New Canadians a better credit risk: Report

Not surprising but interesting:

“There is a common misconception that providing credit to new immigrants is a risky move for financial institutions, but the fact is that immigrants have a 20 per cent lower delinquency (rate on credit cards) than the national average of the general population,” explains Regina Malina, senior director of decision insights at Equifax Canada.

In her latest report, she says lenders often approach new Canadians with caution, and wind up presenting these customers with a limited product selection for credit due to a lack of insight into their credit history and risk score.

As a result, limited credit options tend to push customers to seek credit with another institution because the initial options available to them may not meet their changing needs over time, the study found.

For example, many new immigrants end up closing their first Canadian credit cards or let them become inactive, and financial institutions are losing these customers to their competition, often within two years, notes Malina.

But 46 per cent of new immigrants with an inactive or closed credit card still need that product, and 71 per cent of them will turn to a new financial institution that offers a higher limit, says the data and analytics firm study.

Between 2006 and 2011, approximately 1.2 million people immigrated to Canada, primarily from China and India, and one of the first things newcomers do is apply for credit to secure housing, car loans and phones, she said.

“Institutions are competing hard for this key market, as nearly 80 per cent of new immigrants obtain their first financial product from one of five major Canadian banks,” she noted.

“With about 250,000 new immigrants arriving in Canada every year, financial institutions have a big opportunity to build long-term relationships with this growing customer base,” the report states.

New Canadians a better credit risk: Report | Toronto Star.