Getting a Credit Card in Canada

Credit cards in Canada.

Canadian Credit Card

Getting a credit card in Canada – Secured credit cards – Credit history

How to get a Credit Card in Canada

Whether or not you get a credit card in Canada depends on your credit history.

Credit History

Your personal credit score is reported by two credit bureaus:

›› Equifax
›› TransUnion

Credit numbers range from 300 to 900 with higher numbers indicating a more favourable credit score. This allows you to get a larger credit limit when you apply for a credit card.

Arriving From Overseas

Foreign credit history is not applicable in Canada. That is, Canadian credit institutions and banks do not recognize foreign credit scores. This can make it quite difficult for newcomers to Canada who want credit cards.

However, as we shall see, there are several options for those who are interested in quickly obtaining a Canadian credit card.

If you are coming to Canada from overseas and a bank in your own country allows you to keep an account open after you have moved to Canada, you ought to do this. You can use your overseas card in Canada while you build up your Canadian credit score.

Understanding Credit Scores in Canada

You are permitted to see copies of your credit reports and scores without penalty by contacting Equifax or TransUnion in writing and requesting your credit score be delivered to you by snail mail. Other methods, such as “free online credit score” agencies, will also reveal your credit score, but may penalize you by lowering your credit score if numerous credit score requests are made in a limited period of time.

The Government of Canada has published “Understanding Your Credit Report and Credit Score,” a tutorial that walks you through a sample credit report and its interpretation. This resource is often the only explanation for Canadians trying to interpret a credit report. It is available free of charge through the Financial Consumer Agency of Canada.

Types of Credit Card

1. Secured credit cards

A secured credit card is not a typical line of credit. While it offers an agreed credit limit and charges interest on balances, applicants need to offer some sort of “security” for the credit issuer. This could be in the form of a cash deposit or personal possessions that can be collected in the event a balance is not paid off within a previously agreed time frame. Secured credit cards are the card of choice for many newcomers to Canada as they allow speedy credit reporting within Equifax and TransUnion when balances are paid off and can quickly establish a credit score in Canada. However, secured credit card issuers are legally permitted to seize assets or other security put forward if a balance is not paid off in a certain time frame.

2. Joint credit cards

Joint credit cards offer the cardholder an unsecured or “regular” credit card when a second name, which is usually one with an established Canadian credit history, is added to a card. This can either be in the form of friends, family members, or work colleagues. Joint credit cards offer the flexibility of having unsecured credit, but carry a personal liability in that its joint holder or co-signer is permitted to use the credit card at will and can quickly accumulate debt that might legally become the responsibility of the original applicant.

3. Retail credit cards

There are numerous retail outlets and financial related businesses that offer unsecured credit cards. These are typically offered through a loyalty scheme or incentive to shop within a designated place of business, such as Presidents Choice Financial’s “PC Points Mastercard” that offers points that can later be exchanged for groceries or other items within a President’s Choice supermarket. Retail credit cards are usually regarded as easier to acquire than typical credit cards offered by banks, but tend to be issued with high interest rates resulting in payments that can quickly spiral out of control if a balance is not paid off by its due date.

It is usually not difficult to come across retail credit cards. A lot of these retail outlets typically coax new applicants by offering “free gifts” in exchange for a new customer’s personal information, but may later take the gift back if a customer refuses to apply for a credit card! This is not only embarrassing, but can also leave a poor impression of otherwise respectable retail outlets in Canada.

4. Loans
Short term loans from your personal bank can quickly lead to favourable credit scores. While costly, taking out short term loans and swiftly paying them off can lead to positive credit score reports and can quickly establish a credit score allows you to successfully apply for an unsecured credit card.

Using your Credit Card to further boost Your Credit Score
After you have obtained your credit card, look at your credit limit – the maximum you are allowed to spend each month using the card.
Then make sure you don’t spend anywhere near your limit.
Maxing out on your card reduces your credit worthiness because you are interpreted as living at your financial limits rather than comfortably within them.

Boosting your Credit Score with a Loan
Taking short term loans from your personal bank and paying them off reliably and on time can quickly improve your credit score.

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