Creating Credit History in Canada

Few concepts are more controversial than credit when it comes to a person’s financial decisions. On one hand, credit can be a fantastic tool to help you get a loan or a mortgage, save on interest rates and even rent a home or obtain certain jobs. On the other hand, if poorly managed, credit can haunt you for many years and make you miss out on financial opportunities.

Creditors can run a credit check on you to assess if you are a low-risk or a high-risk borrower, and decide to grant or deny you a loan, or to charge you a lower or higher interest rate.

Landlords can rent or deny you accommodation based on how consistently you pay your bills.

Certain jobs require credit checks to verify information listed on your resumé, or to avoid conflicts of interest in jobs where money and sensitive financial information are involved.

Your credit history speaks volumes to lenders about what kind of risks they take when they agree to lend you money. It takes a long time to build, it’s very easy to sabotage and it takes even longer to rebuild. Can you do without it? Yes. Should you try to do without it? No. Without credit, you will not be able to improve your living standards; at the very least, not quickly enough to get to enjoy the results.

Maintaining good credit history

Credit histories are recorded by credit reporting agencies. Equifax and TransUnion Canada are the two major such agencies in Canada. Your credit report will contain information on your loans, credit accounts, certain bills (outstanding cell phone bills can be listed on your credit report, for example), collections items (meaning if an outstanding debt was sent to a collections agency) and legal items (meaning if you had a court order issued against you for an outstanding debt). Collections items stay on your credit report for six years; legal items, for 10 years.

Take advantage of the fresh start to establish a good credit history in Canada. Get a credit card or two, and use them, but use them sensibly. It’s best to start with only one, until you are financially comfortable enough to afford more. Pay off your balance each month, to show potential lenders your reliability.

On top of paying your monthly bills and loan instalments on time, you need to be careful when signing up for services such as cable, telephone, internet, gym subscriptions and whatever else requires a monthly fee. Check the cancellation fees and deadlines when you sign up for such services.

Never move without cancelling or transferring your services, because sometimes final bills end up in collections out of sheer neglect, and from collections they land on your credit report for the next six years.  Always keep track when you make such changes, by recording the date, the names of the agents you speak to and your case number.

If you hit a rough patch, such as an extended period of unemployment, do not be complacent about your credit. Call your creditors and try to renegotiate your monthly payments. They will likely be willing to help you, because sending outstanding accounts to collections would cost them a lot more money. Cancel or suspend services you can do without, rather than have the bills rack up.

All in all, credit is a rather sensitive tool, but you will definitely need it and you should learn to manage it to your advantage. Even if some aspects seem confusing, keep in mind that it’s always easier to prevent credit damage than fix it later.

Source: http://www.prepareforcanada.com/money/financial-first-steps/creating-credit-history/story.html

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Long-term immigration approach needed to maximize newcomers’ employability

Benjamin Tal, Special to Financial Post  Jul 24, 2012 – 3:19 PM ET | Last Updated: Jul 27, 2012 4:37 PM ET


Textbook economics suggests immigration should lift productivity. After all, new immigrants open up trade opportunities; they diversify the engines of economic growth; they offer new and different perspectives on business; and they inherently take risks in hope of greater gains — a key ingredient of innovation.

Yet the results have been quite different. A recent study by the Organisation for Economic Cooperation and Development (OECD) found immigration has no impact on overall productivity. In Canada, it appears immigration is, in fact, working to reduce productivity given the chronic underemployment of immigrants in the country. According to some estimates, 20% of the increase in the U.S.-Canada productivity gap over the past decade can be attributed to immigration.

A male immigrant who arrived in Canada in the 1970s made about 80¢ on the dollar relative to a Canadian-born worker, and he was able to narrow the gap at a rate of roughly 1¢ per year. Today, despite the fact two-thirds of newcomers have post-secondary education, their earnings have dropped to close to 60¢ on the dollar and the gap is narrowing at a much slower pace. Nearly half of the individuals who immigrated to Canada between 2001 and 2006 are overqualified for the jobs they occupy.

This disparity is not without a price. I estimate that the current employment and wage gaps between new immigrants and native-born Canadians, cost the economy slightly more than $20-billion in forgone earnings. And more than 20% of working-age male immigrants leave the country within a year of arrival.

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Addressing productivity is becoming increasingly crucial for the Canadian economy. An aging population means that just to stabilize the ratio of working-age to non-work in gage population would require tripling the annual number of new arrivals for decades — something not being contemplated. So without a significant increase in immigration-based productivity, the aging profile of the Canadian population will work to reduce the standard of living of all Canadians.



Many recent changes in Canada are modeled on Australia, which maintains a 50% smaller earnings gap between its native-born and non-native-born workers than Canada. The key here is the recent move by the Canadian government toward an increased use of temporary, employer-driven, lower-skilled workers, while still making it easier for successful temporary workers to gain permanent status through the Canadian Experience Class program.

However, the program should not grow much larger than its current size. Immigration policy should not be based on short-term job market considerations. Too heavy a reliance on short-term, unskilled foreign workers might improve job market flexibility in the near term but will reduce its growth potential in the long term due to the comparatively limited ability of low-skilled workers to adjust to changing labour market conditions.

Even the Federal Skilled Workers program, which is supposed to take a long-term approach, is not immune to short-term bias.

Out of the 29 preferred occupations in the FSW program, no less than one-third of preferred occupations are directly linked to the construction industry. It is not a stretch to imagine many of these immigrants will find it difficult to find or maintain employment in a slower housing market.

The FSW should direct its attention to the job market of tomorrow by developing an information infrastructure system designed to identify emerging trends in labour-market activity. That should be supplemented by a much simpler and efficient credential-recognition process. While difficult to achieve, the ideal situation would be to establish a single regulator assessing credentials for each occupation.

The bar on language proficiency should also be raised.

The move in Australia toward mandatory pre-immigration English-language testing in the late 1990s is probably the most important distinguishing factor explaining the performance advantage of Australian immigrants relative to the Canadian experience. In Canada, language skills have also proven critical to success. Those in the FSW program who are proficient in either national language are 50% more likely to find a job and earn close to 40% more than FSWs who are minimally proficient in either language.

Immigration is critical to Canada’s economy but it is clear some inherent barriers exist that prevent us from reaping the full economic benefits new Canadians have to offer. We need to address these to continue to improve productivity and sustain our standard of living.

Benjamin Tal is deputy chief economist at Canadian Imperial Bank of Commerce