The Real Estate and Mortgage Show - March 16
Steve and Frank are joined this week by Erin Peck and Sara Orr of the Paul Rushforth team. This week, the team discusses good versus bad debt, and keeping your credit score in line.
On this week's Real Estate and Mortgage Show, the group addresses what seems to be an ongoing debate when it comes to Canadians' finances - good versus bad debt.
The federal government's upcoming budget has many wondering if Jim Flaherty will once again move to tighten mortgage regulations, despite the fact that regulations that were set in motion in 2012 have already had a significant impact. The percentage of total Canadian mortgages in arrears continues to sit at an all-time low, which is one sign that Canadians are borrowing for mortgages responsibly and have sufficient income to service these debts.
What seems to be the issue for many Canadians is high-interest debt. One example that was talked about this week was a consumer with a good credit score who could potentially obtain several credit cards from different retail stores, all with high limits. These cards tend to come with higher interest rates than a card obtained through a financial institution, and incentive to use the card is high as well. This can lead to a dangerous cycle of "spending to save", and amassing more and more debt. The potential inability to service these high interest debts can also lead to credit issues. Frank reminds listeners that missing just one payment, regardless of the amount, can have a marked impact on your credit score. Some tips to keep in mind to keep a clean credit report:
- Limit the number of credit cards you obtain, and keep the balances on these cards ideally to less than 50% of the credit limit.
- Always make payments in full, and on time. Do not estimate what you believe your payment to be.
- If you have a card you do not use that has an annual fee, consider cancelling the card. If it is a card you rarely or never use, the potential to forget to pay the annual fee rises, which can dent your credit rating.
- Take advantage of email reminders or automatic payments to ensure all bills are paid in full and on time
- Don't forget to check your credit report at least once each year for potential errors, and to see where you stand.