Understanding Credit Score

Understanding Credit Score

While beginning a new life in Canada, one must build a robust foundation for long-term success. Having a sound credit score is an important parameter to qualify for loans for small transactions, large purchases, and everything in between. Nothing can compare with a credit score if someone judges your creditworthiness. Hiring a knowledgeable immigration expert to understand various immigration options and procedures will enable you to apply for different immigration pathways.

Credit history and credit score

An individual who enters Canada for the first time has no credit history in Canada. A credit score depends upon the credit history. Following is a brief explanation of the terms:

  • Credit

    It involves borrowing money from the bank or any financial institution. Repayment will include paying the loan amount and the interest portion for using the lenders amount for a specific period.

  • Credit history

    It is a record of past borrowings from different lenders including banks, retailers, and financial institutions. Credit history reflects the borrower’s financial discipline and ability to repay on time. In Canada, most information about an individuals credit history is stored for seven years.

  • Credit score

    An individuals credit history is the basis of determining the credit score by the Central Credit Business Bureaus of Canada. The score is a number to indicate the individual’s creditworthiness. Banks and other lending institutions study the credit score before lending money.

You will qualify for larger loans at a lower interest rate if you have a higher credit score. A sound credit score will make things easy for you as you will be able to purchase a home, car, and a wealth of facilities with no hassles.

Building individual credit score as a newcomer in Canada

You will lack a credit history when you come to Canada as an immigrant. You will not be eligible for mortgages or larger loans during the initial phase of your stay. The only option is to start building your credit history step by step. These are some tips to achieve good credit scores:

  • Credit cards

    Using a credit card is necessary to build your credit score. Using a credit card for regular purchases offers convenience as you need not worry about having enough money in your purse.

  • Paying credit bills in time

    The second step is to start paying the dues in time without any default. It is the process of creating a sound foundation of credit history.

  • Unutilized credit

    It is always beneficial not to consume the entire credit limit. According to the Financial Consumer Agency of Canada, using only 35 percent of available credit is ideal.

  • Spread your credit options

    You may start spreading your credit options slowly as you start building your credit score with timely credit card payments. Go for simple loans like a phone plan or car rentals that require no significant credit history. You may aim for higher loans as you continue strengthening your credit history.

The following tips may help you make prudent use of your credit to build a h3 credit history:

  • Timely payment

    Making the payment before the due date to avoid penalties

  • Spend wisely

    Resist the temptation by avoiding purchases that you cannot afford

  • Avoid paying the minimum balance

    It is always good to pay a higher amount than the minimum to improve your scores

  • Maintain proper records

    Scrutinize the monthly statement by cross-checking the payment receipts

You may find that the going is tough during the initial phase as you struggle to gain higher credit ratings. However, you will soon have a comfortable credit score if you follow a proper repayment habit.

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