What is credit history and how it works Canada

Credit Bureaus: In Canada, there are two credit bureaus: Equifax and TransUnion. These bureaus collect information from banks and other financial institutions to create credit reports about your financial behavior.

Credit Report: Your credit report contains information about your credit accounts (i.e. debt), such as credit cards, loans etc, as well as your repayment history. It will include financial records like collections and bankruptcies.

Credit Score: Based on the information in your credit report, credit bureaus calculate your credit score. This score is a numerical representation of your creditworthiness and ranges from 300 to 900. A higher score indicates better creditworthiness however score above (approx.) 720 does not make much difference for the lender.

Factors which will affect your credit score.
Payment History: your track record of making payments on time, how good you are with your repayment and managing debt.
Credit Utilization: the amount of credit you're using compared to your available credit limits for example you spend 500 dollars on a credit card with a limit of 1000, the utilization ratio will be 50%.
Length of Credit History: how long you've had credit accounts open. The longer of course the better.
Types of Credit: the mix of credit accounts you have, such as credit cards, loans, credit lines, mortgages, leases, cell phone plans etc.
New Credit: recent applications for credit, which can indicate increased risk for the lender. The more applications you have in the short period of time the more likelihood the application would be denied.

You might have good credit history but bad score (however you cannot have bad credit history and good score). The reason for that is for example the utilization ratio, it should not be more than 30% on each revolving debt (like credit cards, lines of credit). Also if you go over the limit on your credit card it will negatively affect your score. If you applied for credit in the short period of time your score will drop and sometimes significantly.

Building Credit: If you're new to credit or have a limited credit history, you can build your credit by:

1.Getting a secured credit card: Requires a security deposit but can help establish a positive payment history. We can help you with that, even a person on a visitors’ visa in Canada can apply for a secured credit card. You can apply for a secured credit card online or connect with us 403-690-8622, contact@artemfinancial.ca. Please note, we get a small commission when you apply with us but it does not cost you anything regardless if you apply directly with the company or with us.

2.Buying a cell phone plan (typical cell phone plan is for 2 years)

Maintaining Good Credit: To maintain a good credit score, it's essential to pay your bills on time. Late payments can have a significant negative impact on your credit score including collections.
Keep credit card balances low: high credit card balances as mentioned above relative to your credit limits will lower your score. Try not to use more than 30% of the limit of your credit line or credit card.

Avoid opening too many new credit accounts in a short period of time (every 6 months is ok). It does not apply to bank accounts since they are not debt.
Big quantity of credit cards (including unused ones) per see does not affect your credit score and in many cases even improves it as long as your utilization ratio is below 30% on each card

Accessing Your Credit Report: you're entitled to get a free copy of your credit report from each bureau as many times as you would like. Please note, they are not required to provide your credit score for free.

Building and maintaining good credit history can open doors to better loan terms, lower interest rates. Also when you rent a place often your landlord wants to check your credit history.