Everything you need to know about credit

Obtaining “credit” allows individuals to obtain a good or service before paying for it, with an understanding that it will be paid for later.

A credit card, which is issued by a bank, is the most common method of paying for goods or service on credit. Many banks require that a person have a credit history before approving them for a credit card, which can put some newcomers at a disadvantage.

Scotiabank’s StartRight™ program, however, offers you the chance to obtain your first credit card without providing a credit history beforehand. This will help get you started on building your credit in Canada. Once you’ve been approved for a credit card, it’s important to use it responsibly in order to build a good credit score.

What’s more, if you set up your banking through the StartRight™ program, you can bank without monthly account fees and get up to $5,000 in a credit limit on a Scotiabank credit card!*

Before applying for a credit card, it’s important to decide which type of card will suit your needs. Some credit cards have low annual interest rates (less than 19.99% on purchases), while others may have low or no annual fees. Other cards offer rewards such as cash back, which means that you earn back a percentage of whatever money you spend on your everyday purchases.

Scotiabank has a wide range of credit cards for newcomers, and a Scotiabank advisor can help you decide which one is right for you.

A credit score is a number that represents your financial health at a specific moment in time. It indicates how risky you are to money lenders, and how likely you are to pay your bills on time. In Canada, your credit score generally falls between 300 and 900, and the higher the better.

There are many factors within your control that impact your credit score.

• Payment history refers to how consistently you pay your credit card bill, and any other bills, on time. Paying off your bills in full, by their due date, is the best thing you can do to increase your credit score and in all cases you should ensure you pay at least your minimum payment due on time. Payment history is the most important part of your credit score.
• Account activity, such as opening new and multiple credit accounts in a short period of time, can negatively affect your credit score. Try to apply for credit only when you need it, such as when you arrive in Canada.
• Length of credit history makes up about 15 per cent of your total score. In general, the longer you use a credit card and ensure you make payments on time, the better it is for your score.

Too many credit checks can also lower your credit score. Whenever a money lender asks for access to your credit score, it is recorded on your credit report. Multiple or recent inquiries may give lenders the impression that you need credit urgently or aren’t budgeting your money well enough.

1. Pay your bills on time.
2. Try to pay your bills in full.
3. Get a credit card to build your credit history.
4. Don’t spend more than your credit card allows.
5. Read your monthly account statements to ensure they’re correct – and report any errors as soon as possible.