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How to Establish & Get Credit in Canada | Credit Education

If you are applying for credit for the first time, you might find it hard to get a credit card or a loan. If you have no credit history, it is difficult for lenders to determine whether or not you are a good credit risk. How do they know if you will make your payments on time? How can they be sure you won’t just go on a spending spree and then take off without ever repaying the money?

5 Ways to Establish Credit or Get a Credit Card

You might ask, “Well how can I establish a good credit history and prove I can be trusted if no one will give me credit?” To many people this seems like a catch 22. Fortunately, some lenders are willing to give people without credit a chance. Here are some tips to help you find a lender who might help you establish a credit rating:

  1. Try applying for credit through a gas station or a department store.
  2. If you attend university or college, many credit card companies will give students a low limit card to try to entice them into becoming a customer.
  3. You could get a cell phone on a contract and establish credit that way.
  4. You can get a family member or friend with good credit to co-sign a loan or credit card application for you. However, be aware that your co-signer is 100% responsible for your debt if for some reason you don’t make your payments (check out the dangers of co-signing).
  5. A common and prudent way to establish credit is to get a secured credit card. If you chose this option, you would provide your cash as security in exchange for the credit that is granted to you. If you rack up a debt and then don’t repay it, the lender would just keep your cash. This option allows creditors to give you credit without very much risk to them. Look around for a bank, credit union or finance company that provides secured credit cards with low fees. Once you have improved your credit rating and qualify for a card with no annual fee, you can then switch cards.

Credit cards can be an expensive and dangerous tool if you do not use them wisely. You should always pay your full credit card balance off each month. Click here to learn tips on how to use credit cards wisely.


Don't Despise Small Beginnings - Building Credit Takes Time

When you apply for your first credit card, a lender may offer you a credit card limit that is very low. If this happens to you, don’t be offended. Use the low limit responsibly, build a good repayment history with it and apply to have it increased in a year or two.

To establish a satisfactory credit rating, you typically only have to have one loan or credit card reporting on your credit bureau for about a year. The size of your credit limit doesn’t matter very much. What matters most is that you make your payments on time every month without fail. If you do this, within a year or so, your credit score may be high enough to qualify for a better credit card, a car loan or maybe even a mortgage.

Once you have established a credit rating, you then need to maintain it. To find out how to maintain and strengthen your credit, click here.