Monday, 29 August 2011

How to improve your credit score to qualify for low interest credit

If you want to improve your credit score, the first thing you need to know is what it is. Once you know your number you will have an idea of how far you have to go to achieve a great credit score. The better your credit is the lower interest credit you will qualify for when the time comes to seek credit.

Creditors call your credit score a “Beacon Score”. If you request your credit report online, it will reference your credit score as a “Fico Score” – these are the same numbers.

The credit score ranges from R all the way up to 900. An “R” credit score stands for “Reject” and appears immediately after someone files for bankruptcy. It does not become a number until the individual has been discharged from bankruptcy. 900 represents the best possible credit score. The majority of individuals have a credit score in the 700’s.

You need a minimum credit score of 680 to qualify for a mortgage with a major bank. If your credit score is between 600-679, you don’t have bad credit yet but you better make some improvements. If your credit score is below 600, most financial institutions will consider you to have bad credit.

So what goes into to a strong credit score? You just wouldn’t believe how seemingly simple things can reduce your credit score and they have nothing to do with making late payments. Here are the top 5:

1. Too much debt – this will reduce your credit score

2. Inquiries – the number of times you apply for credit in a single calendar year impacts your credit score. The rule of thumb is not to exceed 4 applications for credit in a single calendar year. Remember, when opening an account or applying for utilities or insurance, if you are asked for permission to pull your credit, it will count as an inquiry.

3. Too many new accounts – when you obtain a number of credit cards at the same time it will reduce your credit score.

4. Too many accounts altogether – even if you don’t owe money to all of them, too many credit products will reduce your credit score.

5. Credit balances too high in proportion to credit limit. Even if you pay your credit card in full each month, never run a balance that is more than 75% of your credit limit. This will reduce your credit score.

Your credit score is one component of your overall financial health. A relationship with a good financial advisor will help you not only work towards an excellent credit score but will also help you get your financial profile strong enough to qualify for the lowest interest rates. For more information about your credit score and how to qualify for the lowest interest rates please visit

Monday, 22 August 2011

Debt Counsellors vs. Credit Counsellors vs. Financial Advisors

When you hear “debt counsellor”, “credit counsellor”, or “financial advisor”, they may all sound like the same type of professional. They are not. All three provide very different services from one and other and it's important that you know the differences so that you don’t make the wrong financial choices.

Debt Counselling is an industry that has emerged in the past 5 years as a direct result of the public’s cries for help during the recent recession. Going directly to a trustee in bankruptcy is the same as negotiating with your creditors. In essence they represent your creditors so when they interpret your financial information, it often won’t be in your favour.

Debt counsellors understand bankruptcy and consumer proposals, only they are hired by you to structure your financial information before you meet with a trustee. The problem is that debt counsellors’ services are linear and are often the only choice. That choice is a bankruptcy or consumer proposal.

Credit counsellors are different. “Credit Counselling companies” services do not fall within the literal definition of credit counselling. Credit counselling companies offer a single service, which is a credit counselling program. In a credit counselling program your creditors agree to freeze the interest on your accounts at which point you make a single payment to the credit counselling agency that they then disperse to your creditors each month.

Credit counselling programs have a devastating impact upon your credit (as damaging as a bankruptcy or consumer proposal). Given the impact to your credit and the fact that it only freezes your interest, a consumer proposal would be a better option than credit counselling. A credit counselling program often only makes sense if the individuals’ debt is less than $8,000.00. If you approach a credit counselling agency for budget help and financial counselling and not for a credit counselling program, they will offer you little to nothing in the form of meaningful help.

Financial Advisors work for companies that offer a wide range of financial services. Financial advisors are hired by you to help you achieve your financial goals. Financial advisors can help you work through your budget and finances to find ways to get out of debt and increase cash flow. Some Financial Advisors offer debt counselling services and can provide you with access to Federal Government Programs that include bankruptcy and consumer proposals.

Financial advisors are different because they understand not just debt settlement and bankruptcy but also mortgage financing, credit products, insurance products, investment products, credit, regulatory bodies and more. A “financial advisor” is not a genuine financial advisor if they offer the financial product that they are recommending as a solution to your debt problem. A financial advisor is hired by you (paid by you) to help you make effective financial choices that propel you out of debt.

For more information about debt counsellors, credit counsellors and financial advisors please visit

Monday, 15 August 2011

Using Equity in Your Home to Consolidate Debt

If you owe debt on loans and credit cards and are at the point where you are only making your minimum monthly payments, it may be time for some intervention.

Making minimum payments on credit cards often means that you are only paying interest. If making minimum payments is all that you can afford to pay, then essentially the credit card debt will never get paid down.

If you own a home one of the easiest way to consolidate debt is through a mortgage. The challenge is choosing the right mortgage product.

In the finance business everything comes down to money. Banks, lenders and brokers are all incented based on their volumes. The more money they loan, the longer the terms, the more the financial institutions make. Sometimes going directly to a financial institution or a mortgage broker for financial advice is not the best choice. Often the first solution that a mortgage lender will present to you will be the one that earns them the most money. That first solution is refinancing your first mortgage.

The amount of debt that you have, the type of debt that you have, your current mortgage rate and terms, the amount of equity in your home, your credit and your overall financial profile will determine the best strategy to pay off your debt and what resources may be available to you.

If you owe less than $30,000, a second mortgage may be the best choice. Yes, second mortgages often bear a slightly higher interest rate, however they stand completely independent of your first mortgage and offer more flexibility. You can amortize your second mortgage more aggressively so instead of stretching it out over 25-30 years like a first mortgage, you can opt for a shorter amortization that will result in less overall interest and still reduce your monthly payments.

If you owe a significant amount of money, then refinancing your mortgage may be the best choice. However you can refinance your mortgage in a way that not only eliminates the debt but also your overall interest. You can achieve this through obtaining a lower mortgage rate than what you are currently paying, commit to accelerated mortgage payments or reduce your amortization by 5 years. Most folks don’t even realize that simply reducing their mortgage amortization by 5 years will save them tens of thousands of dollars in mortgage and interest payments.

It may be that a mortgage is not even the best choice at all. If you owe more debt than you have property equity, then you may need other financial resources to get out of debt.

The only way to receive impartial advice about how to use your home equity to consolidate debt is to hire a financial advisor to work with you to come up with a financial strategy to get out of debt. For more information please visit

Monday, 8 August 2011

Avoid Bankruptcy through Personal Debt Management

Personal debt management is easier said than done. No person chooses not to pay his or her bills. If you don’t have the money, you don’t have the money. Debt can become unmanageable for so many reasons.

Regardless of the reason, whether you have lost income or you have simply become over extended, all reports indicate that the economy is improving. Canadians are looking for options to deal with debt without sacrificing their dignity and without filing for bankruptcy.

There are pro’s and con’s to bankruptcy. If you have no means whatsoever to pay your bills, are being garnished or have collection agencies after you, bankruptcy may be the best choice. Bankruptcy immediately protects you from your unsecured creditors and stops most collection action. The drawback to bankruptcy is, it is a long process, is often expensive and has a negative impact upon your credit. The choice to file for personal bankruptcy is one that should be considered carefully.

Statistics show that Canadians are looking for other financial choices to pay off debt. The challenge is simple, it seems that no matter where you turn someone has an agenda.

The banks often pay mortgage brokers. The banks promote their products to brokers and different products carry different incentives. The larger the mortgage and the longer the mortgage term, the more the mortgage broker earns from the bank. On that basis, if a small short-term second mortgage is the best solution, a mortgage broker may propose that you refinance your entire first mortgage. Sometimes it is better to pay the mortgage broker fee yourself and negotiate a shorter term more flexible mortgage product.

Many debt companies that promote “debt consolidation” only offer two choices, consumer proposal or bankruptcy. The best way to know if you are dealing with one of these companies is to ask them what options they offer other than bankruptcy and consumer proposals.

Of course, if you turn to your bank and they offer you help at all, it will come in the form of a credit product that yields them the most benefit. Most financial services representatives in banks are paid different incentives based on the products and services that they sell to you.

So what can you do when you need help with personal debt management and at the same time want to avoid bankruptcy altogether? Hire a company that offers a wide range of financial counselling services to help you find a solution to your money problems.

Here are a few good rules of thumb when looking for a good financial advisor:

You get what you pay for! It is better to pay for a service that is impartial and can help you make responsible financial choices vs. trying to sell you products and services.

Do lots of research. If you find a company, read through their website. See how diverse their ranges of services are. For example, debt counselling services that only offer federal government programs as the solution indicate that there is no incentive to encourage you not to participate if there is another option available that they don’t offer. Google the companies’ name to see if they have lots of credible published literature online or search for positive client reviews. Ask lots of questions to ensure that whatever personal debt management program you chose, you have chosen one that gives the most consideration to your credit and future financial goals.

For more information about how to avoid bankruptcy through personal debt management please visit

Thursday, 4 August 2011

Personal Money Management and Money Management Skills through Personal Budgeting

Everyone is different, but one thing that we all have in common is that we all spend money. Some are more aware of their spending than others. Those who are highly aware of their spending habits are so for one of three reasons: they follow a budget, they have little to no income, or they are living paycheque to paycheque because they have extended their credit, beyond what they can afford.

A personal budget is the key to effective personal money management because it creates awareness of each and every dollar you spend. Outside of a loss of income, the most common reasons that folks cannot make ends meet are:

1. Lack of awareness of spending
2. Careless spending
3. Impulsive spending
4. Overuse of credit

When you are running on a tight budget any number of seemingly innocent things can send you into financial turmoil. Buying a vehicle or home that is too expensive or any unexpected expense, could spell financial disaster. Working towards better money management skills starts with refining your budget.

A personal budget should include all of your expenses, right down to how much you spend on coffee each day. Sometimes it can feel like our budget is tight and there is no room for improvement, but there often is room for improvement.

Your personal budget should consist of four sections. Housing, which includes your payments to rent, mortgages, property taxes, property maintenance and insurance. Transportation, which includes payments to vehicles, vehicle insurance, vehicle maintenance, bus/train passes, parking, gas, etc. Personal, which includes the money you spend on food, utilities, phone bills, entertainment, education, childcare and any other personal monthly household expenses. Finally, liabilities, which are the payments you make to loans, credit cards and other people you owe money to.

Prepare your budget in a table that has a column that represents the type of expense, a column that represents monthly cost and a third column that represents the areas in the budget that can be reduced. Go through your budget and indicate the places where you can save and by how much.

At times personal budgeting can be scary. It forces you to face your monthly expenses and if you can’t find ways to improve, you may feel deflated. Sometimes it pays to realize that you may need help with your budget. A professional financial counsellor will not only help you create an effective budget, but they also have access to other resources that may ease the process of achieving your financial goals. For more information about personal money management and money management skills through personal budgeting please visit