s a newcomer to Canada you will quickly find out the importance of building a good credit score.
Financial Institutions and other businesses will generally look at your credit score to determine whether to do business with you or how much money “to lend you”. Here are some quick examples:
- To rent a property and qualify as a tenant
- Applying for a credit card
- Getting a mortgage to purchase a home
How credit scores are determined
Your credit score is determined by your credit history. Every time you apply for or receive credit, and every time you make or don’t make a payment on time and use your credit you are building your credit history.
When you apply for credit, there are three ways your financial institution will evaluate your credit history:
- Review your past dealings with them;
- Consider any new information you provide in your credit application;
- Contact a third-party credit agency for a report on your overall credit history.
Credit companies collect information from the companies that provide the credit to you. This builds your credit report, which represents a summary of your activities with a variety of financial institutions.
It is good practice to request the details of your credit report from the credit agencies periodically, to help you understand your rating and ensure that the information is correct. This is important because a strong credit record enhances your ability to get credit in the future, whereas negative reports such as overdue payments or non-payments, could make it more difficult for you to borrow or get credit in the future.
Your credit score from other countries will generally not be used in Canada. There are two companies in Canada that gather the information to provide you with a score – one of them is EquifaxⓇ and the other is TransUnionⓇ.2
What’s a good credit score?
EquifaxⓇ notes that a good credit score in Canada is usually between 660 to 724. If your credit score is between 725 to 759 it’s likely to be considered very good. A credit score of 760 and above is generally considered to be an excellent credit score.1 The credit score range is anywhere between 300 to 900.1 The higher your score, the better your credit rating.1
Your credit score helps lenders to assess your credit capacity.2 The higher your score, the more likely you are to get approved for loans and credit.2 It may also be checked when applying to rent a property or when applying for certain jobs.2 However, everyone’s financial situation is different and your credit score will change over time based on your credit history and the amount of debt you owe.
What information are these companies collecting to determine my credit score?3
EquifaxⓇ and the Government of Canada note the following information is assessed to determine your credit score:
- How consistent you have been in paying off the money you have borrowed. Note that opening a credit card is considered borrowing money and will be taken into account3
- The amount of credit that a bank or credit card company has given you versus how much you have used up3
- The length of your credit history – this is something you can’t impact when you first arrive but the earlier you start building your credit, the better3
- You should also avoid applying for too many loans, having too many credit cards and requesting too many credit checks in a short timeframe.4 That’s because it could negatively impact your credit score too.4
How do I build a good credit score?
As a newcomer, it is important to understand how to establish a good credit score. There are several ways you can do so:
1) Apply for a credit card
TD offers a credit card as part of its TD New to Canada Banking Package. You have to apply and be approved for it. Once you get your credit card, you can make purchases with it. You should then make sure to pay your payments on time. The earlier you open your first credit card, the faster you will start building your credit history.
2) Get a cell phone or internet service plan
Some mobile or internet plans require a credit check to open. Once you get a cell phone or internet service plan, make sure you pay your bills on time. Also, not all mobile companies report your monthly payments to the credit bureau. You should ask if they do.
3) Other forms of debt
If you happen to be leasing a car, the payments on a timely basis could count towards a good credit score. The same would apply to a student loan, mortgage, or any other form of loan – it’s all part of establishing a history of you paying back money that you owe in a timely manner.
4) Budgeting Helps
Regardless of the type of credit you have taken out from the examples above – to get a higher credit score you must be making payments on time. One of the ways of doing this is to make sure that you budget properly. If you need help with creating budgets, TD can help you manage your money from wherever you are with the TD App or online banking through EasyWeb.
Why Choose TD?
150 years helping Canadians:
TD has a proud history of delivering financial solutions to Canadians for more than 150 years. TD also brings a century of experience helping newcomers navigate the unique challenges of the Canadian banking system.
With over a thousand branches and a reputation for excellence in financial services, TD has become one of the largest and most trusted banks in Canada, now serving 16-million Canadians.
TD offers online support and resources of interest to newcomers on topics like banking basics, moving to Canada, credit score essentials and more. TD can also serve you in more than 50 languages at more than 1,100 branches. TD is open longer hours for your convenience. TD has thousands of ATMs across Canada to help you take care of your everyday banking quickly and easily.