What to know about credit if you’re new to Canada

By ATB Financial 18 November 2024 4 min read

A dial showing that credit can range from poor to exceptional.

What is credit?

Credit is the ability to borrow money or get things that cost money without paying right away with the understanding that you will pay for them later—usually with interest. Credit comes in various forms like credit cards, line of credit, loans and mortgages.

A lender decides whether to give someone credit based on that person’s creditworthiness.

What is creditworthiness?

Creditworthiness is the likelihood that a borrower will repay a loan on time, based on their past financial behaviours and current financial situation.

Creditworthiness will influence your ability to do things like:

Get a credit card
Borrow money from a bank, including a mortgage or a line of credit
Lease a car

Banks and other lenders each have their own way of calculating creditworthiness, but they all look at the similar factors such as:

Income and/or employment
Current outstanding debts
Repayment history
Credit score
Net worth

If you are new to Canada, you might not have held any credit products yet. This means that you don’t have an established credit history and most likely do not have a Canadian credit score. If you are applying for credit, like a credit card, banks and lenders will also consider your income and employment status when assessing your creditworthiness. Once you get credit, you will start to build a credit history and establish a credit score.

What is a credit score? How do I get a credit score in Canada?

In Canada, credit scores are based on your financial activity (also referred to as credit history) over the last six years. Your credit history in other countries does not influence your score in Canada. Once you have a credit product, like a credit card or line of credit, it takes about six months to build a credit score as a newcomer.

The score is a number between 300 and 900.

A score over 670 is considered good. Anything over 800 is exceptional. A higher score will generally allow you to receive a higher credit limit or borrow at a better interest rate, or both.

Credit scores are automatically calculated by credit reporting agencies. As soon as you get a credit card, loan or line of credit, you’ll begin building your score. Until then, you’ll have no credit history. This does not mean you have a low score—it means you do not have a score at all.

If you are new to Canada and don’t have a credit history yet, there are still ways to get a credit card.

Why do I need a credit score?

Your credit score forms part of your creditworthiness, which lenders will look at when deciding whether to approve you for credit. In Alberta, you need to give permission to a business or lender to access your credit report which includes your credit score.

Your credit score also can also play a role in renting housing or getting a job. For example, if you apply to rent a house, the landlord might look at your credit score as part of their evaluation of your application.

Potential employers may also look at your credit score when you apply for a job. Your score could influence their decision to hire you or not.

What can change my credit score?

There are two important things you need to know:

Pay your bills on time. This includes bills from credit cards, loans, utilities and rent. For example, if you have a credit card you need to pay either the full monthly balance or required minimum payment by the payment due date. Not making a minimum payment by the payment due date will have a negative impact on your credit score.
Keep your outstanding balance low. High utilization of credit and maintaining maximum outstanding balances tells lenders that you may be spending more money than you can afford.

An additional benefit of following these two practices is you can minimize interest charges resulting from outstanding balances.

There are many factors that can impact your credit score. To learn more about the details of building a credit score, read our article “How to build your credit score as a newcomer to Canada.”

How can I check my credit score?

The two biggest agencies that calculate and track credit scores in Canada are Equifax and TransUnion. Follow either of those links to order your credit report, which will include your credit score.

It’s a good idea to check your score at least once a year. Checking your score will show you if it is increasing, decreasing or staying the same. You can also watch out for fraud or inaccuracies on the report.

If you bank with ATB and have a credit product with us, you can also check your score easily from within ATB Personal web.

ATB everyday banking advisors are here to help you and your family. For answers to your questions, to learn more about the Canadian banking system, and for advice on reaching your financial goals, book an appointment with an advisor at an ATB location near you.

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