In order to purchase a home, you must have anestablished credit history.

Each time you pay a bill (for your credit card orfor a monthly service such as your telephone or electricity), you areestablishing a credit rating for yourself. A credit rating is a number or scorethat banks, mortgage companies, and other lending businesses use to assess yourlevel of financial responsibility.

Paying your bills on time every month, contributes tohaving a good credit rating. If you miss payments, or are often late makingyour payments, your credit rating is probably not as good, and money lendinginstitutions will consider this when you apply for a loan. Numerous factorscontribute to your overall credit score, such as outstanding debt, paymenthistory, severity and frequency of derogatory credit information, and theamount of credit you use compared to what you have available.

Also important is the length of your credit history. Formany immigrants, this only begins after entering Canada.

To begin to establish a credit history:

§  Open an individualsavings or chequing account in your name. From this account, your deposits,withdrawals, and transfers will demonstrate that you can handle moreefficiently and responsibly.

§  Applying for asmaller loan demonstrates responsibility, and will positively affect yourcredit rating over a longer term, once you demonstrate that you can make timelyand consistent payments.

§  Other forms ofcredit include department store and gasoline credit cards. These are generallyeasier to obtain than major credit cards and, if used responsibly, can alsoserve to enhance your credit rating.

§  In short, there isno quick way to establish credit. It is much better to go slowly and develop astrong credit record than to apply for too many credit cards or a loan that islarger than you can handle. Mortgages are long-term commitments, so appreciatethat lenders will need proof of longevity and consistency.

YourCredit Rating

Once you’ve begun establishing your credit history, itis a good idea, and your right as a consumer, to know exactly what your creditrating score is, even if you always pay your bills on time.

In Canada, Equifax Canada and TransUnion are the two majorcredit rating companies and will give you a copy of your credit history andoverall credit rating score, usually for a fee.  

(Source: Genworth Financial / http://www.genworth.ca/mi/eng/home_ownership/credit_history.html)