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#SponsoredContent. This article was produced through a paid partnership with HSBC Canada.
How to establish and build your Canadian credit history
One of the primary reasons many immigrants choose to work and live in Canada is to establish a stable financial future. The Canadian financial system has been resilient throughout COVID-19, giving newcomers an equal opportunity to earn, save, and set themselves up for a prosperous future.
One of the steps that has traditionally been associated with a stable financial future is purchasing a home. This investment can provide financial stability and help individuals and families build equity in an asset that may appreciate over time.
Recent research from Ipsos Public Affairs shows that many newcomers are so eager to enter the Canadian housing market that they are prepared to pay roughly $100,000 more than the average Canadian-born homebuyer.
But, to do things like enter the housing market, get access to the best credit cards, and save on interest rates long-term, you need to establish and build a Canadian credit history.
How the Canadian credit system works
The Canadian credit system works by assigning a three-digit credit score to residents of Canada, including immigrants, based on their credit history. Essentially, this number is an expression of how well you manage credit, and how sensible it would be for a Canadian creditor to lend you money. The lowest credit score available is 300, and the highest is 900.
There are lots of factors that go into calculating a credit score, including:
- How long you’ve had credit in Canada
- What type of credit you use
- If you regularly miss payments
- The number and total of your outstanding debts
- How many times you’ve applied for credit
- If you’ve ever been declared bankrupt or insolvent
- How long each credit account has been registered on your credit report
All of the factors that influence your credit score can be viewed on your credit report. This is essentially a summary of your credit history. Credit scores and credit histories are maintained by Canada’s two main credit bureaus – Equifax and TransUnion.
Equifax and TransUnion typically only recognize financial experiences that take place in Canada, which means that when you first arrive, it’s likely you’ll need to start fresh.
Why is having a good credit rating so important?
Your credit rating, or score, is an essential component that businesses, landlords, and other creditors will use to evaluate how well they think you will manage credit. This is typically referred to as ‘creditworthiness’.
If your credit score is high, it is more likely that you will be trusted with jobs, housing, credit cards, and favourable interest rates on loans. This can help open doors both personally and professionally. Plus, lower interest rates and better credit card opportunities can save you a meaningful amount of money long-term.
Key steps to establishing Canadian credit
One of the most essential components of a good credit score in Canada is the length of your credit history. This can be challenging for recent newcomers, who need to set up housing, a job, and a credit card, among other to-dos. Having very little to no credit history can make all of this difficult.
However, there are lots of ways that you can quickly establish and build your credit history and, in doing so, establish and build your creditworthiness. Here are some suggestions of key steps on the path to building your Canadian credit history.
Open a chequing account
The first simple step for most newcomers to Canada is to open a chequing account. This is necessary for managing finances such as receiving pay from their employer, paying bills, buying groceries & other items, transferring money, paying rent/mortgages and more. Newcomers have many options when it comes to banking, including the five major banks headquartered in Canada — that’s RBC, TD, Scotiabank, BMO, and CIBC — as well as some smaller, often digital-only options, plus large international banks, notably HSBC.
Many banks offer special newcomer programs that typically waive monthly fees for the first year and may have some cash incentives. With most banks, it’s easy to open a chequing account with low monthly fees. All you’ll need is proof of identity (originals, not photocopies), your immigration documentation, and your Social Insurance Number (SIN).
Often, new arrivals may be required to show proof of funds as a final step in their immigration process. Certain banks in Canada, like HSBC Bank Canada, enable newcomers to apply online for an account before arrival and add funds to this account in order to fulfill their proof of funds requirement.
HSBC Bank Canada also offers other benefits for newcomers. For example, their Premier and Advance chequing accounts make it easy for newcomers to manage their money online from anywhere. The “minimum balance” is not just what is deposited into one specific account like other banks, but the total amount across all HSBC products – chequing, savings, etc. Newcomers have their first year of monthly fees waived. Also, as an international bank, there’s the added benefit of recognizing HSBC customers from other countries – an HSBC Premier customer in one country is a Premier customer in Canada.
For a limited time, new chequing account holders get up to $500 cash back when they open an eligible HSBC chequing account, up to $1,650 with HSBC’s Newcomers Program, plus additional rewards after they are approved for a credit card. Speaking of credit cards . . .
Get a credit card
The next step in establishing a solid credit history in Canada is getting a credit card. Newcomers often have difficulty in gaining approval for a credit card soon after landing in Canada, but with HSBC they are able to get a credit limit of $5,000 to $25,000**, even without any Canadian inquiries or history on their credit file. This differentiates HSBC from many other banking options in Canada.
An ideal credit card option for newcomers to Canada is the HSBC Cash Rewards Mastercard. With this card, you’ll earn an additional 12.5% cash back* on all purchases for the first 180 days (offer ends October 31, 2022).
After the first 180 days, the HSBC Cash Rewards Mastercard continues to offer 1.5% cash back earnings on up to $6,000 of your online purchases, 1% cash back on your eligible gas, grocery, and drugstore purchases, and earn 0.5% cash back on every $1 of eligible purchases other than online, gas, grocery and drugstore purchases.
The HSBC Cash Rewards Mastercard also has a $0 annual fee.
*These are only a few of the benefits available with the HSBC Cash Rewards Mastercard. Learn about the other benefits here. Conditions apply.
If you’re an avid traveller, you may also want to consider the HSBC World Elite Mastercard, which provides rewards points and other travel rewards for purchases. New card holders can earn up to 80,000 points ($400 travel value), plus a full annual fee rebate for the primary cardholder for the first year ($149 value) and a $100 annual travel enhancement credit (for seat upgrades, luggage fees, or lounge passes). Get more information about the World Elite Mastercard here. Offer ends October 31, 2022.
Building your credit score
A great way to show creditors that you’re creditworthy is to pay off your credit cards in full every month which also helps you avoid paying interest on your purchases. At the very least, paying the minimum amount on time each month is a crucial component of any good credit score.
It’s always best to avoid using the entirety of your credit limit every month. This shows creditors that you don’t stretch yourself too thin. Using 35% of your credit limit or less every month is recommended. Also, avoid applying for too many forms of credit within a short period, this may have a negative impact on your credit score.
Establish a good credit score to help your financial future
Building your Canadian credit history and improving your credit score takes time and energy, but is well worth the effort. By boosting your credit score, you can open doors for both you and your family, making it easier to secure good housing, get a job, and save money for your future.
Open up a world of opportunity with HSBC Bank — Get up to $500* in value when you open a Chequing account and up to $649 with the World Elite Mastercard. Get started today.
*Terms and conditions apply. **Subject to credit approval.
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