credit vs. your available credit) and any public records on your file (did you declare bankruptcy in the past?).
Another factor impacting your credit score is the length of your credit history in Canada. This poses a challenge for newcomers, who lack any credit history upon arrival in the country. The bulk of credit bureaus and financial institutions do not consider credit histories established in other countries.
Your credit history can be viewed by a credit bureau which can then generate your credit report and credit score. In Canada there are two credit bureaus: Equifax and TransUnion.
There are certain entities that can request to view your credit report and credit score, including banks, credit card companies, employers, automobile lenders, phone companies, landlords, and more. Generally, you have to give consent to these entities before they can view your credit report, although in some provinces the only requirement is for the entity to let you know they’re viewing your credit report.
For detailed information about factors impacting your credit score as well as who can access your credit report, please refer to this guide by the Financial Consumer Agency of Canada.
#3 — How to improve your credit score in Canada as a newcomer
As a newcomer to Canada, you will not have an established credit history in the country. This means that you may not qualify for big loans or mortgages right away, but there are a few simple steps that you can take to begin building your credit history, increasing your credit score, and setting yourself up for success in the future:
- Get a credit card: Credit cards are a normal part of life in Canada. Credit cards give you a credit limit of funds you can borrow from the issuer. Each month, however, you have to make a minimum payment on the balance owing on your credit card.
- Make your monthly credit card payments on time: Making your monthly payments on time is crucial to building a good credit score in Canada. In addition to the importance to your credit score, you’ll also accrue interest on any outstanding balance on your credit card.
- Don’t use the entire limit on credit card: One factor in determining your credit score is your credit utilization (available credit vs. used credit). It’s better to have space left unused in your credit card limit, as it demonstrates that you haven’t stretched yourself too thin. The Financial Consumer Agency of Canada recommends only using 35 percent of your available credit.
- Branch out into using other types of credit: Once you have enough credit history to qualify, you should introduce other types of credit to further improve your credit score. Initially, this could include signing up for services that require less credit history, like a contract-based monthly phone plan. As your credit history grows, it may be possible to begin using types of credit that may require a higher credit score, like automobile loans, lines of credit, or property mortgages.
Building your credit score can be challenging at the start, especially with your lack of credit history inhibiting your eligibility for certain types of credit. However, once you get the ball rolling, as long as you practice good and healthy financial habits, your credit score will grow in parallel with your journey in Canada. Plus, we can help you make the first step easy, with a special deal on credit cards for newcomers to Canada!
#4 — Credit card options for newcomers to Canada
As a newcomer to Canada, it can be challenging to find a credit card company or bank that is willing to give you a credit card without an established credit history in the country. Thankfully, with HSBC Bank Canada, you can qualify for a credit card with a limit of up to CAD$5,000* without having any credit history in the country. This can provide you with the foundational tool you need to begin building your credit history in Canada.
This credit card offer is available through HSBC’s Newcomers Program. Right now, get started with HSBC and you can earn up to $1,000* cash bonus and rewards. HSBC is here to help you get settled in Canada.
Learn more about the HSBC Canada Newcomers Program and find out how you could qualify for a credit card with a balance of up to $5,000 without any credit history in Canada. Issued by HSBC Bank Canada and HSBC Investments Funds (Canada) Inc. *Terms and conditions apply.
*HSBC Mastercard is subject to standard HSBC credit review and approval. HSBC Advance Mastercard is available to HSBC Advance customers. HSBC Premier Mastercard is available to HSBC Premier customers. HSBC Premier World Elite® Mastercard® is available to HSBC Premier customers with a minimum annual gross personal income of $80,000 or a minimum annual gross household income of $150,000 or a minimum of $400,000 in assets under management (based on liquid, investable assets with financial institutions in Canada).