Can Low Credit History Cause Car Loan Rejection?
Can Low Credit History Cause Car Loan Rejection?
Posted on June 9, 2021
It’s customer question time again, this time from our Woodstock auto loan team. The question was ‘I just moved to Canada and was refused a credit card due to lack of credit history. Is this legit or just an excuse?’
As the Woodstock team fielded the question, we also asked them to put this post together.
Auto loan refusals
First, let’s tackle the easy part. Lenders can refuse a loan application for any reason they like. They are considering lending often large amounts of money to people they don’t know.
Understandably, they want to be careful when they do that.
Most lenders will provide completely reasonable grounds for refusing the auto loan. Unfortunately, not having a credit history is one of them.
New home, new credit history
When you move to a new country, you leave your old life behind. That also means leaving your credit history behind. Both TransUnion and Equifax are international organizations but your credit history is only relevant in the country you created it in.
If you move country, you have to start over. Which is where our client comes in.
We regularly work with people who haven’t used credit before or who are newcomers to Canada. In both situations, they don’t have a credit history which can make borrowing difficult.
It isn’t an insurmountable problem though.
Building a credit history
Building a credit history in a new country is actually very straightforward if you know how.
This is how.
Open a Canadian bank account
Your first step is to open a checking account here in Canada. That could be the Canadian branch of your existing bank or one of the national banks. They all have schemes for recent immigrants.
Once you have a bank account, you can begin building credit.
Get a credit card
Some of those banks will offer a credit card to accompany the bank account. If the terms are reasonable, take it. Otherwise, look at secured credit cards. These will require a cash deposit equal to the amount of the credit limit.
Use the credit card for everyday expenses and set up automatic payments to make sure you never miss one. Don’t depend on that minimum though. Aim to clear your credit card in full each month.
That way you minimize the interest you’ll pay while also building up a payment history.
Rent and utilities
If you’re renting a property in Canada, some commercial landlords will note payments on your credit report. Some utility companies do too.
Not all will, so look for landlords and utility companies that do and you’ll also receive a minor boost to your credit history.
Get a phone
Once you have a bank account and a permanent address you can get a phone. Some carriers won’t perform credit checks and will note payments in your credit report. Use one of these carriers, set up automatic payments for the bill and you have another monthly entry into your payment history.
Those are the easiest way to begin creating a credit history. When you’re ready to apply again for an auto loan in Woodstock, come see our team and we’ll be happy to help.
When you’re ready for a car lease or loan, get in touch with the Woodstock auto loan experts at Northway Ford for great deals on auto finance.
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