Immigrant credit visibility: Access to credit over time in Canada

Using data from the 2016 and 2019 Survey of Financial Security, this paper studies 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”). Typically, newcomers to Canada do not have a credit history in the country, and their history from their home country is not available. The study uses logistic regression to estimate the factors associated with credit invisibility, including demographic and financial characteristics and the number of years in Canada. This study found that newly landed immigrants who had been in Canada for less than two years were less visible (14.8%) than Canadian-born families (7.5%). The difference in visibility disappeared after the first two years; that is, immigrants quickly became visible, and, over time, immigrant families that had been in Canada for two to four years were actually 3.15 percentage points more visible than comparable Canadian-born families. Notably, the difference in visibility in the first two years also disappeared once financial and demographic characteristics were taken into account. However, much of new immigrants’ visibility was due to access to credit cards and not higher credit limit instruments such as mortgages, vehicle loans and student loans. Immigrants are generally eager to build credit and to obtain credit visibility, but they are often not able to access all credit products in a timely manner. New immigrants tend to quickly obtain a cell phone account and acquire a low-limit or secured credit card. This creates a credit file yet provides insufficient credit history. Thus, their ability to be approved for larger credit amounts for products such as an automobile loan or a mortgage remains impeded, as would be the case for a Canadian-born individual new to credit with only a cell phone or low-limit secured credit card. These larger credit products can have a significant impact on an immigrant’s daily life and ability to create wealth. To minimize credit invisibility and improve a newly landed immigrant’s ability to access credit, credit bureaus could capture data from new, non-traditional sources, such as rent, phone and utility payments, on these individuals that inform the Canadian credit scores of newly arrived immigrants and inform them earlier.