Credit

What is credit?

- Credit is a way of borrowing money.

- When you repay the money, you pay the lender (such as a bank) principal and interest.

- The principal is the original amount you borrowed, and the interest is a charge that compensates the lender for using their money.

Credit history

- In Canada, your credit history contains facts gathered from financial institutions, retailers and lenders about how you have handled credit in the past.

- Most of this information stays in your credit file for seven years.

Credit score

- Canada’s central credit bureaus use your credit history to give you a credit score (or credit rating), a number that reflects how well you have borrowed and repaid money.

- Lenders look at your credit score to decide whether to lend you money (and how much).

- The higher the score, the better!

Why is a good credit score important?

- A good credit score helps you qualify for loans and lower interest rates when you borrow.

- This will help you buy a car, get a mortgage, pay for school, qualify for lower-rate credit cards and more.

- Having a good credit score can even help you save money on your cell phone plan.

Credit Cards

- A credit card is a payment card issued by a bank or financial institution.

- It is usually a plastic or metal card with a microchip or magnetic strip.

- A credit card allows users to make purchases on credit.

- So, you can purchase items or services using money borrowed from the bank and pay it back later.

- A credit card is not free money.

- When you get a credit card, you sign a legal contract promising to repay the funds you borrow.

- If you don’t pay your credit card bill in full and on time, you’ll have to pay interest on the borrowed amount in addition to the initial sum you owe. Interest rates on credit cards can be quite high compared to other forms of borrowing.

Why do newcomers need a credit card in Canada?

- Canada is a credit-based economy, and most Canadians use credit cards instead of cash or debit cards to make purchases. As a newcomer, getting a credit card is a great way to start building your credit history in Canada, by paying your bills on time.