Opening a bank account, getting a cellphone and finding a place to live are some of the many practical tasks involved in making the transition to life in a new country. For many newcomers to Canada who don’t have a credit history here yet, these usually commonplace undertakings could be laborious and stressful — and unnecessarily so.
With access to global credit histories, Canadian lenders can turn potential candidates into loyal clients. And they’re not the only ones who may find this information useful. Wendy Burton at TransUnion Canada explains how other lenders, service providers and even prospective employers can benefit by tapping into the global credit data community.
Great service from the get-go
Having completed an exhaustive process to obtain their visa and move to Canada, most newcomers still have many steps to take before they can start feeling settled. From finding work and a place to stay to setting up banking services, many of these steps involve providing a credit history that helps service providers and lenders make informed decisions about their relative financial risk.
In the past, this may have involved acquiring and verifying information from the applicant, large amounts of collateral or, to save time, treating them as ‘new to credit’ rather than a new to Canada client. But, as discussed in a previous blog, TransUnion Global Credit Connect - Powered by Nova is helping to change that. It’s a platform that enables newcomers to import their historical credit information and have their international credit reports and scores delivered to lenders and service providers, in a standardized format. The foreign credit score is mapped to a Canadian equivalent so that it can be consistently applied. All of this is, of course, only done with the consent of the consumer, when they order their own foreign credit information.
Here, we look at how access to global credit history can enhance how this important – and growing – market is served.
1. Home sweet home
Rental properties are currently in high demand and potential tenants may be unlikely to be considered if they are unable to supply adequate proof of their ability to make payments.
For newcomers to Canada, this means they might have to put up valuable assets as collateral or put down a hefty deposit, or both. The same goes for hydro companies and other utility providers, which may insist on large deposits to cover any potential risk. Having a guarantor can help, but all these alternatives are again time-consuming and not ideal when you’re looking to invest in your new home and quickly get settled.
And if an ‘invisible’ credit history is a barrier to renting property, you can imagine the difficulties that arise when it comes to applying for a mortgage. Given that 15% of first-time homebuyers are newcomers to Canada who have immigrated within the last decade1, mortgage lenders would be wise to access reliable information that can help them streamline the application and approval processes, and offer attractive terms to this growing market without taking on additional risk.
2. Banking needs
Regardless of their country of origin, reasons for immigrating, or strength of their Canadian support network, a large percentage of newcomers to Canada will need to open a bank account, as soon as possible. It makes sense that many may want access to credit, too.
Banks, credit unions and other similar institutions may well recognize the long-term value of these clients but how do they assess potential risk and determine suitable terms at the start of the relationship? With limited information, they may follow their most stringent risk management principles and policies, and treat the applicant as a thin-file customer.
With reliable information on an applicant’s past credit behaviour available in a standard format, lenders can make better decisions, faster, establishing trust from the start. By increasing loan and credit amounts and extending appropriate offers to these customers, they’re more likely to build customer loyalty over time, not to mention encouraging valuable referrals from their own personal networks.
For banks with a robust New-to-Canada strategy, access to this kind of data serves to strengthen the decisioning process—and its results. It also helps with ongoing portfolio management strategies, such as financial education programs and proactive credit limit increases.
3. Staying mobile and connected
Global credit histories aren’t limited to assisting with the ‘big’ things, like banking services and mortgages. They can also make it easier for newcomers to Canada to get access to vehicle financing, affordable mobile phone contracts, and access to home internet and cable services — all of which contribute to making life a lot easier by staying connected to family and friends, and leads to establishing a consumer’s own credit footprint in Canada.
4. Employment opportunities
It’s not only credit providers that can benefit from access to credit history. Potential employers (and employment screening agencies) often request this information as part of a routine background check, particularly for candidates applying for roles that involve high levels of trust, confidentiality and financial responsibility. Having access to this data on international job seekers can help make the screening process easier for everyone.
A gateway to financial inclusion
Having a credit history has numerous benefits to both newcomers and lenders. It means newcomers can make use of mainstream financial services providers rather than relying on more expensive ‘fringe’ providers. They can better access the services they need without having to undergo lengthy and burdensome approval processes, and get credit on terms that reflect their credit profile.
It also allows banks, credit unions, fintechs, auto finance providers and other lenders to deliver these critical services from the get-go—and build customer loyalty over time.