Best way to build credit

[shelleyd]

My family and I just moved to Canada. My husband is from here but hasn't lived here since 2001. So there is nothing recent on his credit report except for a loan he defaulted on aboug 5 years ago. I have no credit here. We would like to improve our credit and I'm looking for ideas as to the best way to do this. Should we try to get a credit card and charge a small amount each month and pay it off? We are considering getting a small car loan (if we can even qualify) to help build our credit even though we are able to buy a car outright. Advice? Basically we want to improve our credit here so that in about ten years we can qualify for a mortgage.

TIA

[leigh09]

my mom told me one of the best ways to do this is to charge all your gas (or other small, stable monthly amount such as groceries) on your credit card and pay it off in full every month. ensure your credit card will charge you no interest at all for this, some charge you interest from the date of sale.

if you get a car loan when you can afford to pay it outright, you will be paying unnecessary interest. if you pay a credit card off in full monthly, you won't be paying any interest ... this will save you monthly.

if your goal is a mortgage in ten years, this should build your credit sufficiently.

i am also in canada, be aware the rules for mortgage borrowing have changed recently and the minimum down payment required has increased. you may want to start saving!

[sanguine_speed]

Originally Posted by leigh09

i am also in canada, be aware the rules for mortgage borrowing have changed recently and the minimum down payment required has increased. !

This is not true. The rules have only changed for investment properties, i.e. not your primary residence. The only other change besides for investment properties is that you can only borrow against 90% of your home's equity. But this doesn't change the 5% down minimum for primary residence properties.

[sanguine_speed]

You should have little trouble getting a bank credit card with a low credit limit. Once you have one Visa or Mastercard, you could easily open a department store credit card. You could use these two regularly, paying in full each month. You could earn a good credit score while also saving money (lots of dept stores offer a discount if you use their credit card, even if you pay the card off before paying interest).
You can obtain a free copy of your credit report from the credit reporting agencies. The two major agencies in Canada are TransUnion and Equifax. The reports do not contain your score, however. If you ever want to know your score, you have to pay, and you can do this online.

From what I've heard around, it seems some places in the US rely on bill payments for credit reporting? I could be way off here. But I wanted to emphasize that you do NOT earn credit here by paying your regular bills on time. Late payments on utilities do not show up on your credit unless they're grossly overdue and sold to collections (months and months), but on the other hand, on-time payments do not help your credit score as they are not reported either--with the exception of some cell phone companies.