New country, no credit? Tips for new Canadians

For the better part of the last century, Canada has been referred to as a cultural mosaic. And, with good reason. According to Statistics Canada, 23% of people living in Canada were born outside the country. However, it says four years after arriving, one in five Canadian immigrants still finds it difficult to access social interaction and support. Many also report they have financial concerns.

As someone who immigrated to Canada, Mark Thomas Prieto has first-hand experience establishing himself. Prieto, an advisor with Sun Life, says a plan and support are key to success. “It’s not easy moving to another country. But having clear goals and proper guidance makes things a lot more achievable.”

Prieto works with many newcomers and shares this advice:

• Have a clear picture of your finances.
• Identify your goals and the timeline you’d like to achieve them in.
• Have a monthly budget and regularly review it and discuss it as a family.

Financial tips for new immigrants to Canada

It’s important to understand the following basic financial steps you need to take to build a secure financial future. Here are 4 tips for new Canadians:

1. Get a bank account

Getting a bank account allows you to save money in a secure and easily accessible way. Start by familiarizing yourself with the major banks and credit unions (financial institutions) in Canada. With a little bit of research, you’ll get a good idea of the different options and features each financial institution offers.

Some factors to consider are:

• Account options: Look at financial institutions that offer a variety of account options that meet your specific needs. This could include: - basic checking accounts, savings accounts, student accounts and accounts tailored to newcomers that waive fees for an introductory period.
• Branch and ATM accessibility: Evaluate the financial institution's branch and ATM network. Do they have convenient hours, locations and ATMs near your home, workplace or other frequently visited areas?
• Fees and charges: Consider the fee structure of the financial institution. This includes account maintenance fees, transaction fees, overdraft fees, international transfer fees and any other charges associated with banking services. Opt for packages that align with your financial habits and offer opportunities to reduce or waive fees.
• Language support: Consider financial institutions that offer multilingual services or have staff who speak your native language. This can help you feel more comfortable and confident when dealing with financial matters.
• Customer Service: Assess the quality of customer service offered by the financial institutions, including availability, responsiveness and willingness to assist with any questions or concerns you may have.

Typically, you will need two pieces of identification to set up an account –one must include a photo. The Canadian Bankers Association has a list of the many types of acceptable identification.

Set up an account soon after you arrive in Canada. It will provide you with the cheques you’ll need to rent an apartment. It’s also a place to deposit your salary once you start working.

2. Start building your credit history

After you set up your bank account, you can begin to establish credit in Canada. You can do that by:

• Applying for a credit card and repaying the balance on time each month.
• Consistently paying your bills on time, including utilities, cable and telephone.
• Applying for small loans from your bank and paying them back on time.
• Making regular payments on another loan on time, such as a car loan.

You may have a solid credit history in your home country. But, as a newcomer, you need to demonstrate credit worthiness here. Foreign credit scores cannot be transferred from other countries. However, they may be reviewed when it comes to loans or big purchases. This includes taking out a line of credit or buying a house.

Starting from scratch, it may take a few months to build a “good” credit score. A good credit score proves you can reliably make payments on time and over a fairly long period of time. Information on credit scores and credit reports is available from the Financial Consumer Agency of Canada.

Key factors that may affect credit scores in Canada include:

• Payment history: This is one of the most significant factors affecting your credit score. It reflects whether you have made on-time payments for credit cards, loans and other debts.
• Credit utilization: This factor considers how much of your available credit you are using.
• Length of credit history: The length of time you have held credit accounts affects your credit score. A longer credit history generally leads to a higher credit score.
• Types of credit: Having a mix of credit accounts, such as credit cards, installment loans, and mortgages, may positively affect your credit score.
• New credit inquiries: Applying for multiple new credit accounts within a short period can negatively affect your credit score, as it may indicate financial distress or increased risk.
• Public records: Bankruptcies, foreclosures or insolvencies can lower your credit score.

Start off on the right foot by using our budget calculator.

4. Work with a financial advisor

Making sense of financial and investment products in a new country can feel confusing or overwhelming. As a newcomer in Canada, having someone who understands the newcomer experience and who you can rely on for sound financial advice is important, says Prieto. “An advisor can help you stay on track with your financial goals. For example, they will work with you to identify which products are best for your goals based on your needs and budget.”