When Gurleen Kaur Romana moved to Toronto from Punjab, India, last September to begin a master’s degree in public policy, one of the first things she did was buy a SIM card. Next, she opened a bank account.
As a newcomer to Canada, Romana didn’t have any credit upon arrival. Credit history — good or bad — doesn’t follow you to Canada, which presents challenges in accessing financial services that require credit checks, or even renting an apartment.
Romana’s transition to a new country with an unfamiliar banking system appeared to go smoothly — until she hit a snag.
“I reached out to a major company looking for a home internet package, but my request got rejected twice because they said you either have a fraudulent credit history or no credit history,” Romana told the Star.
New Canadians start out with zero credit history and at the time Romana had been in Canada for just over a month. It takes about six months of active use of a credit card or loan to establish a credit score, says Brenda Hiscock, a certified financial planner at Objective Financial Partners, adding that having no credit is the same as having bad credit.
A person’s credit history is an important barometer for lenders to assess one’s ability to manage and repay their debts — from what’s been accumulated on their credit cards to personal lines of credit. A strong credit history, reflected by a high score, can help you rent a place to live, qualify for a loan, and score lower interest rates on certain credit products. Utility companies may even look at your credit score and history to ensure you’ll pay on time.
For most people, your credit history starts with your first credit card. For others, like Romana, it starts with the payment of your first cellphone bill.
With a tight housing and rental market amid an influx of newcomers to Canada, it’s more important than ever for international students to start building their credit history right away rather than waiting until after graduation, experts say.
“If we go to lease or purchase a car, get a mortgage for a home or even a line of credit, what interest rate we get often depends on our credit score,” says certified financial planner Ravi Chhabra. “It starts with the credit score, and that score can go up or down depending on a person’s credit history and their spending habits.”
Equifax, one of Canada’s two major credit bureaus, considers a score above 660 good, and above 760 excellent. The average Canadian credit score sits at around 672, according to Toronto-based fintech firm Borrowell.
Chhabra, who moved to Canada from India in 2000, knows firsthand the financial challenges that come with being a newcomer. He says he was only able to get a credit card as a Niagara College student because the bank could see he was making an income through his co-op placement.
But the lending landscape has changed since then. Chhabra says these days, certain banks offer products that cater to the growing international student demographic in Canada. A record number of international students were admitted into Canada in 2022, according to Immigration, Refugees and Citizenship Canada, with around half arriving from India and China.
Recently, San Fransisco-based Nova Credit expanded into Canada through a partnership with Scotiabank, offering newcomers a “credit passport” to migrate their foreign credit history to Canada to help them access financial products here.
Other products include special-offer credit cards for international students with $1,000 limits, as well as credit cards with lower limits if you put down a security deposit, some for as low as $75, explains Hiscock.
“There are a few items out there that let you establish credit without having to show income because you’re actually providing security with a little bit of money,” Hiscock says.
Aside from obtaining your first credit card, it’s just as important to actually use it and pay it off on time. Within the first six months especially, Hiscock says, you should make regular payments and never go past the due date shown on your statement. Once you are 30 days late on an item, Hiscock says that will stay on your report for “a long time, and if you are new to credit, you’re going to stay down there for a long time.” Chhabra advises international students use just one credit card to start their history, and apply for another once they’ve secured a full-time job offer.
Some international students think a prepaid card can help, but Hiscock says it doesn’t. “Many people believe that a prepaid credit card is going to help you establish a credit rating when it’s in fact much more of a convenience product,” says Hiscock. “A prepaid credit card typically will not show up on your credit rating.”
Chhabra also warns international students to avoid co-signing a loan with someone else, as you risk tarnishing your own credit history should the other person fall behind on their payments.
Having lived in the U.S. for nearly a decade, Nida Zohra was familiar with credit products, but she began taking her credit history seriously when she moved to Canada in 2021 for a postgraduate certificate program at Conestoga College.
“I just knew that I had to pay whenever my statement was ready, and that would keep my credit score in a fair range,” says Zohra.
By discussing with friends who were also new to Canada and watching videos online, Zohra also learned she needed to remain within a certain percentage of her total limit to improve her credit score. (Experts recommend keeping your credit utilization ratio — which measures how much credit you’re using compared with how much you have available — within 30 per cent, but Chhabra adds that Equifax and TransUnion don’t share how they actually calculate credit scores.)
“I just cannot emphasize enough the importance of getting that secured credit card as soon as possible when you arrive because having a credit rating opens so many doors for you,” says Hiscock.
“Then by the time you’re done university or college and you’re starting to think about bigger things, you’ve got a good credit rating behind you, and you’ve developed good banking habits in the meantime.”
Srivindhya Kolluru is a Toronto-based freelance journalist who writes about business and finance.
