If you're a newcomer to Canada, you may be excited about starting a new life in a new country. On the other hand, starting over from scratch can be a little scary. And, if you're like a lot of immigrants, you'll be faced with having to build your credit from virtually nothing.
In 2015, a study was commissioned by the Bank of Montreal's Wealth Management division in order to gauge the financial status of the average newcomer to Canada. Back then, one-fifth of immigrants to Canada had no savings upon arrival. Those who did have some money had, on average, around $47,000, and about half of this amount went toward the cost of getting settled.
It's probably safe to say that not much has changed in terms of what newcomers are bringing with them. So, based on this information, it's easy to see how trying to establish credit as an immigrant would be challenging. However, there are a few things that you can do to get the process started.
Open a Bank Account
This is one of the first steps you should take toward becoming financially established. After you've opened a bank account, you can enjoy the convenience of direct deposit. Also, at some point, you should be able to get a credit card through your bank. Luckily, institutions such as the Royal Bank of Canada (RBC) offer special programs designed to help newcomers.
Pay All of Your Bills on Time
Whether it's your rent payment, the gas bill or any other type of obligation, make sure that you're meeting every due date. Even though not all of your payments will be reported to the credit bureaus, late payments probably will be. Basically, your ability to pay on time will count for a lot when you start to build your credit score.
Open a Regular or High-Interest Savings Account
Once you have a bank account, inquire about opening a savings account. Even if you are only able to put a little money into it, you'll still be able to set up a decent emergency fund. In addition to this, your bank may be more apt to offer you a line of credit if they see that you are responsible enough to save.
Check Your Credit Reports
You're entitled to receive one complimentary copy of your credit report from both of the primary credit bureaus every 12 months. So, even if you're sure that there's little to see in these documents, you should request a report from both TransUnion and Equifax. You can do this easily by visiting their websites, TransUnion.ca and Equifax.ca.
Once you have copies of your reports, you should check them for errors. Also, after you've started building credit, you should continue to monitor your reports to be sure that they remain mistake-free. In addition to this, you'll also want to check for signs of identity theft or any other type of fraud.
Apply for a Secured Credit Card
Opening a secured credit account might be a good option. In order to do this, you'll need to provide a cash deposit up front. The amount of this deposit (normally at least $200-$500) will be your spending limit. After making this deposit, you will be issued a card that works just like a "regular" credit card.
You'll be able to make purchases online and in stores, and you'll get a bill every month. If you make all of your payments on time and keep your balance at or below 30 per cent of your spending limit, your credit score should start to gradually increase over time.
Apply for a No Credit Car Loan
This works quite well if you also need to purchase a vehicle while trying to establish your credit. Of course, not every bank or credit union is able to work with car buyers who have no credit. But some lenders are willing to work with unique credit situations.
Special finance lenders are willing to look beyond slim credit files in order to extend financing to newcomers. And once you've purchased your car, you'll have an opportunity to build your credit. If you make all of your auto loan payments on time, you should notice a big boost in your credit score by the time the vehicle is paid off.
Financing Assistance for Newcomers Who Need Cars
If your schedule requires personal transportation, Canada Auto Loan can help you get a vehicle financed. Even if you have no credit or poor credit, we'll work hard to make your car buying experience as easy as possible.
With our resources, we can match you with a local dealership that can assist you with your purchase. And don't worry about overspending or making commitments that you'll regret. The service we provide is free of charge and comes with no commitments.
Go ahead and fill out our simple and secure auto loan request to get started today.