by Stephen Tustin | Oct 10, 2024

For newcomers and international students arriving in Canada, the current rate of inflation affects how much you pay for housing, groceries, transportation, and other expenses. Staying informed about inflation changes can help you budget and manage your finances. Stay up-to-date with recent changes so you can manage the cost of living in Canada.

The most recent Statistics Canada data (June 2024) shows the annual inflation rate fell from 2.9 percent in May to 2.7 percent in June. This rate drop is welcome news for immigrants who have recently arrived or will soon arrive.

Lower gasoline prices were the driving force behind the rate drop.

Durable goods (cars, home appliances, consumer electronics, furniture, sports gear, toys, etc.) fell by 1.8 percent, which also helped lower the rate.

More good news for newcomers is that cell phone services were down 12.8 percent in June compared with 19.4 percent in May. Canada has some of the highest mobile phone rates in the world.

Clothing and footwear prices also edged lower in June. Service prices rose 4.8 percent annually in June, compared with a 4.6 increase in May.

Newcomers can monitor inflation in Canada to help budget for costs.

“Shelter inflation,” or the costs involved in homebuying and renting, was still more than double the primary rate of inflation in June. Shelter prices in Canada increased by 6.2 percent over the last year and continue to be the primary cause of higher inflation.

While rent growth has slowed in recent months in Canada’s largest cities, Toronto and Vancouver, some popular rental markets, such as Alberta, continue to have rental price growth. Rent prices in Canada rose 9 percent in June compared to June 2023.

So, will the drop be enough to convince the Bank of Canada (BOC) to cut its key overnight lending rate gain?

The BOC lowered interest rates from 5 percent to 4.75 percent in June 2024. That cut was the first in four years, and the first time the rate fell below five percent since July 2023.

The Bank will meet on July 24 to discuss whether current economic conditions warrant further cuts.

Derek Holt, Vice President and Head of Capital Markets Economics for Scotiabank believes that “the BOC is still likely to cut” in July, which would be good news for immigrants.

The BOC has set a target of two percent inflation. Inflation hit a high of 8.1 percent in June 2022, just as the Canadian economy was recovering from the pandemic. The BOC hiked interest rates 10 times between March 2022 and the summer of 2023 to control inflation.

The BOC believes that making it more expensive for Canadians to borrow money forces consumers and businesses to spend less, thus lowering prices and slowing the economy.

The most recent employment report for June revealed that the Canadian economy lost 1,400 jobs. The unemployment rate increased to 6.4 percent, meaning 1.4 million people were unemployed in June, an increase of 42,000 from May.

According to the latest report from the IRCC, monthly immigration to Canada rose by 22 percent in April. It increased again by 9.3 percent in May, with 46,550 newcomers that month,

That puts the total number of new permanent residents arriving in the first five months of 2024 at 210,865.

The details of the report are consistent with the backdrop of consumers becoming increasingly cautious with discretionary spending.

Benjamin Reitzes, BMO economist

Inflation is a major concern for immigrants and international students who have arrived in Canada or are arriving soon. The cost of living in Canada affects many basic items and services essential to newcomers’ daily lives.

A June 2024 Abacus Data poll showed that the cost of living is the number one issue for Canadians.

Building a strong financial foundation is vital to your success. Join this webinar to start your banking journey in Canada on the right foot!

• Inflation affects immigrants and international students who buy essential items such as food, cell phone services, and rent housing.

• Inflation in Canada fell from 2.9 percent in May to 2.7 percent in June.

• Lower prices for gas and durable goods fuelled the drop in inflation while rent and mortgage interest costs continue to drive inflation in Canada.

• The June decrease in inflation may lead the BOC cut interest rates further.

• Inflation is the number one concern of Canadians.

• Continue to monitor the current inflation rate in Canada and the affects on rent prices.

• Be a smart shopper and research the best prices at Canadian companies and stores.

• Consider major purchases carefully.

• Follow the Bank of Canada interest rate cut decision on July 24.

SOURCES:

Scotiabank Economic Publications, Statistics Canada, IRCC

Steve Tustin is the Editor for Rentals for Newcomers and a contributing editor for Prepare for Canada. He is also the former managing editor of Storeys.com and a former senior editor at the Globe and Mail and the Toronto Star.

© Prepare for  2024

Read more about your financial first steps in Canada.

A lesson many newcomers learn when they arrive in Canada is that you need credit to pay for large expenses, buy a car, or purchase a home. However, it’s difficult to borrow without a credit history in Canada. 

Opening a bank account before you arrive in Canada offers many benefits including transferring funds before you travel to Canada. 

For newcomers and international students arriving in record numbers, it’s helpful to understand how the currect inflation rate in Canada can affect how much you pay for housing, groceries, transportation, and other expenses.

Protecting yourself and your family against unexpected danger and risk is what insurance in Canada is all about for newcomers to Canada and international students.

If you became a permanent resident and lived in Canada, even for a short period, filing your first income tax return with the Canada Revenue Agency (CRA) can provide financial benefits.

by Prepare For Canada | Oct 15, 2024

Getting a credit card when you arrive in Canada is a great way to build a credit history, but you must avoid making common mistakes. From spending more than your credit limit, to only paying the minimum monthly payment, these mistakes can damage your credit score and make it difficult to achieve your financial goals. Learn how to avoid these financial mistakes and what you can do to stay in good standing.

Credit card issuers make it easy for you to repay your balance by allowing you to make minimum monthly payments. Sometimes you may only afford to make the minimum monthly payment, but avoid making this a habit. When you only pay the minimum payment each month it increases the amount of time it takes to pay off your balance and you’ll pay much more interest. It also means that you will likely never pay off the full amount of your card.

A better approach is to pay the full balance. If that’s not possible, pay more than the minimum monthly payment to accrue less credit card interest and pay your debt faster.

Missing payments means that you will have to pay a late payment fee. And late payment fees can add up quickly. To avoid late payment fees, you can set up an automatic payment to your debit card. Remember, you should pay off the full balance each month. Falling behind in your payments can lead to higher credit card interest charges and your credit score will suffer. Meeting your monthly payments shows creditors that you manage your money well.

Building a strong financial foundation is vital to your success. Join this webinar to start your banking journey in Canada on the right foot!

If you don’t open your credit card billing statement, you risk missing your payment due date or paying less than you should be. Ignoring your statement could cause you to miss important announcements about changes to your credit card terms. Review the monthly transactions to ensure that there are no purchases that you did not make or approve. If there are any errors, contact the credit card company immediately to discuss the transaction.

Missing payments will also cause your credit score to decrease. Missed payments can remain on your credit report for up to six years.

If you lose your card, the first thing that you should do is report it to your financial institution. The longer it takes you to report a lost or stolen card, the greater the chance of fraudulent activities. Reporting a lost credit card quickly shows the bank that you are responsible.

This credit card mistake is important to avoid. As a newcomer, in your first few months, you will likely have some unexpected expenses you didn’t budget for. A credit card can be a short-term solution but you should never max out a card to its limit. When you max out your credit limit, it indicates to creditors that you are living beyond your means.

It’s better to spend less than 30% of your credit limit. This is known as the credit utilization ratio to assess how much credit you have versus how much you use. This ratio is also about 30% of your credit score calculation. Getting close to your credit limit puts you at risk for over-the-limit fees and penalty interest rates you’ll have to pay when you exceed your credit limit. Maintain a low balance on your card for a healthy credit score and manageable payment amount.

Avoiding these credit card mistakes will help you reduce financial stress, increase your credit score, and build credit history.

Read more about your financial first steps in Canada.

A lesson many newcomers learn when they arrive in Canada is that you need credit to pay for large expenses, buy a car, or purchase a home. However, it’s difficult to borrow without a credit history in Canada. 

Opening a bank account before you arrive in Canada offers many benefits including transferring funds before you travel to Canada. 

For newcomers and international students arriving in record numbers, it’s helpful to understand how the currect inflation rate in Canada can affect how much you pay for housing, groceries, transportation, and other expenses.

Protecting yourself and your family against unexpected danger and risk is what insurance in Canada is all about for newcomers to Canada and international students.

If you became a permanent resident and lived in Canada, even for a short period, filing your first income tax return with the Canada Revenue Agency (CRA) can provide financial benefits.

A lesson many newcomers learn when they arrive in Canada is that you need credit to pay for large expenses, buy a car, or purchase a home. However, it’s difficult to borrow without a credit history in Canada. Canadian lenders typically check each applicant’s credit files at one of the main credit reporting agencies (Equifax Canada and TransUnion). This file is like a financial report card that tracks how much you borrow and how quickly you pay it back, to calculate your credit rating and credit score.

Without a credit history, newcomers may need a loan co-signer with a Canadian credit rating, and considerable assets as collateral, or they must demonstrate a history of stable income in Canada to receive a loan. Fortunately, you can start to build your credit record and history shortly after you arrive in Canada.

Getting Started

The financial decisions you make when you arrive in Canada have a huge impact on your credit history and score. The concept of credit can sometimes lead to a debate about how it can help, or hurt you when you are building your credit rating. On one hand, credit can be a fantastic tool to help you:

• Get a loan or a mortgage

• Save on credit card and loan interest rates

• Get approval for lines of credit

• Obtain certain jobs (i.e. some finance-related roles will require a credit check as a condition of employment)

• Rent a home.

On the other hand, if poorly managed, credit can haunt you for many years, and make you miss out on financial opportunities. Creditors can run a credit check on you to assess if you are a low-risk or high-risk borrower. They will also decide to grant or deny you a loan or charge you a higher interest rate.

What is Credit History?

Your credit history shows lenders that you are responsible when repaying your financial obligations. Whether that is your monthly rent, utility bills, loans, etc. If you come from a country with credit bureaus, you know how important your credit history is. Maintaining a good credit history in Canada is also important.

We’ll share tips to help you build and maintain a healthy credit report. With a strong credit history, you can save money and have more financial freedom.

So what is your credit score when you come to Canada? Nothing. Think of it as a blank slate. Everything you do henceforth will dictate what direction your credit rating will go, up or down.

Your credit history or credit rating starts the first time you get a credit card or loan in your name from a Canadian bank. You can begin by applying for and using a credit card responsibly.

Even if you don’t have immediate plans to buy a house or vehicle, it’s good to establish a credit history, since banks may give special consideration to recent newcomers.

Newcomers may be eligible for a ‘secured’ credit card. A secured credit card is different than a regular credit card because it requires a security deposit equal to the amount of the credit limit. Think of it as a stepping stone to getting an unsecured credit card. Such special offers may be more difficult to obtain later, especially if your income does not grow as fast as you had hoped. A credit card is also useful for larger purchases and as a secondary piece of identification.

Why is Your Credit Score Important?

Your credit score is important for several reasons:

1. Lenders will review your credit score when you want a mortgage to buy a home, or a loan to buy a car. They want to understand your payment history, and your ability to manage credit and pay off debt.

2. Landlords will conduct a credit check before renting their property to you.

3. Some employers will conduct a credit check before they make a job offer. This is common in some roles at banks and other financial institutions such as insurance companies.

What Credit Score is Good?

Your credit score can fall between the range of 300 – 900. Generally, and depending on the credit score model that your financial institute is using a good score is greater than 680. As a benchmark, to get a mortgage to buy a house in Canada, you need a credit score between 600 – 700. If your credit score is lower than 600, you will want to take steps to increase your credit score.

Once you receive a credit card, use it wisely to establish a credit score so that lenders will have confidence in your ability to repay loans.

Your credit is scored on a point system that ranges from 300 – 900 points, where 900 is the best score. To qualify for a loan, your score should be 650 points or higher. If you score lower than 650, it can be difficult to get a loan or receive new credit. However, if you have a low credit score, you can improve your score by carefully managing your credit use.

How Much Credit Limit Should I Use?

If possible, avoid using more than 30% of your credit limit (balance-to-limit ratio). For example, if you have a credit limit of $1,000, you should try not to spend more than $300 and pay the bill in full by the due date.

Your credit score may decline if your balance-to-limit ratio exceeds 30% as it may indicate to creditors that you are a higher-risk borrower.

How Many Credit Cards Can I Have?

It’s best to start with only one until you are financially comfortable enough to afford more. Avoid opening many credit accounts. Many credit card accounts can signal financial distress to lenders, especially if they all carry a balance on them.

Why Credit History is Important to Rent a Home in Canada

Your credit history is one of the things landlords want to see before giving out their home to you. Your credit history will tell the landlord how reliably you pay debt. A good score and credit report in Canada will tell the landlord you are reliable and will likely pay your rent on time. This is important to landlords as it guides their decision about who to rent their home or avoid.

While this arrangement is great for landlords, it can be problematic for newcomers looking to rent a home. If you are a newcomer to Canada, you likely will not have a credit history. It takes a minimum of six months to build a credit history. Because of this, it can often be hard to convince a landlord that you will be a reliable tenant. However, there are some tips that you can follow to rent a home without a credit history.

How Do I Rent a Home Without a Credit History?

The first thing you can do is show proof to your future landlord that you have a good amount of savings in your bank account. This will tell the landlord that you have enough money to pay the rent and will pay it on time.

If you don’t have a good amount of savings, your top priority would probably be to secure a source of income. Once you have done that, you can show proof of income to your landlord. This will also satisfy landlords because it means that you have enough money coming in every month to pay the rent.

There is also another way to get a house on rent without a credit history. Some landlords openly accept newcomers and reserve their homes, especially for newcomers. These rentals may be small and less than ideal. However, they are a good option if you need a place to stay while you build your credit score. Many times, these rental homes have basic furniture like beds and sofas which makes it easier for newcomers to move into.

In the meantime, paying your bills on time and being reliable with all of your payments is a great way to show lenders that you are financially responsible. And over time, you will build a strong credit report in Canada that will provide many financial benefits.

How Do I Maintain a Good Credit History? Five Tips to Follow

1. Take Advantage of Your Fresh Start in Canada to Build a Good Credit History

Get a credit card or two, and use them, but use them sensibly. Pay off your balance each month and avoid going over your balance to show potential lenders your reliability.

Paying in full each month will also reduce the amount of interest you pay. And with the average credit card interest rate at approximately 19%, any balance on your credit card can become very expensive. But, if you don’t pay the balance in full each month, be aware of the interest rate charges.

If you can’t pay the full balance on your credit card, at least pay the minimum balance and make regular payments, to pay off debts as quickly as possible. But, avoid missing payments. Missing payments can damage your credit score and make it difficult to get a future loan such as a car loan, or mortgage.

Using your credit card for cash advances is even more expensive. Typically, the interest rate is higher and you pay interest from the date of the cash advance. There is no grace period like there is for a regular credit card purchase.

 2. Read the Small Print on Cancellation Fees and Penalties

On top of paying your monthly bills and loan installments on time, be careful when you sign up for services such as cable, telephone, internet, gym memberships, and other monthly subscriptions. Check the cancellation fees and deadlines when you sign up for such services. Otherwise, these fees can be high.

Be sure to ask questions about your contract if there is anything that you do not clearly understand.

3. Keep Track of Your Utility Changes

When you move, don’t forget to cancel or transfer your services and utilities to your new address. Sometimes final bills end up in collections out of sheer neglect, and from collections, they land on your credit report for the next six years. These are important details that can negatively affect your credit report in Canada. Always keep track when you make such changes, by recording the date, the names of the agents you speak to, and your case number. Or, if you are given a receipt, be sure to hang on to it to prove that you cancelled the service.

4. Negotiate a Payment Schedule with Creditors if You Hit a Rough Patch

If you hit a rough patch, such as an extended period of unemployment, do not be complacent about your credit. Call your creditors and negotiate your monthly payments. They will likely be willing to help you because sending outstanding accounts to collections would cost them more money. Cancel or suspend services you can do without, rather than have the bills rack up.

It’s wise to live within your financial means. As the saying goes, “It’s not how much you earn, it’s how much you spend.”

5. Use Services to Track Your Credit History and Maintain a Good Credit Report in Canada

Most banks including Scotiabank offer account holders this facility. Alternatively, use free services like Borrowell to monitor your credit. If you notice outstanding payments you have paid off on your report you should inform the reporting agency in writing so that this may be removed.  

What’s in Your Credit Report?

Credit reporting agencies such as Equifax and TransUnion record your credit history. Your credit report in Canada will contain information on your:

• Loans

• Credit accounts

• Bills (for example, outstanding cell phone bills can be listed on your credit report)

• Collections items (for example, if an outstanding debt is sent to a collections agency), and

• Legal items (for example, if a court order is issued against you for an outstanding debt).

Collections items stay on your credit report for six years, and legal items stay for ten years. So it’s essential to practice good financial habits that don’t jeopardize your credit rating.

Your credit history speaks volumes to lenders about what kind of risks they take when they agree to lend you money. It takes a long time to build a credit history. Yet, it’s easy to sabotage and takes even longer to rebuild.

So, can you live without credit? Yes. But, should you try to do without it? No. Because without credit, it will be difficult to improve your living standards, at the very least, not as quickly as you would like. And, when it comes to making major purchases such as buying your first home, a strong credit report in Canada is essential. When you manage how you use credit, you’ll remain in good financial standing and be able to secure credit to achieve your important dreams.

by Prepare For Canada | Oct 15, 2024

Financial stability is very important for anyone who has recently arrived in Canada. Even if you have a strong financial standing in your home country, you will need to establish yourself in Canada as well. Applying for a credit card is one of the first and most effective steps to build your credit and give yourself a buffer. 

Credit cards are convenient, they give you another payment option and they are important to establish your credit history. Paying off your credit card balance each month will help you build your credit score and help you qualify for larger loans and financial products in the future. This is important especially if you want to get a car loan or qualify for a mortgage. 

Applying for a credit card can seem overwhelming, especially if you are a newcomer to the country. You may not be familiar with the application process, the information you need, and if you will qualify. Here we will provide you with the information you need to apply for your first credit card in Canada. 

You will need the following information to apply for a credit card:

• Full legal name

• Date of birth

• Home address (in Canada)

• Phone number

• Email

• Employment status

• Annual income

Before you start applying for credit cards, note that applying will have an impact on your credit score. So, do not just start applying for a variety of cards to see which one accepts your application. You first need to assess your financial situation to better understand the type of card that will benefit you most. 

Ask yourself:

• What do you need the credit card for? (i.e. to pay bills, establish credit, use as an emergency fund)

• How do you plan to use it?

• Do you want to add a partner or family member on the card?

There are many different types of credit cards. They offer unique benefits. Depending on your situation and financial needs, these card features may make sense for you:

• Credit builders: If you have recently immigrated to Canada, lenders will consider you a credit builder. You can apply for cards that are specifically designed to help you build credit. If you have no credit or low credit you can apply for a secured credit card to start building up your finances. 

• Cash back: Get cash back on the purchases you make to help lower your monthly bill. Cash back percentages vary based on the card and lender. 

• Low interest: If you expect to carry a balance on your card from time to time, a low interest rate is a great option to minimize borrowing costs.

• Travel rewards: If you plan to travel back to your home country regularly, you can accumulate travel points that can help you save on travel costs. 

• Points cards: Earn points you can use to cash in at participating retailers. For example, AIR MILES and PC points.

Building a strong financial foundation is vital to your success. Join this webinar to start your banking journey in Canada on the right foot!

• Annual fees: Cards can start at $0 fees and range up to $100 per year or more. Many offer you the first year free.

• Late payment fees: Some cards charge a fee if you miss a payment or pay after the due date.  Late payments can also increase your interest rate. So make sure to pay on or before the due date.

• Foreign transaction fees: I you plan to use your credit card when you travel, be aware of the associated fees. 

• Income requirements: Your annual income will affect the cards you qualify for and your credit limit.

• Additional benefits offered: Many cards offer additional perks such as payment protection, travel insurance, roadside assistance, and an extended warranty. Look into all the benefits that you can use. 

• Ease of use: Getting a credit card from your current banking institution will make it easy to access your card online and connect it to your bank account. 

Once you have completed your research, now you can go ahead and fill out your credit card application. The most effective way to do this is online through the lender’s website. You can also apply over the phone and through the mail. 

If you applied online or over the phone, your application can be processed and approved in just a few minutes. Sometimes you will need to provide additional information to get approved. Once approved, you can expect to get your credit card in the mail in about five business days. 

You have a lot more options to consider than you think. Applying for the right credit card that matches your needs can help you solidify your financial situation.

For more information about your financial first steps in Canada, visit our banking in Canada resource page. Get the essential information you need to manage your finances in Canada!

Read more about your financial first steps in Canada.

A lesson many newcomers learn when they arrive in Canada is that you need credit to pay for large expenses, buy a car, or purchase a home. However, it’s difficult to borrow without a credit history in Canada. 

Opening a bank account before you arrive in Canada offers many benefits including transferring funds before you travel to Canada. 

For newcomers and international students arriving in record numbers, it’s helpful to understand how the currect inflation rate in Canada can affect how much you pay for housing, groceries, transportation, and other expenses.

Protecting yourself and your family against unexpected danger and risk is what insurance in Canada is all about for newcomers to Canada and international students.

If you became a permanent resident and lived in Canada, even for a short period, filing your first income tax return with the Canada Revenue Agency (CRA) can provide financial benefits.