Why is your credit score important?

  • Your credit score is one tool that lenders use to determine if they will lend you money and at what rate and on what The better your rating the more money you can save.
  • Factors that affect your credit scores:
    1. Number of credit accounts;
    2. Age of credit accounts;
    3. Amount owed on all credit accounts;
    4. Total available credit limit;
    5. Ratio of credit balances total available credit limit;
    6. Number of credit debts opened in the last 12 months;
    7. Total debts;
    8. Promptness in paying bill;
    9. Negative factors such as collection accounts, bankruptcies, loan defaults, foreclosures, derogatory public records, consumer

How do I find out what my credit score is?

  • Credit scores are important because they are used to assist the lender when deciding on giving you a loan and how much interest they will Credit scores can change over time depending on how well you manage your financial obligation, how your credit history, and payment patterns change.
  • There are two main credit reporting agencies in Canada, TransUnion Canada and
  • You can order a free report on yourself from either of these (http://www.equifax.com/ecm/canada/EFXCreditReportRequestForm.pdf) or (http://www.transunion.ca)
  • You should check your credit score at least once a Make sure the information and credit reporting represent what is actually happening in your life. If there are discrepancies or mistakes contact Equifax and TransUnion as soon as possible. You will also have to contact the company reporting the credit.
  • Checking your credit score can also detect any identity theft and If you confirm either of these has occurred report them to the local Police Service immediately.

How do I make sure I have a good credit score?

  • The first thing you can do to build good credit is to open a credit card if you don’t have If you can’t qualify for a regular credit card, you can apply for a secured credit card where the issuing bank gives you a credit limit based on your current savings with them.
  • Pay your bills on
  • Keep your balances low and never use more than 50% of the
  • Try to not have too many inquiries on your credit at a
  • The lower your score the less access to capital you will
  • Don’t let a $200 cell phone bill dispute cause you to lose thousands of dollars on your next Keep your credit clean. Pay it, then
  • Avoid bankruptcies and foreclosures at all It automatically drops your credit score and will remain on your credit report for 7 years from the completion date.
  • It can take months and years to fix credit
  • Defaulting on a loan will negatively impact your
  • Your payment history will impact your Did you make your payments on time? Did you miss payments?
  • Your Credit management will impact your Have you been bankrupt, have you had a collection, have you been in a credit repayment plan?
  • Your current debts will impact your What is the total availability to debt? What are your limits and how much of it are you using? Are you maxed out or almost maxed out?
  • How old your credit history is will impact your If you only have a short amount of history, there is not enough information so you will have a lower score.
  • The number of inquiries on your credit report will have a small impact your credit There is less impact if you are shopping for credit on the same item at approximately the same time (i.e.. Different car dealerships to buy a car, different banks for a mortgage.) If you shop for many different types of credit throughout the year this will have a negative impact.
  • The type of credit you have or are looking for will impact your What type of loans do you have?
  • Don’t close old credit cards, losing that history will shorten your average credit age and cause your credit score to The length of time you’ve had credit established with each creditor is important, even if the account is inactive or not used.

How do I fix bad credit?

  • Identify the things on your credit report that are having a negative impact on your
  • Pay your bills on
  • Set up notifications in your calendar to remind you when you have to pay certain
  • Call your creditors and ask them to remove old late or missed payments from your credit
  • If you have cards you no longer use cancel them, but if you have had the account for a long time the history might be helping your credit score.
  • The higher utilization of your credit balances the harder it is on your credit
  • Try to use less than 50% of your
  • Definitely do no exceed the credit limit amount, even if you are paying it off each
  • If you have high balances stay focused on paying down your
  • Make sure you settle any accounts that are in dispute, don’t let a small balances wreck your
  • Think twice about getting a new credit
  • Take your time and make sure you get a credit card that works right for you both short term and long
  • Some financial institutions see departments store cards less favorably than a VISA or
  • Going through divorce, be very careful and watchful of your credit and how things are managed so you don’t end up in a bad credit
  • Joint cards between both husband and wife, sometimes the credit card firm will only report on one of the card holders, not helping to build the credit of the other partner.
  • Always have some extra cash in reserve to cover your monthly
  • If there is a collection or a bankruptcy, they stay on your record for seven
  • When the seven years is up it is up to you to get it removed!!
  • To re-establish your credit it can take an additional two years of good
  • Best way to manage your debts is by creating and following a monthly
  • Controlling your debt is not an easy thing to do, if you can’t control the spending then cash maybe a better way to
  • If possible try to get multiple types of credit rather than just Having one installment loan and one revolving credit account is better than two revolving credit accounts.
  • After bankruptcy or collections, you need to take action to re-establish your Some lenders will require 2 years of two types of credit of at least $2,500.

Tips on Credit Cards

  • Make sure you read the contract and understand the terms and
  • Too much credit will damage your credit rating
  • Every month carefully go through your credit card

Comparing Credit Cards

  • Make sure you include the annual fee in the cost of
  • Larger balances will have a greater value of going to a lower rate
  • Take the time to read the application and/or agreement carefully to understand the terms of the contract
  • Are there different rates for different transactions?
  • Can you transfer balances?
  • How long do the low rates apply?
  • What will the interest rate be at the end of the introduction rate?
  • Look to see if fees or interest rates change if you miss a
  • Understand the minimum balance amounts and what making that minimum payment means to how long it will take to pay off your
  • If you carry a balance on your credit card you may not be getting value for your

Interest Rates on credit cards

  • If you pay the full balance each month and don’t perform any cash advances you will not have to pay any
  • If you carry a balance past the payment date and/or you take cash advances on your credit card then interest charges will
  • You can always call a credit card company and negotiate a better rate or
  • BE aware of low introductory interest rates on new

How do Lenders make lending decisions?

  • There are 5 C’s of credit that are used as the basic lending parameters: Character 2. Capacity 3. Collateral 4. Capital 5. Credit.
  • CHARACTER: is the client willing and do they have a history of repaying loans on time?
  • CAPACITY: your ability to generate enough cash-flow to meet all loan and credit
  • COLLATERAL: what amount is the equity portion of the financing e. the down payment?
  • CAPITAL: what kind of reserve fund savings (or other credit lines) does the client have that can be used if necessary as a safety valve?
  • CREDIT: what’s the accumulated experience of the client’s habits in repaying credit?

Tips on dealing with Debt Collectors

  • A Debt Collector can be the credit card company itself, or they may contract the collection of the debt to a third
  • Being in collection will have a negative impact on your credit, try to pay it off as soon as Make arrangements with the credit card
  • When repaying debts make sure you do not pay cash and you get receipts and confirmation of
  • If you believe there is an error gather the information you have on the debt and make arrangements to correct as soon as Doing nothing hurts you more than the credit company.
  • Debt collectors are not allowed to contact friends, employer, relatives, neighbours for any information (other than phone number and address).
  • Debt collectors are not allowed to use threatening, intimidating or abusive language, contact you on holidays, before 7 am and after 9

Managing Debt

The strategies below are used by many, however, you must understand that these will have a negative impact on your credit!

  • Credit Counselling can assist you on making budgets and sticking to
  • Credit Counselling can assist you how to use credit
  • Credit Counselling will also assist you in repairing your credit
  • Credit Counsellors will work directly with everyone you have debts with and develop a plan for you to
  • In some cases your creditors will reduce or eliminate the interest rates and or penalties on your debts to assist in correcting the
  • It is important to know that not all debts are covered in these programs, including secured debts like mortgages and vehicle
  • While you are working on a debt management plan you will not have access to any
  • This arrangement will show your credit reports for 2 to 3 years after
  • Make sure you select a reputable and qualified credit
  • Make sure you know the cost of the service and how the fees are

Making a budget

  • A budget is a written document that assists you in managing your income and
  • A budget will help you better understand where you are spending money, where you can save money, reduce expenses, and help you pay off debts
  • Track your income and Collect pay stubs, receipts, bank statements, credit card statements, any other debts or investments you may have.
  • List out all the monthly income amounts and all the expenses that you have on a monthly
  • Track it for a month recording where every dollar has Did you miss anything?
  • By using information you have collected in the past you can start to build a picture of how you want to spend your money in the
  • It is important to consider what your financial goals are and how you are going to achieve them by mapping it out in your
  • Adjust your expenses to ensure that you are saving something each Ideally you should be saving a minimum of 10% of your gross income.
  • Keep track every month and record what you budgeted, what you actually spent and continue to make revisions so improve your
  • Click on the Monthly Budget tab at the bottom of this page to see what your current monthly budget looks

How to pay down debts

  • Have a good
  • Learn to stick to the
  • Make sure you have the right Put your needs before your wants.
  • Avoid using debt to fix your cash flow Buy when you have the money, not buy now pay later.
  • Find ways to reduce small Just by taking out a coffee a day out of your spending can save you hundreds a year.
  • Watch what you are spending in banking
  • Talk to professionals about how to manage debt payments or to consolidate

Buying a home

  • There are lots of costs associated with buying a home and it is important to understand those costs prior to getting into a
  • There are one-time expenses which include: down payment, legal fees, deposits, real estate fees, closing costs, land transfer taxes, home inspection, appraisals, insurance premiums, moving….
  • There are ongoing expenses which include: mortgage payments, property taxes, utilities, insurance, telephone, internet, condo fees, maintenance costs….

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