If you’re new to Canada, it’s likely that one or both of these things are at the top of your priority list as you get settled: finding employment and a place to call home.
One of the things that you might not be aware of as a newcomer—or may underestimate—is how much your credit score and history (or lack thereof) can impact your search for housing or the employment opportunities that may be available to you.
What does this mean for you as a newcomer to Canada? More importantly, what can you do to build your credit score so you can secure safe and affordable housing and employment opportunities?
Read on to learn more about credit scores in Canada and how they can influence your ability to find a place to rent or qualify for certain jobs.
What Is a Credit Score in Canada?
A credit score is a number that companies and lenders use to try to predict how financially reliable and responsible you are.
Credit scores range between 300 at the low end and 900 at the high end. The higher your score, the more likely it is that you’ll be approved for loans and other financial services at a favourable rate.
Here’s how credit scores are categorized:
- Poor: 560 or below
- Fair: Between 560 and 659
- Good: Between 660 and 724 (many credit scores start in this range)
- Very Good: Between 725 and 759
- Excellent: 760 or higher
A “poor” credit score may make it harder to secure certain financial services or jobs in industries that have strict security requirements.
Can Your Credit Score Affect Employment Opportunities as a Newcomer?
You might be wondering how (and why) your credit score could affect your employment opportunities. While a low credit score cannot be a cause for termination from your existing employment in Canada, it can be used to exclude you from being hired by certain organizations.
Employers are one of the entities that are allowed to request your credit report and use it to make decisions—along with banks, landlords, credit card companies, government organizations, insurance companies, and retailers. However, these entities generally need to seek your consent before running a credit check, except in the following provinces:
- Nova Scotia
- Prince Edward Island
- Saskatchewan
In these three provinces, a potential employer or other business needs only to let you know that they’re checking your credit report.
Why Do Employers Check Your Credit Score?
Employers may check your credit report and score as part of a larger pre-employment background check. These checks may look for criminal records, employment history, and credit history to try to determine your suitability for a given job.
Why are credit checks for employment in Canada important to potential employers? There are a couple of things that an employer might be able to determine based on a review of your report, such as:
- Whether You Pose a Security Risk. Having high debts can potentially make someone a security risk to an organization. If you owe a lot of money to creditors, employers may assume that you could abuse a position of trust to pay off those debts. So, some high-security jobs or jobs that involve handling large transactions have pre-employment background checks that include examinations of your credit history as a prerequisite to employment.
- How Financially Responsible You Are. An employer might use your credit history to try and determine how responsible you are with your money—and, by extension, how responsibly you might handle the organization's money. This might be common when applying for jobs where you might be expected to handle the company’s finances (or the finances of the company’s customers)—such as when you’re going to work in the banking industry or are taking a high-level position in an organization.
The better your credit history and score are, the more likely it is that you can pass this credit check for employment.
How Credit Scores Can Affect Your Housing Options
Another aspect of life where some might not anticipate the importance of good credit is finding a rental home or apartment. However, landlords need to know that their tenants can pay their rent on time, every time, for the duration of the lease. So, they often perform credit checks on prospective tenants before offering a lease agreement.
How does a low credit score affect your ability to secure an apartment? Odds are that your credit score will be the first, or only, part of the credit report that a landlord looks at. Some may choose to go deeper into the credit report to look at your payment habits, any bankruptcies you may have filed, and your current debt utilization rate (how much debt you have vs your maximum credit available).
As a newcomer to Canada, you might not have had enough time to build up a credit history in this country, which can be both positive and negative. It can be positive in that you won’t have many major negative events in your credit history and report. But it can also be negative since you won’t have had time to build up a history of making regular payments to your creditors in a timely fashion.
What’s the Minimum Credit Score for Renting an Apartment in Canada?
There isn’t a standardized credit score requirement for renting an apartment in Canada that will apply to all landlords. Some landlords might be more or less accepting of tenants with low credit scores than others would be.
As a general rule of thumb, you’ll want to have a “good” credit score of 660 or higher. This will make you appear trustworthy in the eyes of most landlords and make them more willing to offer a lease. An especially high credit score (above 760) combined with a positive reference from a previous landlord may even be enough to get a landlord to offer more favourable terms on the agreement.
What Affects Your Credit Score after Immigrating to Canada?
Given how important a good credit score is for finding housing and certain jobs, knowing how to build credit as a newcomer to Canada is vital. Part of building your credit is knowing what affects your score.
The two major credit bureaus in Canada are Equifax and TransUnion, and they generate your credit score based on the following criteria:
- Your payment history (35%). This is the record of how often you were able to meet your minimum monthly payments on debts. Consistently meeting your minimum monthly payments helps improve your credit score.
- Your credit utilization (30%). A measure of how much credit you have available to you versus how much you’re currently using. Having a low utilization rate helps improve your credit score.
- The length of your credit history (15%). An assessment of how long your credit history is. The longer your history, the better.
- Credit Mix (10%). An assessment of how many types of credit you currently hold. Having more types of credit is typically better for your score than having fewer types of credit.
- Number of new credit applications (10%). A measure of how many hard inquiries have been made on your credit in the recent past. Frequent inquiries can negatively impact your credit score.
As a newcomer to Canada, starting your credit history off right will help you build your financial foundation.
Here are a few FAQs about Canadian credit:
Can I Be Denied Employment Because of My Credit Score?
Yes. You can be refused employment because of your credit score. Refusing to consent to a pre-employment credit check can also be an automatic disqualification for certain jobs—such as government work that requires a security clearance.
How Can I Build Good Credit Quickly?
The main things to do to build a credit score up with limited time is to:
- Use credit products issued by organizations that report to credit bureaus.
- Pay your monthly minimums consistently.
- Maintain a low credit utilization rate, if possible.
How Can I Check My Credit?
You can typically check your credit by:
- Reaching out to your bank and requesting a check. You can often do this on your bank’s website.
- Checking with one of the credit bureaus: Equifax or TransUnion.
- Check with other financial institutions such as Credit Karma or Borrowell.
Need more advice and information about building your credit? Check out our Building Credit from the Ground Up e-learning program!
If you need help right away, please reach out to our team directly. Our certified credit counsellors are standing by to help answer any questions about credit and to help you get (and stay) out of debt so you can focus on living your best life!
This blog has been sponsored by easyfinancial.
At easyfinancial we believe everyone deserves fair access to credit, and since our inception we have worked with customers like you to make that a reality. We provide financial relief and a second chance when banks aren’t an option.
We choose to see beyond your current situation and look towards your potential for a tomorrow that includes improved credit and financial stability.
