Credit scores are critical in Canada (and the United States) when applying for loans. They show lenders how trustworthy you are at paying back money. A higher credit score shows that you pay on time, have used your credit responsibly for years, and have low credit utilization.

Many international students do not have credit scores. This is because they have never borrowed money in a country that uses credit scores. Having a credit score to study abroad is not essential, but if your long-term plans include staying in Canada, it’s important to build one. 

Passage provides educational loans to international students even if they don't have a credit score. If you're interested in studying in Canada, check out our eligibility checker to discover the loan you qualify for.

Understanding credit scores for international students in Canada

Credit scores are not used in every country worldwide, so it can be difficult for international students to understand precisely what it means. Simply put, a credit score is a three-digit number that shows how likely you are to repay borrowed money. Credit scores are broken down into a range:

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A credit score is calculated based on payment history, credit usage, credit history length, new credit, and credit mix. These factors combined create a score that is used to help individuals get approved for loans and credit cards, qualify for lower interest rates, rent property, or even get a phone plan.

You won't have a credit score if you have never borrowed money in Canada. Let's discuss how to build credit in Canada.

Step-by-step: How international students can build credit in Canada

Here are some ways that you can build credit in Canada as an international student:

1. Open a bank account. This is your starting point for building credit in Canada. Lenders and credit card companies can't work with you without a bank account. You'll need a bank account to secure a personal loan, get your first credit card, and develop a line of credit.
2. Apply for a secured credit card or student credit card. Once you have a bank account in Canada, you'll be eligible to apply for a credit card. A secured credit card is ideal for students with no credit history. Your initial refundable deposit becomes your credit limit, and you can build on it safely over time. A student credit card is offered to full-time college or university students with no deposit required.
3. Pay all bills and loans on time. If you want a good credit score, you must pay your credit card bills and loan payments on time. Consistent late payments can cause your credit score to drop and affect your available credit with financial institutions.
4. Monitor your score with free services. It's important to keep track of your credit score to understand how your creditworthiness improves with time. It's also a good way to check for fraudulent activity. You can get a credit check from Credit Karma Canada or Borrowell to monitor your score over time.
5. Keep credit utilization low. This means only using a small portion of your available credit limit. Your credit utilization is calculated at your current balance divided by your credit limit, multiplied by 100. Keeping this number between 10-30% is typically good practice.

One way to keep credit utilization low is to pay off your credit card balance biweekly instead of monthly.

Do international students have a credit history in Canada?

Unfortunately, international students who have never borrowed money in Canada will not have a credit history in the country. Upon arrival in the country, you start from scratch. Some global banks (like HSBC or American Express) and platforms like Passage may recognize your history if you have a bank account with them in a foreign country, but this doesn't always give you a credit score; instead, it helps you to get started.

Each country has its own credit system with unique rules and scoring models. Canadian lenders need to know your creditworthiness based on their standards and data that meets their reporting methods. This can only be done by creating a credit report from Canadian financial institutions.

How a Canadian bank account helps international students start their financial journey

If you're planning on staying in Canada long-term, it's important to open a bank account early. Opening a bank account is the beginning of creating a line of credit. Through your bank, you can apply for a debit card, credit cards, and various loans that, if paid back responsibly, will boost your credit score.

Many banks in Canada offer student-friendly bank accounts with no fees. Here are a few great banks to consider when opening a bank account in Canada:

• Royal Bank of Canada: Students can open a bank account with no monthly fees, unlimited debit transactions, and no ATM fees at RBC machines.
• Toronto-Dominion Bank: Students under 23 or with proof of enrollment can open a bank account with no monthly fees and have protection from overdraft charges.
• Bank of Montreal: Get access to student credit cards and no monthly fees while you're in school.
• Scotiabank: Open a student bank account with no monthly fees, unlimited transactions, and access to special rewards programs.

Using a credit card to build credit as an international student

Using a credit card responsibly is one of the fastest ways to build credit in Canada. Making on-time payments, only using a small percentage of your available balance, and using the card consistently can help you build good credit.

Start by choosing the right credit card. There are specific cards for students with limited credit history that protect them from abusing their line of credit. Secured credit cards or student credit cards typically have lower limits and may require a security deposit.

Once you have you card, use it wisely. It's important to use it often, but for necessary transactions. Consider making small purchases that you can easily afford and pay off each month, such as groceries, gas, or streaming services. Make sure that you pay these bills off fully and on-time each month to avoid interest charges.

Remember, making timely payments is the most important factor in building a good credit score. 

Once you have demonstrated that you are responsible for paying off your card for 6-12 months, you can then ask for a higher credit limit. A higher limit with the same spending habits means that your credit utilization ratio will stay low, which will, in turn, boost your credit score.

What are student credit cards, and are they available to international students?

Student credit cards are tailored to young or new borrowers, such as international students. They offer a low limit and may require an up-front deposit. These cards are only available to individuals with a bank account and a study permit, and may even require income. These are great ways to start earning credit and prove your eligibility for bigger loans or credit amounts in the future.

Should you start with a secured credit card in Canada?

Secured credit cards are designed to help people with no credit history build credit with the bank, with no risk to the bank itself. They are called "secured" credit cards because the bank is protected by your deposit. This credit card requires you to make a refundable security deposit before you can use the card.

How it works is your deposit becomes your credit limit and you use the card just like a credit card. You have to pay your bill every month, and your deposit is not used unless you default. You won't get your deposit back until when you upgrade or close the card in good standing.

Your goal with a secured credit card is to build up enough credit to convert the card into an unsecured credit card with no credit limit.

How Passage helps international students build a credit score

Passage helps international students study in Canada by offering student loans and connecting them to approved education programs aligned with the country’s labor market needs.

These loans are provided with a fixed interest rate of 11.95%. Also, having a co-signer is not mandatory to get approved by Passage. If you're looking to study in Canada but aren't sure about how to financially support your education, check eligibility here!

Taking out a student loan with Passage helps international students build their credit score. Passage reports payments of each loan to the credit bureau in Canada, which then creates a credit score for the individual. Paying back a student loan with Passage can positively affect your credit score development if you pay it back on time and in full. 

FAQs

Can only permanent residents or citizens apply for credit cards?

No, you do not have to be a permanent resident or citizen to apply for a credit card.

Do you need a Social Security number (SSN) to apply for a credit card?

Most banks and financial institutions ask for Social Security number when applying for a credit card in Canada.

Do savings accounts help build credit?

No, savings accounts do not help to build credit. Credit scores are based on how you manage borrowed money, which savings accounts do not reflect.

How many missed payments will negatively affect my credit score?

Even one missed payment can negatively affect your credit score. A payment that is over 30 days late will be reported to a credit bureau, and your credit score will drop significantly.

What are credit bureaus?

Credit bureaus are companies that collect and store information about your credit history and financial behavior. They then use this information to create your credit report and credit score.

What does it mean to be an authorized user?

Being an authorized user on a credit card means that someone legally adds you to their credit card so that you can use their card. You aren't responsible for paying the bill directly; only the main account holder is responsible for paying the bill. If you can become an authorized user on someone's account (like a close friend, roommate, or sponsor), it's a great way to build a credit history without needing to apply on your own.

Should I use my credit card to pay off living expenses?

Only use a credit card to pay off living expenses if you know you can pay it off in full each month.