How to build credit in Canada from scratch

What "having no history" means in Canada (and why your credit file starts from zero)

In Canada there are two main credit bureaus: Equifax and TransUnion. These agencies only record financial activity that occurs within Canada. It doesn't matter if you had an impeccable history in your home country with years of on-time payments. When you arrive in Canada, your Canadian credit file simply doesn't exist.

This doesn't mean you have "bad credit." It means you have no credit, which in many ways is just as difficult because lenders, landlords, and even some employers have no way to evaluate your financial reliability. Understanding the cost of living in cities like Montreal will help you plan better while you build your history.

Your Canadian credit report is created automatically the first time you apply for a credit product (card, loan, line of credit) and that institution reports your information to Equifax or TransUnion. Before that moment, you literally don't exist in the Canadian credit system.

How your credit report is created for the first time

When you apply for a credit card, loan, or line of credit in Canada, the lender sends your information to one or both credit bureaus. That's the moment your file is created. From there, every month the lender reports whether you paid on time, how much you owed, what your credit limit was, and other details.

Credit scores in Canada range from 300 to 900, where 900 is a perfect score. In practice, a score of 660+ is considered good, 725+ is very good, and 760+ is excellent. As a newcomer, your initial goal should be to reach 650 points in your first year.

The factors that determine your score are:

• Payment history (35%): The most important factor. Paying on time, every month, without exception. A single late payment of more than 30 days can stay on your report for 6 years.
• Credit utilization (30%): The percentage of your credit limit that you're using. Keeping it below 30% is the general rule.
• Credit age (15%): How long you've had your accounts open. That's why it's best not to close your first card even if you later get a better one.
• Credit mix (10%): Having different types (credit card, loan, line of credit) shows you can manage multiple obligations.
• New inquiries (10%): Every time you apply for a new credit product, a "hard inquiry" is recorded that slightly lowers your score for about 6 months.

Your 90-day plan (step by step) to start right

You don't need a complicated plan. These are the concrete steps you can follow from your first week in Canada:

Mistake #1: high "utilization" (and how to keep it low)

Credit utilization is the percentage of your total limit that you're using at any given time. It's calculated by dividing your current balance by your credit limit. For example, if your card has a $1,000 limit and you owe $400, your utilization is 40%.

The general rule is to keep it below 30%. Ideally, below 10% is even better for your score. But the most important thing is that it never approaches 100%.

The trick few people know: Pay part of your balance before your statement closing date, not just before the due date. This way the bank reports a lower balance to the bureaus. If you spent $600 of a $1,000 limit, pay $400 before the closing date so only $200 in utilization (20%) is reported.

The closing date appears on your monthly statement or in your bank's app. It's generally 3 to 7 days before the payment due date.

How to check your report and correct errors

Both Equifax and TransUnion are required by law to provide you with a free copy of your credit report. The Financial Consumer Agency of Canada (FCAC) recommends checking it at least once a year, but as a newcomer building credit, checking every 3 to 4 months is a good practice.

You can request your free credit report in the following ways:

• Equifax: Online at equifax.ca (you need to create an account) or by mail by sending the request form.
• TransUnion: Online at transunion.ca or by phone at 1-800-663-9980.
• Borrowell: Offers free access to your Equifax score updated weekly, without affecting your credit (it's a soft inquiry).

When reviewing your report, verify that the following information is correct:

• Your full name and date of birth
• Your current address and previous addresses
• The listed accounts are actually yours
• Balances and credit limits are correct
• There are no payments marked as late that you actually made on time
• There are no accounts you don't recognize (possible sign of fraud)

Secured card vs. newcomer card (which is better and when)

A secured card works like this: you deposit a refundable amount of money that becomes your credit limit. If you deposit $500, your limit is $500. It's the most accessible option because approval is practically guaranteed. The bank has no risk because it has your deposit as collateral.

A newcomer program card is a regular card (no deposit) that major banks offer to newcomers with a work visa or permanent residence. Requirements vary, but generally you need to have a bank account with that bank and demonstrate you have sufficient income or funds.

Both options report to Canadian credit bureaus, and that's the central point. What matters is not what type of card you have but that you use it responsibly and that the activity is reported. Check our guide on what banks require for newcomer cards to learn the specific requirements of each program.

Our recommendation: If you qualify for a newcomer program card, that's your best option because you don't need to lock up money as a deposit. If you don't qualify (for example, if you arrived on a tourist visa, student visa, or don't have regular income yet), the secured card is your safe path. There's no shame in that — it's simply the right tool for your situation.

Carlos Alviz

Co-founder, FinMaple

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