Using your Credit Card Responsibly

How to use a credit card responsibly?

Contents

Tips when using your credit card

When you use your card, you are borrowing money that you have to pay back. It does not increase the amount of money you have available. Your credit spending should fit within your regular household budget.

If you don’t use the facility wisely, you may end up:

  • building up debt
  • paying interest
  • hurting your credit score

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Aim to pay off your credit card balance in full every month

The money you owe  is called your balance. Try to pay it off in full by the due date each month. If you don’t pay your balance by the due date, you’ll pay interest from the date you made the purchase. The interest you pay will increase the cost of everything you buy with your credit card.

Paying your balance in full each month shows lenders that you are a responsible borrower. Regularly making late payments or missing payments entirely, will hurt your credit score.

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Pay at least the minimum amount you owe on your credit card

If you can’t pay your balance in full, always aim to pay at least the minimum amount you owe.

If you don’t pay at least the minimum payment, you risk:

  • your interest rate increasing
  • negatively affecting your credit score
  • losing the benefit of any promotional rate offer you have
  • your financial institution cancelling your card
  • your  balance insurance being cancelled by your credit card provider

Regularly check your credit card statement for errors

Carefully review your monthly credit card statement to make sure that there are no errors.

When you check your  statement online, purchases will usually appear after a few days. Keep receipts of all your  purchases so that you can check the amounts against your statement.

If you find an error, report it right away. Contact your bank or other financial institution that issued you the credit card.

Keep your personal information confidential

Keep the following information confidential:

  • your card
  • the personal identification number (PIN)
  • your password for online transactions
  • the card security code, also known as the CVV number located on the back of the car

If you share your PIN or card security code, you may be held financially responsible for unauthorized transactions.

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Warning signs that you’re overspending

If one or more of the situations below apply to you, you may be living beyond your means:

  • your balance keeps growing
  • you’re using all of your available credit
  • you carry a credit card balance from month to month
  • not making a payment or only making the minimum payment on your bill
  • you take out cash advances with your credit card

If you often find yourself in one of these situations, do the following:

  • stop using your credit card, if possible
  • avoid applying for a new card because you’ve reached your credit limit on other cards
  • look at your budget for ways to trim spending
  • if you have to use credit, consider other less expensive credit options

You may be overspending if your balance keeps growing or you’re using all of your available credit.

Learn more about making a budget to control spending.

Consider getting help if you’re having trouble making payments or you have to use your card to pay bills.

Consider other credit options

You should look for other ways to borrow money that cost less in interest if you’re having trouble paying off your lending facility.

Other credit options that may have lower interest rates than standard options include:

Article From: Financial Consumer Agency of Canada

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Credit Report – Understood

What to look for on your Credit Report?

While reviewing a Credit Report, a lot of the information could look abstract and very difficult to understand. It is quite common for consumers to either willfully or by lack of knowledge, ignore many key details on the report. Lenders use codes to send information to the credit bureaus about how and when you make payments.

These codes have two parts:

  • a letter shows the type of credit you’re using
  • a number shows how good your payment history is

You may see different codes on your credit report depending on how you make your payments for each account

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Breaking down Letters on the Credit Report

The Letters Used

There are typically 4 types of credit and 4 letter codes to specify each one of them:

  1. Revolving or Recurring Credit (R): In this case the creditor allows you an amount of money that you can use on an ongoing basis. As a consumer, you use an amount and after you pay that amount, you can use it again. Use-Pay-Use-Pay. It revolves. There is no term. A minimum payment would be required on the due date. A good example would be a credit card or a line of credit.
  2. Installment Credit (I): Here, you would be granted a certain amount for a fixed period of time – along with a predetermined payment that comes from a predetermined interest rate. Once the loan is payed off, you would need to apply again to have access to that same amount again. A good example would be getting car financing or a bad credit car loan. 
  3. Mortgage Loan (M): This is also defined as installment credit in some cases. It refers to a mortgage that the creditor is granting for the purchase of a home. In this case, terms are defined differently. You have a total amortization period, and a number of terms within that. Essentially, if you have a 5 year term & 20 year amortization – your payment is calculated for the first 5 years and renegotiated for the next 5 year period.
  4. Other or Open Status Credit (O): The money is borrowed when needed. An example could be telephone bills or utility bills, overdraft etc.
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Breaking down the Numbers on the Credit Report

 

0
  • Too new to rate
  • Approved, but not yet used
1
  • Paid within 30 days of billing
  • Pays as agreed
2
  • Late payment: 31 to 59 days late
3
  • Late payment: 60 to 89 days late
4
  • Late payment: 90 to 119 days late
5
  • Late payment: more than 120 days late, but not yet rated “9”
6
  • This code isn’t used
7
  • Making regular payments using one of the following debt management options:
    • a consolidation order
    • orderly payment of debts
    • consumer proposal
    • debt management program with a credit counselling agency
8
  • Repossession
9
  • Written off as a “bad debt”
  • Sent to collection agency
  • Bankruptcy

It is very important to understand that when a lender determines a late status, it is always in reference to your payment due date. In order for an account to be R2 or I2 the consumer must not have made a payment 31 days from the due date. 

For example:

  • If you have a credit card account that you paid on time, it’ll be reported as “R1”
  • Should you have a line of credit, and you missed a payment by 45 days, it’ll be reported as “O2”
  • If you have credit card debt and you’re being contacted by a collection agency for payment, it’ll be reported as “R9”

The best rating is 1. Any number higher than 1 will likely hurt your credit score.

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Financial information on your credit report

Your credit report may contain the following financial information:

  • non-sufficient funds payments, or bad cheques
  • chequing and savings accounts closed “for cause” due to money owing or fraud committed
  • credit you use, including credit cards, retail or store cards, lines of credit and loans
  • bankruptcy or a court decision against you that relates to credit
  • debts sent to collection agencies
  • inquiries from lenders and others who have requested your credit report in the past three years
  • registered items, such as a lien on a car that allows the lender to seize it if you don’t make payments
  • remarks, including consumer statements, fraud alerts and identity verification alerts

Your credit report contains factual information about your credit cards and loans, such as:

  • when you opened your account
  • how much you owe
  • Whether you made your payments on time
  • if you missed payments
  • Whether your debt has been transferred to a collection agency
  • if you went over your credit limit
  • personal information that’s available in public records, such as a bankruptcy

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Used Car Finance Guide

Used Car Finance Guide

If you are looking at purchasing a vehicle, it might be tough to decide on some big questions. Is it a good idea to lease? If you buy, is used better than new? What’s the best way to finance a used car?

New Vs. Used

Because of the rising cost of new cars & the massive margins that the dealers charge, it might make a lot more sense to you to buy & finance a used car – getting a much more affordable price. Especially since you can get a monthly payment that meets your budgeting needs – something much easier to do with a cheaper used car. Also, it’s important to recognize that a new car depreciates much faster than a used one.

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How to Finance a Used Car?

The number one factor in getting an approval for used car financing is your credit score, credit report & credit history. Of course, the higher the credit score, the easier the approval – since your past has shown lenders that you have the capability of paying. However, luckily, a low credit score does not necessarily mean the end of the world. We offer a lot of options for all types of credit, as do many lenders in order to facilitate used car finance.

A good rule of thumb for financing a used car is putting down 20% of the value of the car & trying to get an approval that hits what you think you can afford. A good basic rate might be getting a long enough term to hit around 15% of your operating income. However, keep in mind, that this might not work for everyone since all financing needs differ.

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With Bad Credit

How to finance a used car with bad credit? Though it might seem like getting used car financing is tough, there are options for all types of credit. Even those with previous credit troubles can qualify for used car finance under our programs! You just need to have an open mind, put in an application, and have enough income to afford your car.

Try to use the same rules that we outlined above – but keep an open mind and remember that they might need a slightly higher down payment or payment because of previous credit troubles.

Keep in mind also, that used car finance is arguably the best way to rebuild your credit. As we mention in other articles, car loans qualify as installment types of credit. These represent to lenders and credit bureaus that you are committed to making monthly payments on a high value item. As such, because of the relative “difficulty” & trust associated with such a loan, good performance sets you up for a much easier time in the future!

Used Car Finance is also a great option since used cars are relatively cheap. This makes them a very affordable option for everyone, and a very good bang for your buck in both building your credit and getting functionality out of it.

Car Loan After Bankruptcy

How to finance a used car after bankruptcy? Bankruptcy is a tough ordeal and it can leave many lenders thinking that you shouldn’t qualify for used car finance. Luckily, there are a lot of us that disagree! We believe that you deserve a second chance, and that you just need the opportunity to rebuild your credit.

Here as well, make sure to try for financing that makes you feel comfortable, but again, keep an open mind about the down payment especially since it can vary a lot for used car finance.

We recognize that bankruptcies occur because of a variety of factors: divorce, business failure… However, now that you have the opportunity for a fresh start, you need to make sure that you keep up with your payments & demonstrate to lender that you are not as big of a risk as your history shows. And, as we just said, used car finance & installment type loans are how to accomplish just that.

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New to Canada/New to Credit

Being new to Canada or just starting out your credit journey can be tough, but there are also programs set up specifically for you. Used Car Finance & Installment credit in general is the best to build your type of credit especially. It shows lenders that your first ever dalliance with them comes from a place of strength and can catapult the level of trust as soon as your next transaction.

How to get the Best Rate for used Car Finance?

If you meet any of the above categories, you are going to need to build your credit up first before getting the best rates. That is not to say that with any of these categories you won’t get great financing, it will depend on your income, down payment, the content of your history & not just you credit score. If you do have good credit, then great – any of the below options will be able to check multiple lenders for you to try and get the best option for you.

Used Car Finance Options

Traditional Used Car Financing

Borrowing the money to buy a used car can be a difficult process and it is important that you understand your options for used car finance:

There are ​three different ways you can get a loan:

  • Direct, online used car finance
  • A loan that a Used Car Dealer arranges for you and on your behalf.
  • You could also arrange used car finance directly from a financial institution​ that you as a consumer have direct dealing with. Your own Financing Institution could consider either traditional used car finance or a line of credit

Online Used Car Finance

It is quite common for consumers to find websites for companies that specialize in financing for certain types of clients. Our website, for example, is set up for all types of credit: bad credit car loans, good credit car loans, and everything in between. If you apply, we can process your application & approve you for a certain vehicle. Once that’s done, you’re all set!

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Arranging for used car finance through the dealer.

Arranging for used car finance with your car dealer is usually the easiest way in most cases. Most dealers will make loan arrangements for you with a lender. Car Dealers might be signed up with major banks, credit unions or private lenders and can make the application process very easy. You can apply for and receive a loan directly through  the dealership. These car dealers have this relationship through the dealer financing centers that each lender or bank has. The banks have these Financing Centers working and dedicated only for the dealers. As a consumer you have the benefit of receiving lower interest rates compared to the option of getting the loan from your own bank. In the meantime your Car Dealer will have a competitive edge considering that all the banks will offer competitive programs through the Car Dealer in order to gain business.

Your Car Dealer can arrange the financing for you through:​

  • a Manufacturing Financing Department (Example: Ford has a division that could act as a lender in providing funds)
  • a financial institution, such as a bank or credit union
  • an independent finance company, such as one that specializes in providing used car finance

Loans or lines of credit from a financial institution

You may be able to get a loan or line of credit through your financial institution rather than getting a loan from a dealer.

If you have a strong relationship with your financial institution (for example, you have a bank account, mortgage and/or a credit card that are in good standing), you may be able to negotiate a better interest rate on a loan or line of credit than you could through a dealer. In most cases the banks would offer better rates if you have a Home Equity Line of Credit (HELOC)

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Car Leases

The best way to understand Leasing is to consider it as a long-term rental. When you lease a car, you make regular payments for the use of the car over a set period of time, typically 3 to 5 years. In this case you do not own the car. The ownership portion of the car registration remains in the name of the Leasing Company and the plate portion of the car registration remains in your name and gives you the right to drive the car. However, lease contracts typically give you the option to buy out the car at the end of the lease term.

Leasing is more common for consumers who like to have a new car more often and don’t want to sell or trade in their previously purchased car. Leases are typically arranged through dealers. There are usually conditions and restrictions attached to a lease and it is important that you fully understand what they are before you sign the contract.

When it comes to Leasing you need to be careful as in some cases you might have a considerable Buyback amount. This amount must be paid from you in case you decide to keep the vehicle. Check the contracts very carefully.

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Bad Credit Car Loans & Consequences of Debt

Bad Credit Car Loans

It is quite common for consumers to find themselves in Financial Hardship and, at that point, it can be very hard to make payments on previous debts. If this has happened to you, not to worry, there are still plenty of options for you to get the vehicle you want & deserve – like bad credit car loans. We are here to help! There are a lot of options available to those who have had trouble in the past – whether that be bankruptcy, divorce, newcomer, or anything else! Though it is of course better to avoid problems in the first place, remember that as long as you show a good attitude and have acceptable income, there is still a good chance of an approval – at the end of the day, giving it a shot costs nothing!

What is crucial is to start rebuilding your credit. Luckily, bad credit car loans are arguably the best way to do that, since as big-ticket items that require regular payments, they show all lenders that you can be responsible, but, as a counter, it is crucial to make your payments on time, since screwing up your rebuilding credit option could be a bad look for any future financing. At the end of the day, if you need a ca & are ready for the responsibility, make sure to get a bad credit car loan from Priority Car Financing today!

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Consequences

All of this is not to say that messing up on a previous or current loan is without consequences. Failure to make the payment on time may force the finance company to repossess your vehicle in order to recover the money they are owed. Financing companies can use Tow Companies or Bailiffs or their own agents to repossess the car. Having the vehicle towed, however, is just the start of your financial problems. In most cases, the vehicle will be worth less than the loan balance, which means you will likely have a residual debt (called a deficiency or shortfall) after repossession. This is a very important part to understand as a consumer.

Bad Credit Car Loan vs. Bad Credit Car Lease

Please be aware that having a Car Loan or a Car Lease makes no difference in terms of repossessing the vehicle. 

In the case of a leased car, the dealership or auto seller retains ownership of the vehicle. You signed a contract or lease agreement with terms allowing the lessor to seize the vehicle if you fail to keep up with your monthly lease payments. If you purchased your vehicle, you own the vehicle, but the car lender will register a lien against your car as collateral to ensure payment. If you default on your payments, they have the right to repossess the car. Keep in mind that the Lien registered in the Consumer’s name and on the vehicle gives the financing company the legal right to repossess the car.

You will receive notice that you are behind on your payments, but the lender does not have to notify you when they send someone to pick up your car. If the lender takes action, this is known as an involuntary repossession. If you know you can’t afford your vehicle any longer, you can also surrender your vehicle willingly, something known as voluntary repossession or voluntary surrender.

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Misconceptions after Repossession

One of the biggest confusions for consumers is their assumption that when the car has been repossessed, then they no longer need to make payments. Unfortunately, the repossession process does not cancel your obligation to make payments under the loan or lease agreement. Once the financing company seizes the vehicle, the lender can sell it or put it up for sale at auction. The proceeds of the sale will be subtracted from any balance that you owe. Repossession costs, interest charges, and late payment fees will be added.  This deficiency in realizations is now an unsecured debt which you  still owe to your auto lender.

Credit & Bad Credit Car Loans

One of the big disadvantages for the consumer is the fact that the consumer’s credit will be negatively impacted. The lender will also report the late payments on your credit report, which will impact your credit score as well. This note will remain as part of your credit history for up to seven years.

While the process of Repossession is very unpleasant, we strongly recommend making payment arrangements with your lender.  Any payment plan will require you to catch up on all of your payment arrears and repay any repossession fees and recovery costs they may have incurred. Arrangement with the Lender will only benefit your current situation since a settlement offer could clear up your debts.

This process & the problems that your lack of payment causes to your credit report & score is what creates the environment for a bad credit car loan. The fact that you have caused these problems, or lost money for previous companies in the past, whether through car loans or other debts (credit cards, line of credit…), means that a new lender needs more compensation for the higher risk – this is why it is a bad credit car loan!

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Bankruptcy

Filing bankruptcy will not stop a repossession because your auto lender is a secured lender. Secured creditors are not prohibited by the automatic stay in bankruptcy or consumer proposal from enforcing their security rights.

If you decide to walk away from your car loan, or if your lender has already repossessed your vehicle, it is possible to file bankruptcy or a proposal to eliminate the unsecured deficiency.

Car repossession does not have to lead to continued financial hardship. While we don’t recommend people pursue the last resort of bankruptcy just to deal with a car loan deficiency, if you have other debts, filing a bankruptcy or proposal to deal with all your debt problems can make sense.

Keep in mind, this is concerning to a lender since they will assume that others have lost money with you.

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Checking for errors on your credit report

Checking for errors on your credit report

Why check your credit report?

A Credit Report is a summary of all the Trade Lines or credit Relations you have undertaken with all the registered Financing Institutions.

A Trade Line is created at the moment you are first granted credit from any of the registered financial institutions. Also when you apply for credit for the first time a Credit Report will be created even if you are not accepted for credit – this will list only an inquiry, but not a trade line.  

Financial Institutions or Lenders will send information about your accounts to the credit bureaus, also known as credit reporting agencies. A Credit report is a collection of all the dealings/trade lines you have had with any said financial institutions. It will show how good or bad you have managed your credit. If the Lender is reviewing a file and the information showing turns out to be incorrect, then decision would be conducted with faulty information. If there’s an error on your credit report, a lender may turn you down for credit cards or loans, or charge you a higher interest rate. You may also not be able to rent a house or apartment or get a job.

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Apart from errors creating the basis for an unsatisfactory dealing and result, the errors could also be a sign that someone is trying to steal your identity. They may be trying to open credit cards, mortgages or other loans under your name.

It is for the above mentioned reasons that we believe that Credit Reports should be checked regularly. A yearly check might be a good decision.

What errors could be on your credit report

Once you get your report, check for:

  • name, address, date of birth, employer and occupation.
  • errors in credit card and loan accounts, such as amounts, balances, payment amount, date open etc.
  • negative information about your accounts that is still listed after the maximum number of years it’s allowed to stay on your report
  • Make sure you are aware of all the trade lines existing there. If you see a RBC card and you never had a dealing with RBC, it is time to worry. Chances are these accounts would be in arrears.

Keep in mind that negative information does not disappear from your credit report because you paid it off. The negative information stays there for some time. Checking these trade lines would be the way to inform yourself on what might have been negatively affecting you.

Look for accounts that don’t belong to you on your credit report. Accounts that you don’t recognize could mean that someone has applied for a credit card, line of credit, mortgage or other loan under your name. It could also just be an administrative error. Make sure it’s not fraud or identity theft by taking the steps to have it corrected.

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Steps if Fraud Suspected

If you find an error on your credit report, you should contact lenders and any other organizations that could be affected. Tell them about the potential fraud.

If it’s fraud, you should:

The Canadian Anti-Fraud Centre is the central agency in Canada that collects information and criminal intelligence on fraud and identity theft.

If you are certain that the information is wrong then we strongly suggest that add a Fraud Alert (warning) in your Credit Reports. A fraud alert, or identity verification alert, tells lenders to contact you and confirm your identity before they approve any applications for credit. The aim is to prevent any further fraud from happening.

Ask the credit bureaus to put a fraud alert on your credit report if:

  • you’ve been a victim of fraud
  • your wallet has been stolen
  • you’ve had a home break-in

You may need to provide identification and a sworn statement to prove that you’ve been a victim of fraud.

Your Rights

You have the right to dispute any information on your credit report that you believe is wrong. Additionally, you can ask the credit bureaus to correct errors for free. Always support your case by gathering receipts, statements and other documents related to your credit accounts. This is since you may need them to prove your claim. Crucially, you need to report to both Equifax & Transunion, since different lenders use different platforms. Before the credit bureau can change the information on your credit report, it will need to investigate your claim. First, it will check your claim with the lender that originally reported the information. If the lender agrees that there is an error, the credit bureau will update your credit report. However, if the lender disputes your claim – and instead suggests it is correct, the bureaus will leave your credit report unchanged.

The second step would be to contact the lender that reported the information. It will not be an easy process and you need to understand that the Lender will require a lot of things in order to believe your claim. They will have to compare the information they have and the one you are suggesting to them. Importantly, you should ask to speak with someone at a higher level at the credit bureau or at your financial institution if you’re not satisfied with the results of the investigation.

 

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Complaints

Federally regulated financial institutions must have a complaint-handling procedure to help resolve disputes between consumers and their financial institutions. This procedure includes a third-party dispute-resolution body.

Assuming that the credit bureau confirms the information is accurate but you’re still not satisfied, you can submit a brief statement to your credit report explaining your position. It’s free to add a consumer statement to your credit report. TransUnion lets you add a statement of up to 100 words, or 200 words in Saskatchewan. Equifax lets you add a statement of up to 400 characters to your credit report.

Lenders and others who review your credit report may consider your consumer statement when they make their decisions.

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Credit Cards & Their Importance

How do credit cards work?

Credit Cards are considered Revolving Credit. It is very important to understand that Credit Cards have a huge impact in your Credit Report and paying them on time has a great impact on you. 

Credit Cards could be very widely used in everyday life and they could be used to pay for all kinds of goods and services.

You can use your credit card to pay for goods or services:

  • at a cash register or checkout, that is, a point of sale
  • over the phone
  • online

Keep receipts for all your credit card purchases. Check your receipts against your credit card statement to make sure there are no mistakes. If you find a mistake, immediately contact the financial institution that issued your credit card. Most importantly contact the Credit Reporting agencies in order to place a warning to stop any possible fraud in further credit granting.

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Cash Advances

A very common way of using Credit Cards is through forms of Cash Advance. You can use a credit card to get a cash advance by:

  • taking out cash at an automatic teller machine (ATM)
  • getting cash from a financial institution

A cash advance can be a very expensive way to borrow money. Before you take out a cash advance, consider a cheaper way you can borrow, such as a personal loan or line of credit. When you use cash advances, try to pay off as much of your balance as you can as early as possible.

There is no interest-free grace period with cash advances. You’ll pay interest from the date you get a cash advance until you pay it back in full. The interest rate charged for cash advances is usually higher than for regular purchases. For example, the interest rate for regular purchases may be 18%, but it may be 28% for cash advances.

You may also have to pay a fee each time you get a cash advance.

A fee may be:

  • a fixed amount per cash advance
  • a percentage of the amount of the cash advance
  • a fixed amount plus a percentage of the cash advance

Some financial institutions set a minimum and a maximum for those fees. If you apply for a credit card from a federally regulated financial institution such as a bank, the application must include an information box. The information box must present key features of the credit card, such as interest rates, fees and other charges, in a clear and easy-to-understand way.

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Credit Cheques

Sometimes it might come as a surprise to you when you see cheques in your mail attached to your credit cards bill. You can use credit card cheques to make purchases the same way you would with personal cheques. Credit card cheques are also called convenience cheques or promotional cheques. You can also use them to pay bills or other debts such as outstanding balances on other credit cards (though this can end up being a problematic infinite loop).

You’ll pay interest from the date you use the cheque. The interest rate charged when you use a credit card cheque is usually higher than for regular purchases. Credit card cheques are linked to your credit card account. If you use them to pay for goods or services, the amount will appear on your credit card statement. Federally regulated financial institutions, such as banks, must get your consent before they can send you credit card cheques. If you choose to get credit card cheques as part of a special offer, make sure you understand all the terms and conditions. If you don’t want to use credit card cheques, cut them up before you throw them out to protect yourself against fraud. Contact your credit card issuer and ask them to stop sending credit card cheques.

Balance Transfer

It is quite common for credit card companies (Visa, Mastercard…) to offer you lower than market rates. This is done for the purpose of achieving a Balance Transfer. This occurs when you pay off the balance from your current credit card by transferring it to a new card that generally has a lower rate. Be careful as these rates are temporarily low and they increase at a later time. In some cases they charge a fee for the transfer which could be in the form of a percentage of the amount transferred. Before you transfer a balance, be sure to read the terms of your credit card agreement carefully. 

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Key Elements

Here are some very important elements to know while using Credit Cards:

High Credit (Credit limit)

Your credit limit is the maximum amount you can normally spend on your credit card. The limit is set when you first get your credit card, but you can request that it be reduced or increased.

Your credit card issuer has to get your permission in writing or verbally before increasing your credit limit. This is known as giving your express consent, which means you clearly agree in writing or verbally to a credit limit increase. If you agree verbally to an increase, your credit card issuer has to confirm the change in writing no later than your next credit card statement.

Credit Card Balance

The Credit Card Balance would reflect the amount of money you have already used while purchasing goods or services. You need to understand that high balances and non payments of these balances might result in high interest payments. 

Available Credit

The available credit reflects the amount of credit still available to be used. It is normally the difference between the High Credit and the Credit Card balance. Keep in mind that Credit Card Companies might allow you to use more than the High Credit.

Due Date and Minimum Payment

The due date is a very important element in the invoice (bill) that you receive from the Credit Card Company. It reflects the time by which you must pay either the total balance left in your Credit Card or the Minimum Payment. Minimum Payment is the amount required to pay in order for the account not to be considered delinquent. It normally is the interest that the Credit Card Company charges. Please note that credit cards become very expensive because of this feature. It lets the consumers believe that it is ok to make this small payment and continue holding the balances unchanged. We strongly suggest that you try to reduce the balances. It will be saving you a lot of money in interest. The due date is what determines how late you are with making payments. 

Example: RBC provides  you with a Visa in the amount of $1000. You use $300 to purchase goods or services on 31 January 2021. The bill comes in the mail and the billing date is 8 February 20021 and gives the information that you have a payment due on 1 march 2021. Minimum payment is $35.

 

Based on this information:

High Credit = $1000

Credit Card Balance = $300

Available Credit = $700 ($1000 – $300)

Due Date = 1 March 2021

Minimum Payment = $35

Transaction Date = 31 January

Billing Date = 8 February 2021

Late Payments & Their effect on your Credit

If we assume that the payment of $35 was not made on 1 March 2021 you have now 30 days to make that payment. Assuming the payment of at least $35 is not made by 1 April 2021 then the account in the Credit Report will have an R2 status and reflects that you have been 30 days late in making your payment. Again, if the payment is not made by 1 May 2021 the account in the Credit Report will have an R3 status and reflects that you have been 60 days late in making your payment. Should the payment not be made by 1 June 2021 the account in the Credit Report will have an R4 status and reflects that you have been 90 days late in making your payment. Finally, if the payment is not made by 1 July 2021 the account in the Credit Report will have an R5 status and reflects that you have been 120 days late in making your payment.

Please note that after this point if the Credit Card Company has not received a payment then this account would probably end up in a R9 status or an account being written off (or considered a loss) from the Credit Card Company. 

Interest on Credit Cards

Interest is the money you’ll pay if you don’t pay your credit card balance in full by the due date. You’ll continue to pay interest until you pay your balance back in full. Interest rates vary depending on your financial institution and the type of transaction. Your credit card statement and your credit card agreement must clearly indicate the interest rates you must pay. When you make a new purchase with your credit card, you have an interest-free grace period. The grace period begins on the last day of your billing period. You can find out your billing period by checking on your credit card statement. The grace period does not apply to cash advances, cash-like transactions and balance transfers. Federally regulated financial institutions such as banks must provide a minimum 21-day grace period. In our example above, if the payment is done by 1 March 2021 you will not need to pay interests. March 1st, 2021 is the date where the grace period ends.

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Over-the-limit fees

It is crucial that you pay attention to the amount of money you use from the Credit Card – especially so if you feel that you are using more money than the High Credit. Your financial institution won’t inform you if you’re about to go over your credit limit. It’s your responsibility to pay attention to your balance and stay within your limit. If you go over your limit, you may have to pay an over-the-limit fee. Federally regulated financial institutions can’t charge over-the-limit fees if a merchant puts a temporary hold on your credit card that goes over the credit limit. A good example would be if you purchase gas. Normally federally regulated companies do not charge over the limit fees. If you’re often close to your credit card limit, you can ask your financial institution to increase your credit card limit. If you don’t want to increase your limit, or don’t qualify for a limit increase, you can ask your financial institution to stop any transactions that will go over the limit. Certain low-value transactions may still go through. Not all financial institutions offer this service. Read the terms of your credit card agreement to see if transactions over your limit will go through, and if there are any fees if they do. Ask your financial institution about anything you don’t understand.

Dishonoured payment fees

Your financial institution may charge you a fee to handle a payment that is dishonoured, or that “bounces back.”

This fee applies if you:

  • make your payment by credit card cheque and the cheque is returned because of non-sufficient funds (NSF)
  • make your payment by a pre-authorized debit that’s rejected because of NSF
  • use a credit card cheque for a cash advance, and your financial institution returns the cheque because you’re over your limit

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Credit Report & Credit Score

Credit Report and Credit Score

In Today’s world the importance of the Credit Report is continuously increasing. 

Almost all Financial Institutions traditionally review the Consumer’s Credit Report as the basis of all their Credit Decisions. The Credit Report & the corresponding Credit Score is often the deciding factor in deciding the interest charges, amount of loan extended, time required to pay off the debt etc. 

A bad Credit Report or a Low score is likely to limit your options as a borrower. If you are looking for a car loan for example, you would only be able to get a bad credit car loan. 

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Recently the Credit Bureau and the Credit Score are becoming major factors even in the renting of apartments. Nowadays, having a low score can be a big part of getting denied for a property. 

Consumers can also use the credit report to check for signs of identity theft. This is something you should do at least once a year for both credit bureaus. Look to make sure someone has not tried to open credit cards or other loans in your name.

Options for Bad Credit

In our experience, for car financing, despite previous mistakes in your credit, it is still quite possible to get great car financing. Getting a bad credit car loan is definitely possible – whether divorce, bankruptcy, new to Canada, or any other reasons, we can help you get the financing that you need. Make sure to apply with us if you are ever looking for car financing & especially a bad credit car loan, we are here to help!

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What is a credit report?

A Credit Report is a summary of all the Trade Lines or credit Relations you have with all the registered Financing Institutions.

A Trade Line is created at the moment you are first granted credit from any of the registered financial institutions. Also when you apply for the first time a Credit Report would be created even though the Credit is not granted. Financing Institutions or Lenders will send information about your accounts to the credit bureaus, also known as credit reporting agencies.

What is a Credit Score?

A Credit Score is a three digit number that reflects the probability that you, the consumer, will pay in the future, higher the score, higher the chances that the Consumer will pay. Lower the Score, lower the chances that the Consumer will pay in the future.

The score shows how well the Consumer managed credit and how risky it would be for a lender to lend money.

The score will go up and down depending on if you use the Credit Responsibly or if you have trouble managing your trade lines (credit accounts). The credit score will change according to the information coming from the updates that the financing institutions or the lenders give.

How is a credit score calculated?

Considering the importance of the Credit Score we believe that it is important that we provide a picture of what can be done from your end in order to have a chance at increasing your score. It is at the end the actions that you take that will directly affect the way that the Score goes up and down.

Factors that may affect your credit score include:

  • Time in the Credit Report and how long you have had credit for.
  • How long each credit has been in your report
  • Whether you carry a balance on your credit cards
  • If you regularly miss payments
  • The amount of your outstanding debts
  • Being close to, at or above your credit limit
  • The number of recent credit applications
  • The type of credit you’re using
  • If your debts have been sent to a collection agency
  • Any record of insolvency or bankruptcy

If you have a good credit score, you may be able to negotiate lower interest rates. However, when you order your credit score, it may be different from the score produced for a lender. This is because a lender may give more weight to certain information when calculating your credit score. Each Lender sets its own guidelines on the minimum credit score you need for them to lend you money. There are obviously a lot of other factors that influence their decision like income, type of work, time at work etc.

Who creates your credit report and credit score

There are three main credit bureaus in Canada (though the first two are much more used):

  • Equifax
  • TransUnion
  • Experian

These are private companies that collect, store and share information about how you use credit.

Each one uses a different way of calculating the scores and their algorithms might generate different scores for the same Consumer. Mostly the factors affecting the score are the same.

Who can see and use your credit report?

Considering the importance of the data that Credit Reports contain, not everyone can have access to these data. Credit bureaus follow rules that define who can see your credit report and how they can use it.

Those allowed to see your credit report include:

  • banks, credit unions and other financial institutions
  • credit card companies
  • car leasing companies
  • retailers
  • mobile phone companies
  • insurance companies
  • governments
  • employers
  • landlords

These businesses or individuals use your credit report to help them make decisions about you.

These decisions could be to:

  • lend you money
  • collect a debt
  • consider you for rental housing
  • consider you for a job
  • provide you with insurance
  • offer you a promotion
  • offer you a credit increase

A lender can never require access to your Credit Report unless an authorization has been granted to the Institution from you as a Consumer. A lender or other organization may ask to “check your credit” or “pull your report”. When they do so, they are asking to access your credit report at the credit bureau. This results in an inquiry in your credit report. An inquiry tells you that one of the Institutions has pulled your credit and has had access to your data. A lot of inquiries might make a lender nervous while deciding to extend credit to you as a consumer. It can seem like you’re urgently seeking credit or trying to live beyond your means

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Should consent be given for credit checks?

A simple answer is YES. In general, you need to give permission, or your consent, for a business or individual to use your credit report. In the following provinces a business or individual only needs to tell you that they are checking your credit report:

  • Nova Scotia
  • Prince Edward Island
  • Saskatchewan

Other provinces require written consent to check your credit report. When you sign an application for credit, you allow the lender to access your credit report. Your consent generally lets the lender use your credit report when you first apply for credit. They can also access your credit at any time afterward while your account is open.

In many cases, your consent also lets the lender share information about you with the credit bureaus. This is only the case if the lender approves your application. Some provincial laws allow government representatives to see parts of your credit report without your consent. This includes judges and police.

What’s included in your credit report

Your credit report contains personal, financial and credit history information. In general, it takes 30 to 90 days for information to be updated in your credit report.

Personal information in your credit report

Your credit report may contain your:

  • name
  • date of birth
  • current and previous addresses
  • current and previous telephone numbers
  • social insurance number
  • driver’s licence number
  • passport number
  • current and previous employers
  • current and previous job titles

Financial information in your credit report

Your credit report may contain:

  • Non-sufficient funds payments, or bad cheques
  • Chequing and savings accounts closed “for cause” due to money owing or fraud committed
  • Credit you use including credit cards, retail or store cards, lines of credit and loans
  • Bankruptcy or a court decision against you that relates to credit
  • Debts sent to collection agencies
  • Inquiries from lenders and others who have requested your credit report in the past three years
  • Registered items, such as a car lien, that allows the lender to seize it if you don’t pay
  • Remarks including consumer statements, fraud alerts and identity verification alerts

Your credit report contains factual information about your credit cards and loans, such as:

  • When you opened your account
  • How much you owe
  • If you make your payments on time
  • Whether you miss payments
  • If your debt has been transferred to a collection agency
  • Whether you go over your credit limit
  • Personal information that is available in public records, such as a bankruptcy

Your credit report can also include chequing and savings accounts that are closed “for cause”. These include accounts closed due to money owing or fraud committed by the account holder.

Other accounts included in a credit report

Your mobile phone and internet provider may report your accounts to your credit bureau. They can appear in your credit report, even though they aren’t credit accounts.

Your mortgage information and your mortgage payment history may also appear in your credit report. The credit bureaus decides if they use this information when they determine your credit score

A home equity line of credit (HELOC) that is added to your mortgage may be treated as part of your mortgage in your credit report. If your HELOC is a separate account from your mortgage, it is reported separately.

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