Navigating Canada’s financial system as a newcomer can be challenging, particularly without a Canadian credit score. Without this history, accessing basic financial tools like credit cards, car loans, or even apartment rentals can be an uphill battle. However, Equifax is introducing a new program that could help. Starting this week, Equifax’s Global Consumer Credit File (GCCF) will allow newcomers to transfer their credit scores from their home countries, making it easier for them to access financial services in Canada.

How the Program Works

For many newcomers, building a Canadian credit score has been a frustrating “chicken-and-egg” problem. They need credit to build a score, but without a score, they can’t qualify for credit. Through the GCCF, Equifax aims to bridge this gap by allowing lenders in Canada to view an individual’s international credit score. Equifax will convert this score into a Canadian-equivalent score, allowing local lenders to assess newcomers’ creditworthiness without requiring them to start from scratch.

Why This Matters for New Canadians

Having a credit score upon arrival could be a game-changer for immigrants looking to establish a life in Canada. Without Canadian credit history, newcomers often end up relying on high-interest payday loans or “subprime” lenders with less favorable terms, putting them at a financial disadvantage from the outset. With access to their foreign credit scores, these individuals might be able to secure credit cards, auto loans, or even mortgages at better interest rates.

Sue Hutchison, President of Equifax, emphasizes that credit is essential for newcomers to settle and participate in Canada’s economy. She points out that access to credit affects even basic needs like securing a mobile phone plan or finding a place to live. Equifax’s initiative could make it easier for newcomers to begin their financial journey with fewer obstacles.

Key Markets and Global Reach

With India accounting for over a quarter of Canada’s new residents in 2022, it’s one of the program’s primary markets. But the GCCF will extend to cover credit data from other countries as well, including Brazil and the Philippines. Newcomers from any of these 19 countries where Equifax operates will be able to bring their credit history along, helping them access credit in a secure, verified way.

The Potential Benefits — And Risks — of Translated Credit Scores

For many newcomers, the GCCF could be a lifeline. Licensed insolvency trustee Richard Goldhar notes that newcomers are often stuck with high-interest loans because they lack Canadian credit history. Access to a more favorable credit score could help individuals avoid predatory payday loans and start off on more stable financial ground.

However, experts have raised some concerns about translating credit scores from one system to another. Doug Hoyes, co-founder of Hoyes, Michalos & Associates, points out that the Canadian credit reporting system already has accuracy issues, and bringing foreign data into the mix could lead to even more errors. He warns that if newcomers have trouble disputing these errors, it could create significant financial hardships rather than solve them. Hoyes worries that unresolved errors could become a barrier for newcomers, impacting their ability to build a secure financial foundation.

Equifax’s Commitment to Security and Accuracy

Despite these concerns, Equifax assures that they are well-prepared to handle these cross-border credit score conversions accurately. Hutchison says Equifax processes vast amounts of data every month and has robust safeguards in place to ensure accuracy. She emphasizes that this initiative is about creating financial opportunities for newcomers, giving them a fair chance to build a stable life in Canada and contribute to the economy.

What This Means for the Future of Financial Inclusion in Canada

Equifax’s GCCF could set a precedent for making Canada’s financial system more inclusive for newcomers. This program may open up access to financial services, allowing newcomers to skip some of the frustrating delays they’ve traditionally faced. While there are still questions to answer, the GCCF has the potential to provide newcomers with the financial tools they need to succeed, faster than ever before.

With this new program, Equifax is helping newcomers step into Canada’s economy with a stronger financial foundation, making it easier for them to achieve their goals and establish their place in Canadian society.