Now that you’ve landed in Canada, you need to start worrying about your credit score.

What is credit score?
Once you land in Canada and get a credit card or any other form of credit, such as a mortgage — banks start reporting your financial activity on your credit account to credit rating agencies such as Equifax and TransUnion.
These agencies then use this information to assign a credit score to you. Banks run a credit check on you and use your credit score to decide on your creditworthiness for future lending.
Generally, a good, very good, or excellent rating lets you borrow easily and will help you lower your borrowing cost.

Before we begin this section on how to improve and check your credit score, there are a couple of things to keep in mind, hard credit inquiries may lower your credit score. Hard credit inquiries happen when a potential lender is reviewing your credit because you’ve applied for credit with them. Please make sure to check with your credit score provider if they will do a soft or hard inquiry and if there will be no impact on your credit score. Now, let’s see how we can check our credit score.
Another point to consider, if you goto to 4 different agencies, each different agency will give you a different score and the scores will vary a lot. This is how credit scoring works. Each company has a different model. And to complicate things further, the credit score you get as a consumer is not the exact same score that banks get.

How do I improve my credit score?
Here are five tips on how to improve your credit score in Canada:

  1. Tip 1 — As a newcomer to Canada, you don’t have a credit history. You’ve never borrowed. So, it is obvious that before anything else you need to have a credit history. This means that you need to have a credit card or a mortgage or some other form of credit from a financial institution. The first thing you need in this case is to get a credit card. All the big 5 banks in Canada offer credit cards and free banking for a limited period to Newcomers.
  2. Tip 2 — Getting a credit card alone won’t help improve your credit score. You will need to spend on your credit card and make payments on time on debts owed on your credit card. As you repeat this cycle of using your credit card to make payments and paying up your credit card bills on time, your credit score improves.
  3. Tip 3 - Your credit card comes with a credit limit. This is the maximum amount you can borrow on the credit card. Avoid going over the total credit limit at all times and try to avoid going over 1/3rd of the limit assigned to your credit card.
  4. Tip 4 — It is not a good practice to go over 1/3rd of your credit limit on your credit card. However, since you are a newcomer, you may be assigned a low credit limit as a newcomer. If you are in this situation, then you can consider splitting your expenses across multiple credit cards. This way you don’t go over 1/3rd of the credit limit assigned to you on any one credit card.
  5. Tip 5 — And finally, If you are in a tight spot for a month, and cannot make the payment on a credit card bill for that month then to avoid impacting your credit score, you can pay one credit card bill using the credit limit on a different credit card. There is a cost involved in a balance transfer. So, please check with your bank on the cost and options available on your credit card to do balance transfers. Use this option sparingly and only if absolutely necessary.

How do I check my credit score for free?
Leaving the complexities aside, the easiest way to check your consumer credit score is to do so using websites like Borrowell or CreditKarma, links are in the description. Some banks have credit score information built into their banking app — for instance, Scotia bank customers can see their credit score by opening the app and navigating to the updates section.

That’s everything you need to know about your credit score in Canada.