What you need to know about building credit in Canada

Updated on:
May 10, 2022
What you need to know about building credit in Canada

Getting your first credit card can be both thrilling and scary. You can buy goods with money you don't have, and as soon as you do, the entire country is watching what you do with it.

A credit score ranges from 300 to 900, and tells Canadian lenders whether you are trustworthy and deserve a good deal on a mortgage, credit card, car loan, or personal loan. Keeping your score on the higher end of the scale is critical. But where do you begin?

What do immigrants in Canada have to do to build their credit score? This guide will cover everything you need to know about credit in Canada.

What is credit, and how does it work?

Your credit report is established when you borrow money or apply for credit for the first time. Your credit report contains information about your credit history. Credit bureaus get information about your accounts from lenders.

Your credit score is based on the information in your credit report. It might be anything from 300 and 900. It demonstrates how well you handle credit and how hazardous it would be to lend you money. Equifax and TransUnion produce credit scores and credit reports.

The credit bureaus must follow restrictions that limit who has access to Canadian citizens' credit records and how they can use that information. A few businesses that have access to your data are banks, credit card companies, insurance companies, and government agencies.

Your lender or another institution may request a credit check or a copy of your credit report. They ask access to your credit report at the credit bureau when they do so. As a result, a credit inquiry is made. 

Canada Immigration and Credit History

Does bad credit affect immigration to Canada? Does a low score affect one's chances of becoming a Canadian permanent resident? In most countries where credit is used, such as the United States and Canada, a low credit score will result if you have a poor credit history.

The immigration process does not affect credit scores. It is because your credit score from your native country, whether it is good or bad, will not transfer to Canada. This is good news if you have bad credit in your native country. It's not so good if you've built a stellar credit score. Many Americans who move to Canada are surprised to discover that their good credit score back home does not guarantee trust from Canadian lenders. Adverse credit won't follow you worldwide, nor will excellent credit.

But how do you build credit in Canada? You'll need a good credit score once you've arrived in Canada. A good credit score can be established by obtaining a credit card and using it carefully, using reputable credit-building tools, and being cautious to avoid credit card fraud.

What is Credit Mix?

When it comes to credit building for newcomers, you might be unfamiliar with some key terms. One such term is "credit mix."

Credit mix can be understood by understanding the factors in a Canadian credit score. Equifax and Transunion are the leading Canadian credit bureaus. They have noted that credit scores ultimately come down to the following:

  • History of payments (35%)
  • Overall credit utilization (30%)
  • Credit length (15%)
  • Credit mix (10%)
  • Hard inquiries (10%)

The credit mix refers to the diversity of your credit "portfolio." Diverse borrowing history could demonstrate to lenders that you are responsible for various loans. Lenders will be impressed if you use credit cards proficiently. How about car loans, mortgages, home equity loans, and student loans? You should also consider the credit mix and the other credit factors mentioned above if you want to improve your score.

The Average Credit Score in Canada

The average credit score in Canada ranges from 300 to 900. In 2022, the average credit score in Canada will be about 650.

With what credit score do new Canadians start?

When you plan on immigrating to Canada, you might worry that you won't have a good credit score. Your credit score might also be negative if you are a native Canadian entering adulthood and need to build credit. That is not the case, however.

You will not start at the bottom of the scale, at 300. Missed payments and bankruptcy have tarnished a person's image, so this is for them. You begin with no score at all.

At first, your credit score will probably fall within the acceptable range, right in the middle. Until you reach the top echelons of the scale, you won't be able to receive large loans with low-interest rates. There hasn't been much opportunity for you to cause harm, but you haven't proven your worth either.

How Soon Should You Build Credit?

The best time to start building credit for new Canadians is now. As a Canadian, the best time to start building credit is when one becomes an adult. However, building credit should be a learning experience without negatively affecting your credit score. As a result, it is usually recommended that people build their credit with a secured credit card.

A secured credit card indicates that money must be placed with the credit card company in order to create an account. It is essentially a security deposit. Similar to the security deposit held by a landlord when renting a property, the credit card company maintains it while the account is open.

What is the fastest way to build credit, other than where one should start? Is there a way to build or improve credit quickly? There are many things you can do. Check your credit report regularly. Pay your bills on time. Keep the balance on your credit card (even a secured one) between 10-15% of the credit limit. Don't borrow the money you won't be able to repay. Marble offers a creative solution called Boost, to help thousands of Canadians sustainably increase their credit scores. Boost utilizes a loan repayment structure that reports your monthly subscription payment to the credit bureaus. 

A Credit Score Simulator

If you need a little help improving your credit score, we recommend using Marble Point Deduction Technology's Credit Score Simulator. It is easy to use. Based on your credit history and financial goals, set a target score. This step is beneficial because you will need to know your credit score. Afterward, your credit report will be analyzed, and you will be given recommendations on how to improve your credit score. Using Marble Point's Credit Score Simulator, you can build credit in as little as three months. It's as simple as signing up for the platform!


The blog insight is provided by Marble, a partner of ImmiSearch.

What you need to know about building credit in Canada
Eva Li
CPO & co-founder of ImmiSearch
May 10, 2022