Credit: Access and availability in Canada among immigrants

Credit is a key element to modern economic life in Canada. For example, if a person wants to rent a car, a credit card is typically required. If a person wants to attend postsecondary school, they may require a student loan, or if they want to buy a house, they may need a mortgage.

Credit provides investment opportunities such as building home equity with a mortgage, increasing human capital by investing in an education with student loans, and accessing transportation to places of employment by buying a vehicle with an automobile loan.

Credit also provides a person consumption-smoothing opportunities for significant purchases, such as a washing machine or a computer for a child’s schooling, where the buyer can pay off the purchase over time.

Using data from the Survey of Financial Security (SFS), a new Statistics Canada study examines the extent to which immigrants to Canada have access to credit and whether they are credit invisible.

A person is credit invisible if they do not have a sufficient credit history for a credit reporting agency to be able to calculate a credit score or sufficient information to calculate the most accurate credit scores (in the credit industry, this is defined as a “thin file consumer”).

Immigrants face barriers when integrating into their new home country, and barriers to accessing the financial system can be considerable.

Based on data from the 2016 and 2019 SFS, the study found that about 1.1 million economic families, or 7.2% of economic families, were credit invisible. Approximately 26% of credit-invisible economic families were immigrants. Immigrant families that had been in Canada for less than two years were disproportionally credit invisible; their invisibility rate was 14.8% compared with 7.5% for Canadian-born people.

All immigrant families, regardless of years in Canada, were less likely than Canadian-born families to have lines of credit (other than home equity line of credit). This effect was particularly negative for newly landed immigrants, who were 30.6 percentage points less likely to have such credit.

The formal credit system can be particularly difficult to access for immigrants because it relies on a local credit history. However, existing evidence based on the SFS in Canada suggests wealth and debt characteristics are not different for most immigrant families over time compared with their Canadian-born counterparts, after accounting for age and education.

Although newly landed immigrant families were less visible than Canadian-born families overall, there were differences in other factors that may have affected credit visibility, such as income, assets, employment, language or province of residence.

To find out more about the extent to which immigrants are credit invisible, what characteristics mitigate or exacerbate credit invisibility, and how those relationships change for different credit products as immigrants build credit histories in Canada, read the full study: Immigrant credit visibility: Access to credit over time in Canada.