Understanding Canadian Newcomers and Credit

Introduction to Credit and Credit Bureaus

When you migrate to Canada from another country, you will need to build a completely new credit history and credit scores. As a matter of fact, credit history and credit scores are not transferable to the Canadian system — not even between Canada and the USA.

This is frustrating because credit is necessary for living successfully in Canada. All lenders and creditors report information about their clients' credit accounts to two principal credit bureaus: Equifax and TransUnion. The information reported includes balances on your loans, whether or not you pay on time, and your history with the creditor. This reporting is done every month.

Credit bureaus then use that information in their credit algorithms to create a credit report and calculate credit scores. A credit score is a three-digit number usually ranging between 300 and 900. The higher the credit score, the easier it is to access financial service products. Credit scores also determine how much interest you will be charged by the creditor.

Why Credit Matters in Canada

Almost every Canadian has a credit history and credit score — it is an absolutely important financial identity. A credit score is needed to:

• Apply for credit cards
• Buy a house (mortgage)
• Rent an apartment
• Apply for a private student loan
• Get a car loan
• Apply for a job
• Connect utilities to a residence
• Get a cellular phone contract

Even more importantly, credit scores determine the interest rate applied to each of these products. They determine the true cost of borrowing.

How Credit Scores Are Calculated

Credit bureaus typically use five pieces of information to calculate credit scores:

1. Repayment history — do you pay on time?
2. Outstanding debt levels — how much do you owe?
3. Credit account history — how long have you been with a creditor?
4. Mix of credit — what types of accounts do you hold?
5. Recent enquiries — how often have you applied for new credit?

You do not necessarily need all five on your file to have a score.

The Problem — and How Credisys Helps

The way credit bureaus calculate scores effectively means that one has to go into debt first before building a favourable credit score. Credisys wanted to help people build credit without necessarily taking on debt.

In addition to the information credit bureaus already use, Credisys uses monthly rental payment data to help individuals build their credit score. It enables tenants to report their rental payments to both credit bureaus — helping them build credit without assuming debt first.

Credisys' platform leverages data solutions to close the wealth gap, giving newcomers and underserved Canadians the financial identity they deserve.