Mastering How to Build Credit as a New Immigrant to Canada

Learn how to build credit as a new immigrant to Canada. Get expert advice on establishing a solid credit history and financial future.
Bruce Hodges
April 25, 2024
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Table of Contents

Mastering How to Build Credit as a New Immigrant to Canada

Moving to a new country like Canada can be an exciting adventure, but it also comes with its fair share of challenges. There's dealing with Canadian bureaucracy, finding a home, and getting a job. Something that may get overlooked at the beginning is building credit.

Building good credit is crucial for accessing financial opportunities and securing a stable financial future in your new country. While the process may seem daunting at first, with the right knowledge and strategies, you can establish a strong credit history in Canada.

In this blog, we're looking at how you can get started building a credit history and providing you with the information you need to navigate credit scores & achieve your financial goals.

Key Highlights on How to Build Credit as a New Immigrant to Canada

  • Building good credit is essential for new immigrants to Canada as it enables access to financial opportunities.
  • Key factors influencing your credit score in Canada include payment history, credit utilization, length of credit history, new credit applications, and credit mix.
  • Begin building your credit by opening a Canadian bank account and applying for a secured credit card.
  • Steer clear of common credit-building mistakes like missing payments, maxing out credit cards, applying for multiple credit products simultaneously, closing old credit accounts, and ignoring your credit report.

Understanding How Credit Works in Canada

One of the first steps in building credit as a new immigrant to Canada is understanding how the credit system works. In Canada, credit information is collected and maintained by credit bureaus, such as Equifax and TransUnion. These bureaus collect data on your borrowing and repayment history, including your Canadian credit history, which is compiled into a credit report.

Your credit report is essentially a snapshot of your financial behaviour, including information on your credit accounts, payment history, outstanding debts, and inquiries made by lenders. It serves as the basis for calculating your credit score, a numerical representation of your creditworthiness.

Lenders, landlords, and other financial institutions rely on your credit score to assess the risk of lending to you. A higher credit score indicates responsible financial habits and makes you more attractive to lenders, while a lower score may result in higher interest rates or difficulty obtaining credit.

What Factors Impact Your Credit Score in Canada?

Understanding the factors that influence credit scores in Canada is essential for maintaining good creditworthiness. Here are some key considerations:

  • Payment History: Timely payments demonstrate your ability to fulfill financial obligations, significantly impacting credit scores. Conversely, late payments, defaults, bankruptcies, or foreclosures can severely lower your credit scores.
  • Credit Utilization: Your credit utilization ratio, or the amount of credit you are using compared to your total available credit, also plays a significant role in determining your credit score. Keeping this ratio low, ideally below 30%, is advisable for building good credit.
  • Length of Credit History: The length of time you have held credit accounts influences your credit score. A longer credit history demonstrates experience managing credit responsibly and can positively impact your score.
  • New Credit: Applying for multiple new financing options in a short time frame can lower your credit score. This action affects your average account age and the length of your credit history, factors considered in credit scoring models.
  • Credit Mix: Maintaining a diverse mix of credit types, including credit cards, loans, and mortgages, can positively impact your credit scores. It demonstrates your ability to manage various types of credit responsibly.

It's essential to recognize that these factors may carry different weights and importance depending on the credit scoring model used by lenders. Oftentimes, lenders use the FICO model, so this can be a great benchmark to keep an eye on. Regularly monitoring your own credit report and practicing responsible credit habits are vital steps toward maintaining good credit health.

A Beginner's Guide on How to Start Building Credit

A few initial steps can set you on the right path to establishing a strong credit history.

Step 1: Open a Canadian Bank Account

This step may seem like a no-brainer, but it can definitely be daunting to go through the process. Opening a Canadian bank account is an essential first step in building credit as a new immigrant to Canada. A bank account provides a stable financial foundation and enables you to manage your finances effectively.

To open a Canadian bank account, you will need to choose a financial institution that suits your needs. Research different banks and credit unions to find the one that offers the best services and benefits for newcomers. Consider factors such as fees, accessibility, and credit-building opportunities.

Having a Canadian bank account not only helps you build credit but also allows you to save money and manage your finances efficiently. Consider opening a savings account alongside your checking account to start building an emergency fund and demonstrate your ability to save as soon as possible.

Step 2: Apply for a Secured Credit Card

A secured credit card is an excellent tool for building credit as a new immigrant to Canada. Unlike a traditional credit card, a secured credit card requires a security deposit as collateral. This deposit is typically refundable and determines your credit limit.

To apply for a secured credit card, start by researching different financial institutions that offer this type of credit card for newcomers. Compare the terms and conditions, including interest rates, annual fees, and credit-building opportunities.

Using a secured credit card responsibly is a great way to build credit when you’re starting from zero, since your existing credit won’t play a role in getting approved.

Step 3: Use Credit Wisely to Build History

Once you have obtained a secured credit card, it's important to use it wisely to build a positive credit history. Here are some tips for using credit responsibly:

  • Make small purchases: Use your secured credit card for small, necessary purchases and avoid getting too close to your credit limit.
  • Pay off the balance in full: Aim to pay off the full balance of your credit card each month to avoid interest charges. This also shows lenders that you can manage credit responsibly and pay your bills on time.
  • Keep credit utilization low: Credit utilization refers to the percentage of your available credit that you are using. Aim to keep your credit utilization below 30% to show responsible credit management.
  • Avoid excessive credit inquiries: Each time a lender checks your credit, it leaves a record on your credit report. Limit your credit inquiries to avoid negatively impacting your credit score.

Step 4: Pay Bills On Time, Every Time

Paying your bills on time is crucial for building credit as a new immigrant to Canada. Your payment history plays a significant role in determining your credit score and demonstrating your creditworthiness to lenders.

Whether it's your credit card payments, utility bills, or other recurring expenses, make it a priority to pay them on time, every time. Late or missed payments can harm your credit score and make it harder to access credit in the future.

Consider setting up automatic payments or reminders to ensure you never miss a payment. By consistently paying your bills on time, you establish a positive payment history and demonstrate your financial responsibility. This is one of the most powerful habits you can establish, both for your credit and your overall financial well-being.

Step 5: Monitor Your Credit Score Regularly

Monitoring your credit score allows you to track your progress, identify areas for improvement, and address any issues promptly. It also helps you detect and prevent identity theft or fraudulent activity on your credit accounts.

Consider enrolling in a credit monitoring service that provides regular updates on your credit score and alerts you to any changes or suspicious activity. These services can help you stay on top of your credit health and take action if necessary, and many of them are free or low-cost!

What Not to Do When Building Credit as a New Immigrant in Canada

As a newcomer to Canada, it is important to be aware of common mistakes that can negatively impact your credit and financial health. Avoiding these mistakes will help you prevent developing bad credit, establish a strong credit history, and avoid unnecessary financial difficulties.

Missing Payments

One of the most significant factors in building credit is simply making payments on time. Missing payments or making late payments can hurt your credit score. It's essential to prioritize timely payments for all your credit obligations, including credit cards, loans, and bills.

Maxing Out Your Credit Cards

Keeping your credit utilization ratio low is crucial for a healthy credit score. Maxing out your credit cards or utilizing a large portion of your available credit limit can signal financial instability and negatively impact your creditworthiness. Aim to keep your credit utilization below 30% of your available credit limit.

Simultaneously Applying for Multiple Credit Products

While it's important to have a mix of credit products to build a robust credit history, applying for multiple credit products within a short period can raise concerns for lenders. Each credit application generates a hard inquiry on your credit report, which can temporarily lower your credit score due to the number of credit checks performed. Instead, focus on applying for credit products strategically and only when necessary. Starting slow and mastering your credit habits is generally a good idea. Think quality, not quantity.

How to Deal with Credit Fraud and Scams

Credit fraud and scams are unfortunate realities that can impact anyone, including new immigrants to Canada. It is important to be vigilant and proactive in protecting your credit and personal information.

If you suspect credit fraud or have fallen victim to a scam, take immediate action to mitigate the damage. Contact your financial institutions to report the fraudulent activity and request a freeze on your accounts if necessary. It is also advisable to file a police report and notify the credit bureaus (Equifax and TransUnion) to place a fraud alert on your credit report.

Regularly monitor your credit report for any unauthorized activity or discrepancies. By staying informed and taking swift action, you can minimize the impact of credit fraud and protect your financial well-being.

Here are three examples of credit scams or fraud and steps to address them:

Identity Theft

Identity theft occurs when someone steals your personal information, such as your Social Security number, date of birth, or credit card details, to commit fraudulent activities. Fraudsters may use this information to open new credit accounts in your name, make unauthorized purchases, or apply for loans.

Response: If you suspect identity theft, act quickly to minimize the damage. Contact the fraud departments of the major credit bureaus—Equifax and TransUnion—to place a fraud alert on your credit report. Consider placing a credit freeze on your credit reports to prevent new accounts from being opened in your name without your authorization.

Phishing Scams

Phishing scams involve fraudulent emails, text messages, or phone calls that appear to be from legitimate organizations, such as banks, credit card companies, or government agencies. These messages typically request personal information, such as account numbers, passwords, or Social Security numbers, under the guise of verifying account details or offering assistance with a supposed issue.

Response: Be cautious of unsolicited communications requesting sensitive information and never provide personal or financial details in response to these requests. Instead, independently verify the legitimacy of the communication by contacting the organization directly using trusted contact information. Report phishing attempts to the appropriate authorities, such as the Canadian Anti-Fraud Centre (CAFC).

Credit Card Skimming

Credit card skimming involves the unauthorized capture of credit card information, typically through devices installed on legitimate payment terminals, ATMs, or gas pumps. Fraudsters use skimming devices to capture card details, including the card number and expiration date, which they then use to make fraudulent purchases or create counterfeit cards.

Response: Regularly inspect payment terminals and ATMs for any signs of tampering, such as loose or unusual attachments. When using ATMs or card readers, cover the keypad with your hand when entering your PIN to prevent potential surveillance. Monitor your credit card statements for any unauthorized charges and report suspicious activity to your card issuer immediately. Consider using contactless payment methods, such as mobile wallets or chip cards, to reduce the risk of card skimming.


Building credit as a new immigrant to Canada starts with understanding the Canadian credit system and establishing a solid financial foundation. With a few foundational steps and good habits in mind, you’ll be able to tackle building your credit score and master your financial well-being. Remember, patience and consistency are key in this journey!

Frequently Asked Questions

Can I transfer my credit history from another country?

Unfortunately, you cannot transfer your credit history from another country to Canada. Each country has its own credit system and credit reporting agencies. As a new immigrant to Canada, you will need to establish a new credit history in the country.

How long does it take to build good credit in Canada?

The time it takes to build good credit in Canada can vary depending on several factors, including your financial habits and history. On average, it can take about 18 to 24 months of responsible credit use to establish a “good” credit score.

What to do if I get denied for a credit card?

If you get denied for a credit card, it's important not to get discouraged. Instead, consider applying for a secured credit card, which requires a security deposit. Secured credit cards are a great tool for building credit and can help you establish a positive credit history. Carefully reading and researching eligibility requirements and recommendations can help you avoid getting denied for a credit product in the future, as well as being aware of your credit score.

Bruce Hodges
Bruce, Founder and CEO of Parachute, worked for several of Canada’s top Banks, published research for the Canadian Bankers Association, and taught E-commerce Strategy in Wilfrid Laurier University’s MBA program. His first start-up built credit solutions for the likes of National Bank, Fair Isaac, and Ford Credit globally. Prior to starting Parachute, Bruce was COO of Foresters Financial, and EVP Transformation at CIBC, one of Canada’s top 5 banks. Bruce founded Parachute to disrupt the financial wellness space taking on payday, and high interest predatory lenders, with the intent to bring at risk Canadians back from the brink to good financial health.
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