Credit ratings and why they matter

(NC) In the Canadian financial system, credit history is king. Without, it’s hard to secure most cell phone plans or rental agreements, which is why learning about credit and how to build a credit history is essential for all Canadians - especially newcomers.

Like many seeking their first credit card in Canada, newcomers might expect to receive a lower credit limit. This can be frustrating when it's clear that access to a higher limit can help improve your credit score and is more efficient for larger purchases.

“Newcomers receive less support and education around credit than they would for other facets like finding a job or housing,” says Amit Brahme, senior director of the Newcomer and Cultural Client Segment at RBC. “Something many of us who are used to the system overlook is just how critical credit education is to settling down in Canada.”

Since regularly using a credit card helps to build credit history – and credit history paves the way for future purchases, such as rent, purchasing a car and eventually owning a home – it’s worthwhile to seek a banking partner that provides access to higher credit limits with no credit history required.

Here are the top three important things for anyone to learn about credit in Canada:

  1. What it is: A credit score is similar to a report card for your finances that represents your credit risk - the likelihood that you will pay your bills on time, pay back loans, etc. The higher the score, the more likely a bank or other lender is to approve a loan request. Loans can go towards things such as opening a business, continuing your education or securing a mortgage.
  2. How it’s calculated: Multiple factors are taken into consideration, such as your payment history, the length of your credit history and your used credit vs. your available credit.
  3. How to use it: Ensure all bills are paid on time and in full and, if possible, try not to max out your credit limit each month. To improve your credit score, it’s best to use up to 30 per cent of your overall available credit.

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