What is a credit history?
Your credit history or credit rating starts from day one - the first time you get a credit card in your name, a loan or line of credit from a bank.
A credit history is a collective report about how you have handled and managed debt historically.
Your credit file is like a financial report card. It tracks how much money you borrow, and how quickly you pay it back. Every month when you borrow money, use your credit card or pay bills, information about your financial transactions is sent to a credit-reporting agency. The agency uses this information to come up with your credit rating and your credit score.
Your credit rating contains a number and a letter. The number - between 0 and 9 - shows how fast you pay your bills. "1" means you pay your bills within 30 days of billing date and you've had no more than one late payment, while "9" means a bad debt, a debt been placed with a collection agency, having moved without providing a new address, or Bankruptcy.
Establishing Credit History
As a newcomer you will have to build a new credit history in Canada. Credit cards are one of the most effective ways to build a Canadian credit history. Credit cards can be used as a form of identification when renting an apartment or a car or signing up for a new cell phone. A good credit history and score will also help you when you’re making a significant purchase, such as a car, home or setting up/purchasing a new business.
Build a Strong Credit History
Using and making regular payments on time will help you establish a good credit history. Some helpful tips include:
- Pay your bills in full and on time. Or at least pay the minimum amount shown on your statement.
- Don't go over the limit on your credit card. The higher your balance, the more it affects your credit score.
- Don't apply for credit too often.
- Use a credit card wisely.
- Pay off your debts as quickly as possible.
There are two main credit reporting agencies, also known as Credit Bureaus, in Canada:
- Equifax Canada Inc. (For all provinces except Quebec)
- TransUnion of Canada (For Quebec residents)
These private agencies collect information about borrowers from other credit grantors.
International Credit Reports
Canadian credit-reporting agencies such as Equifax or TransUnion, only collect information from creditors about consumers' financial experiences in Canada. Despite this, financial institutions may be willing to recognize your earlier credit history outside of Canada. This may involve, for example, requesting a copy of your credit report from the credit-reporting agency in the other country. You may want to consider bringing in a copy of your credit report form your home country (if available) and present it with your credit and loan application.