It’s not just sloppy credit users who will be further marginalized. Canadians with a short credit history will be hit hard. This includes two vital populations of potential buyers – millennials and newly landed immigrants; the first constitutes one of the most important demographic demographics in Canada, the second is responsible for the demographic growth of the country, its diversity and much of its economic power. Both groups will be at a significant disadvantage when entering the market after July 1.
“Everyone has a story,” says Hansra, referring to CMHC’s assumption that a high Beacon score is the key factor in determining an individual’s creditworthiness. This is simply not true for immigrants. Someone who is new to the country and trying to settle down – new credit card, new apartment, new car – is inevitably going to be the subject of a high number of credit inquiries.
“Your credit score is going to go down because you have all of these credit demands, not necessarily because you have bad credit,” he says. “All of a sudden your score can go from 800 to 660. You’re not looking for credit, you’re just trying to settle in a new country. A policy change that impacts Canada’s immigrant community at a time when the world is debating the harms of institutional racism is a case study from a wrong perspective.
“A lot of the big lenders have programs for newcomers to Canada,” says Fabian. “Some of the rules and products are adjusted to reflect this, so there are opportunities and options for this population. TransUnion research suggests that new Canadians tend to perform as well or better than established Canadians. Many were experienced and responsible credit users overseas, but their credit scores, if that’s all we see, don’t tell that side of their story.
Thankfully, Fabian says consumers with Beacon scores below 680 can elevate them relatively easily by making their payments and monitoring their credit for any forgotten and lingering debt that might bog them down.