Tag Archives: Credit Score


Looking to buy a condo in 2020? Get your credit score on track

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Looking to buy a condo in 2020? Get your credit score on track

If buying a condo is on your list of things to do in 2020, this may be a good time to check your credit score and report. These two pieces of information will play a big role in determining how much mortgage you qualify for and the rate the bank is willing to offer.

Condo buyers will often start the financing process when they find a condo they want to put an offer on. But if your credit score is low, or there is incorrect information in your report, you can be delayed in securing financing. That’s because improving your score and fixing wrong information takes time.

Take a look at your credit score and report now, because you have time to fix and improve your situation. It will set you up to be in the best position to buy a condo when the time comes. It’s also good practice to know your score and most of us could benefit from checking it. A survey from BMO Bank of Montreal shows more than half of Canadians have never checked their credit score.

Credit score and reports

Your credit score is a number between 300 and 900. It is determined from the information that is in your credit report, and it provides lenders a snapshot into how credit worthy you are. The higher the score, the more likely a lender will want to do business with you. The score is the first number lenders will inquire about because it quickly tells them a lot about your financial health.

Your credit report is a list of your financial history going back seven years. It will show what credit cards you own, what debts you have outstanding, if you have paid a bill late, and worse, if you are in arrears on any bill. It will also include all your basic information as well, like your social insurance number and date of birth.

Credit reporting agencies

The two major credit reporting agencies in Canada are TransUnion and Equifax. Every time you request credit, one of the two agencies are supposed to get record of that. But the reports can be flawed as the two companies may have different information about you. Lenders are required to report in only one place. Best practice is to request a score and copy of your report from both agencies. You can make sure the information is up to date and accurate. This is especially true for anyone with a common name, as information that does not belong to you can be inputted on your report by accident.

Determining a good score

The higher your credit score the better. According to TransUnion, 650 is the magic middle number – a score higher than 650 will likely qualify you for a standard loan, while a score lower than 650 will likely make it hard for you to receive new credit. If your score is low, it may be because of some bad information in your report.

How to improve your score

The number one way to improve your score is to pay all your bills on time. This includes your rent and utility bills. As well, don’t apply for unnecessary credit. If you do, you can be seen as a risk to lend to by creditors. Cancel any cards or close account you are no longer using. If you already have a credit card or line of credit, don’t carry a balance of more than 75 per cent of the available limit. Being maxed out all the time on your cards is not seen as a positive. If you can afford to, pay down small loans and close those accounts.

Always knowing where you stand financially will help you better prepare for big purchases such as buying a condo, and avoid any last minute delays due to errors on your credit report.

Start doing this now to see you credit score improve by 2020.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.


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Debt Consolidation

Debt consolidation in Canada – how it works and why you may need it

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Debt consolidation in Canada – how it works and why you may need it

There’s no sugar-coating – the journey to financial freedom is tough. The good thing is, there are effective ways to get out of debt fast. If one of your current goals is to be debt-free, debt consolidation is worth considering. Keep in mind that the only way to keep your finances in order is to learn how to save money and make smarter financial decisions. With that said, we’ll share some more information on debt consolidation to help you decide if this is for you.

What is debt consolidation?

Put simply, debt consolidation in Canada involves bringing together small loans, bills or money you owe from different sources into a single, new loan and then make one monthly payment. Since you are consolidating different types of debts together into a combined loan, the term debt consolidation is used. Remember, each loan has its own repayment terms and interest rates so, in reality, you cannot combine them. What happens is that you take a new loan to clear all the smaller loans you had and then start paying the new loan only.

Who issues a debt consolidation loan?

Debt consolidation is offered by banks, credit unions and other financial companies that deal with credit. When you apply for the debt consolidation loan and your application is approved, the company will deposit the cash to your account and it’s your responsibility to clear the debt or they pay out the debts on your behalf.

What are the benefits of debt consolidation loan?

There are many reasons to consolidate different debts into one payment.

  • Simplifies the repayment process: You never have to keep track of multiple debts, there’s only one payment you need to make each month.
  • Saves money: Sometimes you end up paying lower interest rates especially if you had high interest credit card debt.
  • Can make life manageable: If you get a debt consolidation loan with a lower interest and amortization period then you can repay the loan in smaller monthly payments.
  • Can get out of debt faster: With a lower interest rate, it means most of the monthly payment you make will be going towards repaying the principal hence you’ll be able to clear the debt faster.

How do they determine interest rates on debt consolidation loans?

There are two main factors that determine how much interest you’re likely to pay for debt consolidation:

  • Your credit score: Banks and finance companies consider borrowers with a low credit score as more unlikely to repay debt as agreed in the agreement. Therefore, if your credit score is not good enough, lenders are not confident in your ability to repay the new loan as agreed. You are considered a higher risk borrower and hence they will offer you a much higher interest rate.
  • Collateral: Other finance companies will offer you a debt consolidation loan with lower interest if you provide good security. There are only specific things that the bank can accept as security, mostly stuff that they can easily convert into cash such as real estate or a new vehicle.

Is a debt consolidation loan for you?

There are certainly downsides to debt consolidation. One thing that most people do not understand is that you have to deal with poor financial habits before consolidating debt. Most people take debt consolidation loans with a lower monthly payment compared to their previous payments. This means that they now have something extra to spend every month. They then continue to spend more money than what they earn instead of creating a plan to stop overspending and get their finances back on track. This makes their financial situation worse and in the long run, their credit score becomes worse and qualifying for a new loan is almost impossible.

Therefore, the important thing to do when you take steps to get out of debt faster is to create a budget and follow it making sure you work with how much you spend versus what you earn.

What are your options for debt consolidation?

There are different ways to go about consolidating debt:

  • Home equity loan: This is often considered a second mortgage which you can qualify for if you have acquired equity in your home.
  • Line of credit: There are unsecured and secured lines of credit offered by banks for borrowers with a good credit score and a good income.

Don’t be fooled!

Debt consolidation should help you to get out of debt, not put you in further debt. Therefore, be keen on people who try to sell you a debt consolidation loan that has hefty up-front fees.


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Condo Finance

Finance: How to Help Millennials Buy Their First Condo

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Finance: How to Help Millennials Buy Their First Condo

Millennials are so financially strapped that many can’t find the funds to move out of their parents’ home. These are the findings of a new report by the University of Waterloo called Gen Y at home. It finds 47.4 per cent of millennials (also known as Gen Y) in the GTA live with their parents.

The reasons, the study says, is the high cost of housing, debt and job instability.

For young people moving out, your parents’ home can be the first step into adulthood. If you have a young person living at home with you, or you yourself are a millennial that wants to get out on their own, here are some tips to make that happen.

Focus on Student Debt

First One of the roadblocks in saving for a home is having large amounts of student debt. According to the Canadian Federation of Students, the average student graduates with $28,000 in debt after four years of study. That can make it hard to save. After graduation the number one priority should be to get student debt paid. Buying a house when you are still making payments on a student loan makes you financially more vulnerable.

Lower Your Expectations

Millennials struggling to move out should be realistic about what they can afford. Your first home, especially in a city like Toronto, most likely won’t be a detached four-bedroom. Consider smaller places to live. Condo townhomes are a great option to give a house feel, with a driveway and backyard, without the price tag. If your dream is to live in the core of the city, look for new condo projects happening now that fit your budget. By putting down a deposit, usually a fraction of the price of the condo, you can buy time to plan your big move, while the building is being built.

Buy with Friends

Consider buying a larger home with a group of friends. Banks are now offering products that are tailored to those wanting to buy a home in groups of three or more. Before making this decision make sure you talk to the other buyers about what their long term vision is about the property. If the plan is to sell in five years time and use the profits to buy your individual homes, you can plan accordingly. Or maybe the plan is to hold on to the property and use the profits from any rent collected to supplement your income. Make sure the plan is clear up front.

Check Your Credit Score

It’s never a bad idea to take a peek at your credit score and get a copy of you report. You won’t ruin your credit, as some believe, if you are simply asking for information on yourself. If your score is lower than you expected, take steps now to improve it. Pay your bills on time, don’t carry large amount of debt, and don’t constantly apply to obtain credit, unless you really need it. All this proactive work means it will be easier to get a loan when the time arrives.

Focus on Walking Neighbourhoods

When it comes time to buy, focus on areas where you could survive without a car every day. By ditching it you will save close to $10,000 a year. That’s according to the CAA, and that extra money will help qualify you for a larger mortgage, and give you the ability to make more lump sum payments.

According to the report attitudes about living at home vary. For some, according to the report, co-residence is just about sharing physical space, while for others living with parents means actively being part of a close intergenerational family, sharing domestic work and spending time together.

Rubina ahmed-haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.


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