Estimated reading time: 6 minutes
When moving to Canada we didn’t know anything about credit score and credit history. It wasn’t something that was a part of the U.A.E. life. You didn’t need to have a credit score to receive loans and credit cards in U.A.E. Honestly speaking, the first time I got a credit card was for the immigration process and making online payments. All of our transactions were in cash. And now, we don’t use cash as much. It’s all plastic money being moved around.
I was advised about credit score by my banking advisor at Royal Bank of Canada upon arriving in Canada. Credit score in Canada apparently was a necessity rather than a mere requirement. Let’s delve in to what credit score is and how does it work.
The credit score is plainly a ranking out of 850 for all individuals with a SIN number in Canada. Credit score in Canada is based off of an individual’s credit history. It depends on your debt to capital ratio. Depends on if you are able to pay off your debts in a timely fashion. Make sure that your payments are done on time. Ensure that you don’t default on your financial commitments. That is how you improve and keep your credit score high.
Credit in Canada starts with you applying merely for a credit card. The balance limit on that card is your allowance to spend on the banks’ expense (Credit approved by bank, not your money!!). If you default on your payments, you pay interest and your credit score gets a hit. This hit reduces your credit score/rating.
When I went to the bank to get control of my bank account at RBC, the interesting conversation I had with the advisor is as follows:
Advisor: Do you have a credit card.
Fahad: No, do I need to have a credit card in Canada?
Advisor: No you don’t but you should get one. How are you going to build your credit score?
Fahad: What is a credit score?
Advisor: You never had a credit history checked, or credit card or loans before?
Fahad: Nopes, never needed one!
Advisor: Well, you will need one in Canada. Everything here is linked with your SIN Number and you require an excellent credit score for multiple things!!!
Fahad: Ok, sure. If you say so!!
That’s it, as a New Immigrant in Canada, I was pre-qualified to receive a CAD 2000 credit card. I didn’t need a credit score for getting my first credit card. But that credit card would help me build on my credit history and that would help me in many ways.
Credit score is required essentially by all of the following individuals or organizations:
Your credit report gets checked before any organizations approves your credit, house, car, etc. Technically, not having a credit history or report means that you might not receive certain services. Credit score in Canada serves as the benchmark to your financial well-being and being a perfect resident/citizen (Just kidding).
Now that you know why you need a credit score, history or report for yourself. Let’s jump in to a few tips and tricks to improve your credit score and move in to the good graces of all the institutions involved.
Here they are:
Credit score is rated between 300 and 850 by both the credit unions which is Transunion and Equifax. Following are the credit score ranges and how they stand on the greatness scale:
A good resource to understand your credit scores and viability of these against your borrowing ability can be found on these links here: Equifax or TransUnion.
For your own well-being and that of your family, ensure that you have a good grasp of your financials. Having a balance between spending and earning makes for a huge difference in where you credit score will stand. Make sure that you take care of all of your financial needs according to your ability to fulfill them. My dad used to quote the following on a regular basis while growing up:
“If you have a Dirham in your pocket, BUY. If you don’t, abstain! Cut your coat according to your cloth.” – Muhammad Rafique
I would like to hear about your opinions and your comments. Do share this with your friends and family members who are planning on migrating to Canada so that they choose better. Good luck with your journey forward.
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