You may have a strong credit score in your home country, but that history doesn’t follow you when you arrive in Canada — you’ll need to start building your credit again from scratch. That’s because there’s no international credit reporting agency. The earlier you start building credit in Canada, the better. Over time, you can build a strong credit score which can help you get approved for housing, credit cards, loans and more.
Many banks offer packages catered toward newcomers in Canada. These welcome packages can help you get started with unsecured credit cards, bank accounts, loans and other products, however if you aren’t eligible for an unsecured card, a secured card may be your next best option.
How to build credit with a secured credit card
You build credit by responsibly borrowing money and making your payments on time. However, if you have poor or no credit, few lenders will approve you for a loan, credit card, mortgage or auto loan. But your situation is not hopeless: Your best option may be a secured credit card.
With a secured credit card, you put down a security deposit — typically anywhere from $75 to $10,000, with the average deposit around $200 to $500 — before opening an account. Your deposit then becomes your credit limit. Since this deposit serves as collateral, your card provider is guaranteed to get paid for any unpaid balance even if you fail to make a repayment.
For this reason, secured cards are much easier to get approved for than unsecured credit cards. Once you obtain a secured card, you gain a great opportunity to build credit. With timely payments, you could steadily increase your credit score and then graduate to a more powerful and rewarding unsecured credit card.
Compare secured credit cards
How to choose a secured credit card
Without a credit history, you could still be denied for a secured card. Each time you apply for a credit card, the respective provider initiates a hard pull on your credit report.
To avoid too many hard pulls, apply for one card at a time, make sure you meet the eligibility requirements and apply with providers who are likely to approve you based on your situation. If you’re rejected, wait a few months before applying for the next one. Here are considerations to review when choosing a secured credit card:
Does the card require a credit check? Those that don’t check your credit history will prove much easier to obtain as a new immigrant.
What is the required security deposit? Choosing a card with a low minimum security deposit could help you start building credit without hurting your savings. You can always request a credit limit increase later on and provide a higher deposit.
Does the card report to both credit bureaus? Using a secured credit card that reports to both bureaus – Equifax and TransUnion – is the fastest way to build your credit score.
What languages can Customer Service representatives speak?
Most providers will offer English and French speaking options for over the phone customer service. Banks usually have employees who can collectively speak a variety of different languages such as Spanish, Cantonese, Mandarin, Arabic, Hindi, Punjabi, Vietnamese and more. The specific languages spoken will depend on the bank branch.
Larger companies such as Visa or Mastercard may be able to offer a wide range of languages too since they’re based throughout the world.
If you’re in need of another language option that your bank branch or credit card provider doesn’t offer, your best bet is to use a translator.
No, most of the time your provider won’t pay interest on your security deposit.
Yes. You can use it like any other credit card, as long as you stay within your credit limit. The main difference between secured and unsecured credit cards is that you’ll need to provide a deposit for your secured card.
You can contact the provider directly and ask to close the account. You’ll need to pay off your balance in full before you attempt to close your account. If you’ve proved to be a reliable borrower, they may offer you an unsecured credit card (if they offer one). Be aware that closing a credit account may have a slightly negative affect on your credit score since your credit utilization ratio will go down.
Your credit utilization ratio is the total amount of credit you are using divided by the total amount of credit you have access to. Providers like to see a credit utilization ratio of 30% or less, and your ratio will affect your credit score.
If you have only one credit card with a credit limit of $1,000 and you carry a balance of $300 on it each month, your credit utilization ratio will be 30%.
Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog.
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