Building a Canadian credit score from zero

How credit works in Canada

When you borrow money, lenders report how you use it to Canada’s two credit bureaus, Equifax and TransUnion. Your history becomes a credit score, usually between 300 and 900. Landlords, phone companies and lenders check it to decide whether to approve you and on what terms.

Debit cards and your bank account don’t build credit. Only credit products, like credit cards and loans, do.

Your first card

• Secured credit card: you put down a deposit, often $500–1,000, that becomes your limit. Approval is almost guaranteed, and it reports like a regular card.
• Newcomer credit card: many banks offer an unsecured card to new permanent residents and workers, with a modest limit, often as part of a newcomer banking package.

Choose a card with no annual fee if you can, and check that it reports to both bureaus.

Habits that build your score

1. Pay on time, every time. Payment history has the biggest effect. Set up automatic payment of at least the minimum.
2. Pay the full statement balance. You avoid interest, which is often around 20% a year.
3. Keep your balance low. Using a small share of your limit, ideally under 30%, helps your score.
4. Keep your first card open. The age of your accounts matters over time.
5. Be patient. It takes several months of history before a score appears.

Mistakes to avoid

• Applying for many cards at once. Each application is recorded on your file
• Missing a payment, even by a few days
• Maxing out your card, even if you pay it off later
• Paying for “credit repair” services. You can do everything yourself for free

Checking your credit

You can request your credit report from Equifax and TransUnion for free. Check it once or twice a year for mistakes or accounts you don’t recognize.