Building a good credit score or credit history is very important if one is looking to purchase a car, house, phone and other related items or products in Canada. As a newcomer it will be a challenge to purchase one of the aforementioned items without having a good credit history but do not worry since there are ways in which one can look to build the credit score or credit history from scratch.
Moving from India to Canada will not help in carrying over the credit score and a new credit score or history will have to be built from scratch. In Canada even to get a rented apartment or rented home will require to provide a credit score which is in good standing. In this blog some simple tips, tricks and steps will be shared in order to help one achieve their required credit score.
What is your credit rating?
This is a three-digit figure that can be anywhere from 300 and 850.The credit worthiness will be determined by this number. So the higher the score, the higher your credit worthiness. The lenders would be willing to provide loans easily if the score is higher along with lower interest rates. A low credit score would mean lending the loan is quite risky for the individual or entity providing the loan.
You might or might not get the loan, if you do manage to get the loan however, interest rates will be much higher. Take the example of renting a place, the property rental management would want to know if you have a good credit score before giving the place on rent. If you have a bad credit score then a six month rent in advance will be asked for, which can equate to around 10-12k dollars in advance. This can be a difficult task for a new immigrant to pay such an amount to begin with as one needs to deal with other expenses as well.
Scoring Range
There are different scoring ranges, some are considered good, some are average and some are below average scores. The poor scores are in the range of 300-559, the fair scores are in the range of 560-659, good scores are usually 660-724, the very good scores are between 725-759 and excellent scores range from 760-900. It is usually considered to have a score above 660 to be in good credit score range on average.The greater the score, the better, because it puts you in a better overall position. If you happen to fall between these ranges you tend to get loans easily and good interest rates.
How can you start from the bottom up to improve your credit score?
The first and most critical step in establishing credit is to obtain a credit card and begin using it responsibly. In Canada there are two types of credit cards basically. The secured and unsecured credit card. As a newcomer many a times banks do not offer the unsecured credit card type. In this type you need to pay the monthly statement over a period of time. The secured credit card states that you need to submit an upfront amount for the credit card.
For example say you put in $2000 as a security deposit, you get a limit of $1500 or $2000. If you fail to make the payment on the card for a particular month, the bank will deduct the money that you deposited as a security deposit earlier on. This is a very secure way to continue with the banks as newcomers. This is an excellent approach to begin establishing credit in Canada.
How can I find out my credit score?
You will be charged a price by a number of firms to access your credit report.This fees can range from $10,$20 and so on. Borrowell does offer free credit monitoring services. It is a leading fin tech organization listed in Canada and many people have been using their service to check their credit score. This application service has been used by over a million users.This a free service that not only allows you to check the score once but on a regular basis. There are multiple features that this app has to offer which includes weekly credit scores, bank level security, various personalized financial product recommendations, credit improvement tricks and tips. The weekly reports will not hurt the credit score at all.
Read till here
There is a hard credit enquiry and a soft credit inquiry. The hard credit inquiry basically implies that the individual or entity will dive deep into the credit history and check multiple details inside of it. This type to check will impact the credit score every time the check is made. So if you do it too many times an impact will be created and the score can even be negative. The Borrowell app will allow you to get a soft credit check, which will not affect the credit score no matter how many times you happen to check it.
How to use the credit card in an optimum way?
A number of factors might have a negative impact on your credit score.It is recommended that the credit score increases in a positive direction and that too in a short span of time. The first and most important thing is to not use up all of your credit card’s available credit.It is recommended to use only 30 % of the credit card limit. If the limit of $2000 then do not spend more than $600 of it. The second point is that the credit card must often be used, sometimes we get the credit card and we often do not use it since not using will not help with building the credit history.
The card should be used regularly instead of the debit card or cash. The third tip is to pay the credit card bills on time and not to skip any bill whatsoever.The minimal minimum must be paid at all times.For example you have a bad month and you are unable to pay the entire amount, in that case you can pay the minimum amount.Credit card interest rates are quite high if the total debt is not paid.There rates can be 15,20 or even 25% depending on one card to the other. It is recommended to pay the amounts as early as possible before the next cycle ends.
As you build your credit history, you can get more credit cards to make more credit history but not more than 3 or at the most 4 credit cards. There are numerous benefits that one gets with the credit cards such as cash back, reward points and more. It is recommended to not close credit card accounts soon enough after getting a new credit card as this will affect the credit score of the individual. Try to resist closing one or two credit cards and try holding them for long.
How to improve the credit history or credit score ?
Getting a car loan, for example if you wish to purchase a pre owned car for $10,000 then it is recommended to pay $8000 and get an auto loan of $2000. The lesser the amount of the autoloan the higher your chances of getting a good credit score since that will help in completing the payment in a short duration of time and much sooner. The payments on time whether for a year of two years will help in building a good credit score. The ‘line of credit’ in Canada is a personalized private loan scheme where you can get loan based on your requirements for a fixed rate of interest.
A home loan is an example of a credit line. The interest rate on a loan can be as low as 2% or as high as 2%.Usually the rate is 1.99 lower or higher. This is expected to be a very good rate and one cannot expect a better rate than this when you move to Canada. The credit history will also go higher when you pay your bills on time for the line of credit. This is a great way to improve your score, if you have a good score then you can get it to a very good or excellent score.
These are the ways in which you can look to improve or create your credit score and ratings once you are in Canada. These methods are tried and tested as the best ways to approach credit scores in the country. If you wish to call Canada your home in the near or distant future and work towards making it your long term place of residence then following these techniques will certainly add value and help in achieving that goal.
