7 Ways to Build Your Credit Score as an Immigrant


If you’re a new immigrant to Canada, you’re going to need to understand how credit works as having a good credit score is an integral part of being financially free. Having good credit can mean the difference between getting approved with good terms on a major financial purchase or getting rejected on a loan. Regardless of what your credit score is today, you’ll want to know these ten tips that you can use to build your credit score. In this article, we’re going to go over what a credit score is, what affects your credit score and why it’s so important.

What is a Credit Score?

A credit score is a 3-digit number that represents your creditworthiness which is based on your credit history. Credit scores range from 300-900, with 300 being the absolute lowest possible score amd 900 being the highest. To put it simply, if you use your credit responsibly and consistently pay your loans off on time and in full, you will see your credit score improve. On the flip side, if you fail to make your loan payments on time or in full, you’ll see your credit score drop. You’d be considered to have good credit with a score between 650 and 725. 

What Factors Make Up Your Credit Score?

  • How long you’ve been using credit 
  • The current amount of credit you’re using
  • If you consistently pay your bills on time and in full
  • The number of recent credit inquiries you’ve applied for
  • Records of bankruptcy, insolvency or divorce
  • If you have currently have a balance on a credit card or are exceeding your credit card limits

Why Does Credit History Matter?

Your credit history is essentially a timeline of all of your credit activity, it’s shown in a credit report. A credit report shows all of your previous credit inquiries, credit repayments, missed payments and open credit accounts. Typically, the longer your credit history, the better, assuming you’ve been a responsible borrower. If a potential lender can see you’ve been responsibly managing your credit for a long period of time they will see you as being a dependable borrower and you’re more likely to be approved for a loan at a favourable rate. 

7 Tips to Build Your Credit Score

1. Get a Credit Card

One of the best ways to build your credit without taking a big risk is to get a credit card. It’s best to use your credit card for small recurring purchases like groceries and gas where you can immediately make your payments in full. This is an easy way to build up your credit and there is no risk associated with it as long as your not spending beyond your means. The other potential perks of a credit card are many cards reward points for purchases.

2. Don’t Use All of Your Credit Limit

While having a credit card can be great for your credit score, it’s important to manage your credit spending. Typically, a good rule of thumb is to not use more than 30% of your credit limit. This shows lenders that you’re a responsible borrower because you're not spending to your limit each month. 

3. Use Different Types of Credit

It’s good to use different types of credit to show lenders that you can responsibly manage your credit via multiple sources. For example, if you could manage a car loan, a credit card and a mortgage, lenders would look at you as being a responsible borrower. 

4. Pay Your Bills On Time, Every Time

One of the easiest things you can do to improve your credit score is to always make your loan payments on time. If you’re able to maintain paying your bills on time over a long period of time, you’re guaranteed to see your credit score improve. 

5. Get a Car Loan

In our third tip, we talked about the importance of using different types of credit, this tip goes directly with that! In fact, getting a car loan is one of the best ways to improve your credit. We have a whole article on why a car loan is a great way to improve your credit, check it out here!

6. Limit Your Credit Applications

Many people believe that if they’re looking for a loan they should apply to multiple lenders to find the best possible loan terms. While this may seem smart, it actually hurts your credit score. In order for a lender to consider you for a loan, they need to do what’s called a hard-hit credit inquiry. The hard-hit means that it will negatively impact your credit score. So if you’re putting out a ton of credit applications, you’ll likely see your score drop. It’s best to limit the number of credit applications you apply to unless it is absolutely necessary. 

7. Don’t Take on More Loans Than You Can Manage

The last thing you need to know about building up your credit score is to not take on more loans than you can manage. Unless you’re positive you can manage a loan until it’s been fully paid off, you shouldn’t get the loan. Figure out what’s realistic based on your income and stay within your means, don’t use credit just because you have credit available to you.

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