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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