Each time you pay a bill (for your credit card or for a monthly service such as your telephone or electricity), you are establishing a credit rating for yourself. A credit rating is a number or score that banks, mortgage companies, and other lending businesses use to assess your level of financial responsibility.

Paying your bills on time every month, contributes to having a good credit rating. If you miss payments, or are often late making your payments, your credit rating is probably not as good, and money lending institutions will consider this when you apply for a loan. Numerous factors contribute to your overall credit score, such as outstanding debt, payment history, severity and frequency of derogatory credit information, and the amount of credit you use compared to what you have available.

Also important is the length of your credit history, which for many immigrants, only begins after entering Canada.

To begin to establish a credit history:

  • Open an individual savings or chequing account in your name. From this account, your deposits, withdrawals, and transfers will demonstrate that you can handle money efficiently and responsibly.
  • Applying for a smaller loan demonstrates responsibility, and will positively affect your credit rating over a longer term, once you demonstrate that you can make timely and consistent payments.
  • Other forms of credit include department store and gasoline credit cards. These are generally easier to obtain than major credit cards and, if used responsibly, can also serve to enhance your credit rating.

In short, there is no quick way to establish credit. It is much better to go slowly and develop a strong credit record than to apply for too many credit cards or a loan that is larger than you can handle. Mortgages are long-term commitments, so appreciate that lenders will need proof of longevity and consistency.

Your Credit Rating

It is a good idea, and your right as a consumer, to know exactly what your credit rating score is, even if you always pay your bills on time.

You can get a copy of your credit report, and if you find any mistakes in the report, can arrange to have these corrected. A company or person other than yourself can also find out your credit rating score, but only with a good reason (for example, you want them to lend you money) and if they ask your permission first.

In Canada, Equifax Canada and TransUnion are the two major credit rating companies and will give you a copy of your credit history and overall credit rating score, usually for a fee.

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