If you are a student or immigrant in any Canadian province, you need to earn an excellent credit score in Canada to qualify for a mortgage, loans, insurance coverage, among others.
Furthermore, your creditworthiness determines whether you can be trusted and considered for a loan or not.
Besides, you can use a loan or credit to cover most of your expenditures, which enables you to enjoy your stay in Canada.
In this article
- What is a Credit Score?
- Credit Score in Canada
- What Determines Credit Score in Canada?
- Users of Credit Scores in Canada
- Excellent Credit Score in Canada for Students and Immigrants
- 1. Work on improving your credit history
- 2. Ensure prompt payment of your bills
- 3. Subscribe to a monthly phone plan not prepaid
- 4. Get a secured Credit Card
- 5. Apply to get an Unsecured Credit Card
- Credit Score in Canada vs the US
What is a Credit Score?
A credit score is a number that expresses the level at which an individual or borrower fulfills financial obligations (loan repayment) based on their credit history.
Certainly, you can identify your credit score as a 3-digit number on your credit report. Credit scores in Canada range from 300 to 900.
Moreover, financial institutions, lenders, etc., use credit scores to check if you are worthy to receive a loan or credit from them.
Therefore, you need to maintain an excellent credit score to be creditworthy for a car loan, or to secure a loan to pay medical bills, education, or to support your business.
There are various ways of maintaining an excellent credit score, which is included in this article.
In addition, you will earn points if you repay your loan on or before its due dates.
However, you will lose points if you are unable to manage your credit properly or if you did not fulfill your credit obligations on time.
Credit Score in Canada
If you are student or immigrant in Canada, you may need a loan to cover for an expense such as health bills, car purchase, among others.
Moreover, TransUnion and Equifax Canada are the two (2) chief Canadian credit bureaus that create credit scores in Canada.
Furthermore, credit bureaus like TransUnion and Equifax are private establishments that gather, store, and avails information regarding credit in Canada. The source credit information from creditors.
In addition, a credit score in Canada is subject to change simultaneously based on your credit report. Credit bureaus ascertain credit reports via a formula based on your credit report. This formula is unknown to outsiders, including borrowers.
What Determines Credit Score in Canada?
If you want to have an excellent credit score to get loans at any time in Canada, you need to put several factors into consideration.
Besides, take note that financial institutions and lenders usually set a credit score as a minimum requirement before you can obtain a loan in Canada.
Below are the factors that determine credit score in Canada.
- Your debt total
- If there is any debt on your credit cards
- Your financial condition such as bankruptcy
- If you frequently do not commit to loan repayment dates
- The period of time, which you’ve had credit
- Total number of recent applications for credit
- If you have reached, exceeded, or almost reached your credit limit
- Your credit type
- The duration of every credit in your credit report
- If you have outstanding credit that has been sent to a collection agency like Canadian Express Collection Agency, Canadian Credit Services, Collection Services of Canada, among others
Users of Credit Scores in Canada
Moreover, you need to authorize that your credit score and report are availed to the person, organization, or institution requesting it.
Besides, you have been granted authorization when you fill out and sign a credit application form with the lender, financial institution, etc.
Below are common users of credit scores in Canada
- Credit card companies
- Car rental companies
- Financial institutions like banks, credit unions, insurance companies, etc
- Telecommunication companies
- Retail businesses, among others
In addition, the above individuals, organizations, and institutions view credit scores and reports for various decision-making purposes.
Examples of these decisions are to offer credit, employment, insurance coverage, job promotion, house leasing, collect a debt, etc.
However, Canadian provinces like Saskatchewan, Prince Edward Island, as well as Nova Scotia only require the person or organization that needs your credit score/report to inform you of their actions.Financial Documents Required For Student Visa
Excellent Credit Score in Canada for Students and Immigrants
Regardless of whether you are a student or an immigrant in Canada, there are various ways you can leverage an excellent credit score.
However, you need to attain an excellent credit score in Canada to derive vast benefits.
Below are five (5) ways to earn an excellent credit score in Canada for students and immigrants
- Work on improving your credit history
- Ensure prompt payment of your bills
- Subscribe to a monthly phone plan not prepaid
- Get a secured credit card
- Apply to get an unsecured credit card
1. Work on improving your credit history
First, you need to have a credit history before you can have a credit score.
Since financial institutions make use of your credit score to determine your creditworthiness for a loan, you might have trouble securing a loan if you have never applied or obtained a loan in Canada.
On one hand, this makes it necessary for you to obtain credit in terms of loan or mortgage to start developing a credit score in Canada.
On the other hand, take note that you must meet the lender or financial institution’s minimum credit score requirement to qualify.
In addition, you can get an excellent credit score in Canada by applying for a car loan instead of buying outrightly.
2. Ensure prompt payment of your bills
One of the most effective ways of achieving an excellent credit score in Canada is to make prompt and complete payments for your bills.
Since financial institutions intend to know if you are worthy of the credit, it is important that you focus on earning their trust.
Moreover, you need to check your credit score frequently to monitor its improvements.
In addition, you may need to request your credit report every year in order to know your level of creditworthiness.
3. Subscribe to a monthly phone plan not prepaid
If you seek how to get an excellent credit score in Canada, you can consider subscribing monthly to a phone plan that is not prepaid.
Moreover, you need to ensure that the phone plan subscription is postpaid as it improves your credit score due to your reliability in subscribing to the phone plan every month.
4. Get a secured Credit Card
Secured credit cards work similarly to standard credit cards. It ensures that your loan or credit request gets approval. Besides, it will give an account of your credit activities to TransUnion and Equifax.
Moreover, many Canadian financial institutions make provision secured credit cards to their customers.
As a student or immigrant in Canada, you can use a secured credit card to serve as a collateral/security deposit on the card.
This way, you will easily get an excellent credit score using the deposit in the secured credit card.
Financial institutions that provide secured credit cards in Canada
Here are lists of financial institutions in Canada that avails of secured credit cards.
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
- Toronto-Dominion (TD) Bank
- Royal Bank of Canada (RBC)
5. Apply to get an Unsecured Credit Card
Procuring an unsecured credit card is one of the five (5) ways to earn excellent credit scores in Canada for students and immigrants.
Unlike secured credit cards, unsecured credit cards help to secure a loan without collateral or security deposit.
In most cases, you will not get an unsecured credit card if you have a poor credit score.
Thus, you may need to consider getting a secure credit card first since it is easier to get.
Moreover, some unsecured credit cards are peculiarly for people with poor credit scores in Canada.
However, it is in your best interest to read the term and conditions of the unsecured credit card before applying for it. This allows you to know how the card helps in getting an excellent credit score.
Credit Score in Canada vs the US
If you are worried about these questions, does US credit score work in Canada? Can I use my US credit score in Canada? This aspect will answer your questions.
First, the credit score in the Canadian range is similar to the credit score used in the United States of America. Moreover, they both range from 300 to 900.
Second, you cannot use your US credit score in Canada because Canada and the US have different credit reporting systems.
Above all, you will have a new credit score when you leave the United States to immigrate to Canada.
Q. Why do I need a good credit score in Canada?
Ans – With a good credit score, you can get loans at lower interest rates.
Q. Who manages credit scores in Canada?
Ans – TransUnion and Equifax Canada
Q. What is creditworthiness?
Ans – Creditworthiness is a term used to declare that a person can be trusted with money based on their credit history
Q. How long does it take a credit report to be updated?
Ans – Between 30 to 90 days
Q. What are the collection agencies in Canada?
- National Recovery Corp, Mississauga, ON
- MetCredit, Edmonton, AB
- Canadian Corporate Legal Services, North York, ON
- Vanguard Collection Agencies, Burnaby, BC
- Canadian Credit Services, Calgary, AB
- Collection Services of Canada, Whitby, ON
- Priority Credit Management Corp (Lien-Pro & Priority Credit), Edmonton, AB
- Canadian Express Collection Agency, North York, ON
- Collection Group of Canada Inc, North York, ON, and so on
Q. What is an average credit score in Canada?
Ans – At least 650
Q. What is a good credit score in Canada for a mortgage?
Ans – Minimum of 600 for financial institutions (banks), 550 for Term Blenders (institutional lenders), as well as 600 for Canada Mortgage and Housing Corporation (CMHC) insured mortgages
Q. Does US credit score matter in Canada?
Ans – No
Q. Is my credit score affected by checking it myself?
Ans – No, soft credit check or self-check of credit scores will not affect your score in any way
Q. Whom should I contact for errors in my credit report?
Ans – Contact the credit bureaus (Equifax and TransUnion) if you notice any error in your credit report
Q. What are examples of secured credit cards in Canada?
- Home Trust Secured Visa
- Plastik Secured Visa Credit Card
- Refresh Financial Secured Credit Card
- Peoples Trust Secured MasterCard
- Vancity Enviro Secured Visa, etc