How to Build Canadian Credit From Zero

Your credit score in Canada determines everything from whether you can rent an apartment to the interest rate on your mortgage. As a newcomer, your credit history from your home country does not transfer. You are starting from zero. Here is how to hit 700+ within 12 months.

1. Get a Canadian Credit Card Immediately

Most major Canadian banks (RBC, TD, Scotiabank, BMO, CIBC) offer "Newcomer to Canada" packages. These packages typically include an unsecured credit card with a low limit (e.g., $500 - $1000). If you don't qualify for an unsecured card, get a secured credit card immediately. Capital One and Neo Financial are good options.

2. Keep Your Utilization Under 30%

Credit utilization is the ratio of your credit card balance to your credit limit. It accounts for 30% of your credit score. If your limit is $1,000, never let your balance exceed $300 at the statement closing date. If you need to spend more, pay it off before your statement generates.

3. Pay in Full and On Time

Payment history accounts for 35% of your credit score. Set up automatic payments to ensure you never miss a due date. Pay your statement balance in full every month to avoid paying exorbitant interest rates (usually 19.99%+). Minimum payments keep you out of default, but paying in full shows lenders you are responsible.

4. Do Not Close Your Oldest Account

The length of your credit history accounts for 15% of your score. The first credit card you open is your anchor. Even if it has no rewards and a low limit, keep it open forever. If it has an annual fee, ask the bank to downgrade it to a no-fee card rather than cancelling it.

5. Diversify Your Credit

After 6-8 months of responsible credit card usage, consider adding a different type of credit to your mix, such as a cell phone post-paid plan (which reports to credit bureaus) or a small line of credit. Credit mix accounts for 10% of your score.