How to Build Credit History in Canada (and why it matters)

Coming to Canada and having the ability to pay for many necessities, including a home, acquiring loans, or paying for everyday items will depend on your ability to receive credit. But in order to do that, you’ll have to build credit history. Building that history can take time if you are unfamiliar with the financial landscape of Canada, but there are ways, through the Scotiabank StartRight^® Program¹, which allows you to build a needed credit history quickly and effectively.

Credit is a contract or an agreement where someone borrows money and repays that money to the lender at a later time, generally with an interest charge. The interest is the cost of the loan.

In Canada, having credit history is crucial if you need a loan or want to get a credit card. Why? Many banks or other financial institutions (insurance companies, for example) look at credit reports to see if you have the ability to pay back loans and have a track record of paying on time. A poor credit history can make it harder to get a loan, or more expensive to get a loan, mortgage, credit card, or insurance, for example, because you will be considered a high risk. Alternatively, a good credit history can make it easier to get loans at more affordable interest rates. That is because a good credit history is considered by many lenders as a good indication that you are responsible and pay back loans on time.

This is why it is so important to build your credit history in Canada. Inevitably, you’ll want, or need, to purchase a car or home, get car or home insurance, or borrow money for a host of reasons you may not have yet even considered.

Building credit history

There is a problem for many people starting out: How can you build a history if you can’t get credit, and how can you get credit without a history? The good news is that you can do that with the Scotiabank StartRight^® Program.

The Program allows you to apply for a credit card without having any previous credit history in Canada. If approved, once you have your card and make purchases with it, you are on your way to building credit history so long as you are using it responsibly by making the full payments on time. Through the StartRight^TM Program, you can bank without monthly account fees for the first year² and get up to a $15,0003 credit on a Scotiabank credit card. The longer you have a credit card or credit account open and in use, the better it is for your score (but only if you are paying your bills on time).

How a credit score works

A credit score is like a report from your doctor, except in this case it paints a picture of your financial health. It shows you as either a high or low risk and how likely you are to pay your bills on time. In Canada, scores are marked between 300 and 900. The higher on that range you are, the better. The best ways to keep your score high, once you have your credit card are:

• Always pay your bills on time
• Pay bills in full, as much as possible
• Don’t apply for too many cards at once (this can negatively affect your credit score)
• Keep balances low, if possible
• Don’t go over your credit
• Diversify your credit (credit card, car loans, lines of credit)

Different cards to choose from

There is no one-size-fits-all solution for people looking for credit cards. With many options available, it’s easy to find a solution that will fit your needs and spending habits. Scotiabank offers many cards for newcomers looking to build credit history in Canada.

To learn more about the Scotiabank StartRight^® Program and what it offers newcomers, click here.

As important as building credit history is, it’s also important to limit the number of credit applications or credit checks you do. These checks count towards your credit score and if there are too many of them lenders might think you are looking for urgent credit and may be trying to live beyond your means. It’s best to get quotes from two different lenders within a 2-week period when shopping around for a car loan or mortgage as Credit bureaus will combine and treat your inquiries as a single inquiry. Also, and perhaps more importantly, only apply for credit when you really need it.

Less expensive but also important

Don’t forget that good credit plays a very important role in your entire financial life. It’s not just about making those really big purchases. Getting things like a cell phone, renting a car, renting a home or even getting a job, sometimes, can be determined by your good (or bad) credit history. It can affect so many aspects of your life, which is why it is so important.

For newcomers in Canada there is no universal way of reporting credit scores between countries, so you will start with a Canadian credit score of zero. But through programs like StartRight^TM, giving you the ability to build that history by obtaining your first Canadian credit card, you are on your way to improving that score almost immediately. It could take a few months or longer but with responsible repayment and patience you are well on your way to building credit history in Canada that will open doors to opportunities to build your new life here.

¹The Scotiabank StartRight^® Program, created for Canadian Permanent residents from 0–5 years in Canada, International Students and Foreign Workers.
²To qualify for the 1-Year No Monthly Account Fee Offer (the “Offer”), open a new Preferred Package account under the StartRight™ Program (the “Account”). During the first 12 months, your monthly Account fee will be waived and will not appear as a charge on your Account. The Account must be open and in good standing at the time of the waiver. All applicable service charges on the Account will continue to be applied monthly. After the first 12 months, you will begin to see the monthly Account fee charged to your Account unless you maintain a minimum daily closing balance of $4,000, in which case the monthly Account fee will be waived per the Account terms and conditions. Employees of Scotiabank and individuals who are currently or were previously holders/joint holders of a Scotiabank chequing account within the last 2 years are not eligible for this Offer. This Offer is non-transferable and cannot be combined with any other offers except as otherwise permitted. Maximum one Offer per customer. All rates, fees, features and benefits are subject to change. Offer may be changed, cancelled, or extended at any time without notice.
³Subject to credit approval. To be eligible, you must be a participant in the Scotiabank StartRight^® Program. To qualify for a credit card, you must be a resident of Canada and the age of majority in your province/territory where you live. Your approval for a credit card and the credit assigned will be determined based on Scotiabank’s credit criteria, including your verifiable income and credit history (if available). The credit amount of up to $15,000 under the Scotiabank StartRight^® Program is subject to change by Scotiabank from time to time without prior notice. A credit history in Canada is not required in order to be eligible for a credit card under the Scotiabank StartRight^® Program.