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Credit rating
Credit is a very practical tool that saves you from worrying about unforeseen circumstances and makes everyday spending easier. But it's important to maintain a good credit rating Credit rating: Record of your financial reputation, in particular your ability to repay loans, published by a credit bureau. Financial institutions use your credit rating to assess the risk of lending you money. and limit your debt.
You begin to build your credit rating from the time you first obtain credit. A word to the wise: your credit rating will follow you for the rest of your life!
Bad habits that hurt your credit rating
- Writing bad cheques against your chequing account.
- Depositing empty envelopes at the ATM.
- Making late payments.
- Losing control by borrowing from several financial institutions and accumulating too much personal debt.
Caution! Small acts that may seem unimportant today could come back to haunt you some day. You could pay a higher interest rate, need a co-signer or even be refused. You begin to build your credit rating from the time you first obtain credit. A word to the wise: your credit rating will follow you for the rest of your life!
Useful tips
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If you’re a student, open a Student Savings Account. Not only does it offer an attractive interest rate Interest rate: Amount charged or paid for the use of money, expressed as a percentage. Investors receive interest for letting others use their money and borrowers pay interest to borrow money. , but it will enable you to prepare for the unexpected and demonstrate your sound financial management skills.
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Only buy on credit after assessing your situation, your needs and your ability to pay off your debt.
Avoid impulse buys and unnecessary purchases. Always ask yourself: "Would I buy this if I were paying in cash?"
Calculate the full purchase amount, including credit costs.
Pay your credit card balance Credit card balance: Amount you must pay to reimburse the purchases you charged to your credit card. in full each month and pay your other bills on time.
Make sure you don't go into debt with your credit card. If you do, you might be better advised to take out a loan to clear the unpaid balance. In addition to showing that you take your finances and credit rating seriously, you'll pay less interest with a personal loan Loan: Amount of money lent for a predetermined period of time. . A credit card should only be used for unforeseen expenses, online reservations and purchases, and most of all, when you know you can pay back the total in the next few days.
Don't write cheques if you do not have enough money in your account or your credit history could be damaged.
Make sure you read the credit contract carefully and know the interest rate Interest rate: Amount charged or paid for the use of money, expressed as a percentage. Investors receive interest for letting others use their money and borrowers pay interest to borrow money. before you sign it.
Limit the number of credit cards you have, especially retail store cards which have a much higher interest rate than financial institutions. It will be easier to keep track of your finances.
Go over each statement carefully. Keep the receipts and compare them to your monthly account statements.
Make the highest payments you can manage and always on a regular basis. Missed payments also damage your credit rating.
Notify your creditors right away if you are unable to make your payments or arrange terms with them. You will then be able to make an arrangement that will suit everyone. Never avoid telling your creditors that you can’t pay.
Be aware of your debt capacity. Never borrow more than 35% of your annual income.
All these small acts that may seem unimportant today could come back to haunt you when you apply for a car loan, mortgage or a business start-up loan in the future. Many landlords even run credit checks on potential tenants. Be aware that a few missed payments now could have serious consequences on your future loan application: your financial institution may charge a higher interest rate, require a guarantor or even a refuse to grant the loan. It is easier to start building a good credit rating now than to rebuild it in the future.
