Building and maintaining a good credit score is generally challenging, but newcomers to a country often face an even steeper climb.
A study by TD Bank found that individuals who have moved to Canada within the past five years have struggled to make headway in the country’s credit system. The survey revealed that roughly 80% of these new residents had applied for credit since their arrival, with the majority encountering difficulties during the application process.
The top three challenges cited were limited knowledge of how credit card rewards work, a lack of understanding of Canada’s financial system, and reduced ability to qualify for higher credit limits and loans.
Many respondents said the lower credit limits and loan amounts weren’t sufficient to meet their needs, and approximately 60% said they would have a better quality of life if they had improved access to credit. Most also said it was difficult for newcomers to build a credit history in Canada.
Shying Away from Risks
Credit bureaus and lenders now have access to more information about consumers than ever before. Research suggests that adult credit access is influenced by childhood experiences, including the family and neighborhood in which a child grows up.
Several factors have recently impacted consumer credit scores across the board—such as high inflation and rising interest rates. These conditions have led lenders to tighten lending standards and lower credit lines. Additionally, many credit card companies are now focusing on affluent customers—considered more stable—and are avoiding higher credit risks.
Impacts on Newcomers
These combined factors particularly affect newcomers to countries who lack extensive credit histories and often do not belong to higher income brackets. These consequences can be far-reaching. According to TD Bank, roughly 22% of respondents who applied for credit reported insufficient access to maintain a comfortable lifestyle.
Because of this lack of access, respondents indicated experiencing increased financial stress levels, limited ability to take out loans, higher interest rates, and even difficulties in securing housing.
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