How to Start your Credit History in Canada
The reason you were denied credit in the past might be the high credit score requirements for the credit cards you applied for. When you are just beginning to build your credit, start off small and look for options available for those with little to no credit:
• Secured Credit Cards
Great for building credit, since almost any applicant can qualify for them, as they are backed by mandatory cash collateral deposits. This means that the cardholder is required to make a deposit equal to the credit limit, which helps remove the risk of default payment for the issuer. Just be sure that the company reports the card to the credit bureaus so your positive payment history helps build your credit file. Ask for terms and conditions for Secured Credit Cards at your bank. Some banks offer this type of cards even for new customers. A list of those cards you can find here.
• Retail Credit Cards
Another option commonly used to build credit. While they are easy to get, they usually have low credit limits and the interest rates are usually considerably higher than non-retail cards. Generally, we recommend being extra cautious with retail credit cards. In particular, make sure you are able to pay your balance in full each month - if not, it will cost you. Here is a list of available cards in Canada.
• Student Credit Cards
Great options for young consumers who are just starting to build their credit history. They typically offer higher acceptance rates and may even include promotional offers and rewards. The drawback is that they usually have lower credit limits and higher interest rates. Here is a list of available Student Credit Cards in Canada.
Once you receive your first credit card, it is vitally important to get off to a good start. Practice these good credit habits as often as you can:
• Pay your card in full each month.
Contrary to popular belief, you not need to carry a balance to build an awesome score. We are sure you do not enjoy wasting money, so as often as you can, pay your entire balance to avoid paying interest on charges.
• Pay your bills on time.
Creditors really care about your on-time payment history. Late payments can stay on your credit reports for seven years and wreck your score, so do whatever it takes to make every payment on time.
• Do not carry a large balance.
While you may be excited about receiving your first credit card, do not get be overzealous and proceed to max it out - it will look like you are desperate for credit. Instead, try to use only one to 30 percent of your available credit. This looks good to creditors because it shows that you use credit but are not reliant upon it.