Brigitte Bureau answers a question asked by several listeners. With the COVID-19 pandemic, many people are finding themselves having to delay some of their payments, and they are wondering if these deferrals will have a negative impact on their credit score.

The credit rating agencies assign us a credit score. This is done automatically based on the information sent by our financial institutions. Landlords may ask for a prospective tenant’s credit score, for example, to ensure the tenant’s ability to pay.

Experts advise you to raise the issue with your bank or credit union, says Brigitte Bureau, because they are the ones who send the information to the agencies. It is possible to negotiate with your financial institution to defer certain payments due to the pandemic.

In addition, requesting to consult one’s credit record has no impact on one’s credit score, contrary to what many people believe, since we have the right to consult it a certain number of times per year.

Assistance for Non-Profit Organizations

Brigitte Bureau wanted to mention some information from the Trudeau government that has been somewhat under the radar. Any NPO with a payroll of $50,000 to $1 million in the last year is eligible for a hardship loan during the pandemic to help pay for operating expenses.

If you repay the loan before December 31, 2022, you can keep 25% of the amount borrowed, says Brigitte Bureau. For example, if you borrowed $40,000, you can keep $10,000 if you pay it [RK1] back before December 31, 2022.

Trustee Pierre Fortin expects those in debt, after the 2020 respite, to find it difficult to keep their heads above water for the next several years. “People who have not been able to keep their jobs do not come out richer. Those who were in debt are now more in debt.”

Social assistance recipients are among the other losers of the pandemic. “These people were not able to benefit from CERB. Some have lost jobs that allowed them to survive,” explains François Décary of ACEF Appalaches-Beauce-Etchemins, referring to a client who was on social assistance and who supplemented his income by doing small household tasks for NPOs.

“Special benefits[JS2]  like CERB are not a gift,” says Francine Hamel, budget consultant at ACEF Quebec. “These taxable benefits, by increasing income, will disqualify many people from support programs, such as legal aid or housing benefits.” These people will discover this in July 2021: that is when governments will have finished calculating the benefits and programs to which citizens are entitled. Read also

The various effects of the pandemic crisis on the personal finances of Canadians will be felt in 2021 or even in 2022, if we trust the conclusions of a study on the aftermath of disasters published in 2019 by the Urban Institute, an American NPO specializing in social and economic policy research. The study concludes that residents affected by a disaster, even those who have received financial assistance from the state, experience negative consequences on their personal finances in the medium term, including declining credit scores, difficulty in repaying debts, foreclosure, and bankruptcy.

In the short term, it’s the question of taxes (due April 30) that preoccupies almost all of the financial experts interviewed. According to a survey by Raymond Chabot, a third of respondents who received CERB did not set aside the amount needed to pay the associated tax. Among 18-34-year-olds, the proportion climbs to 50%. This just goes to show that even after the vaccine, COVID will continue to make waves in the personal finances of Quebecers.

Actress Sophie Bourgeois (L’Échappée, on TVA), for her part, assures us that she will not be going there again.  She too had to resort to government aid, with her theatre projects, filming plans, and even a teaching contract having been cancelled in March. “A nasty slap,” said the 48-year-old actress. “My pride took a hit, but up we get.”

The mother of two children aged 8 and 12, who continues to rely on the Canada Recovery Benefit (CRB), is currently starting up television scriptwriting initiatives with producers and broadcasters. She vowed to herself that she would maintain her writing activities no matter what, even when business picks up again. “I don’t want to have to go through this anymore. It’s necessary to diversify. I will never just be an actress again.”

Julie Barlow

L’article What Happens to Our Credit Score with the Pandemic? est apparu en premier sur Simple Credit - simple-credit.ca - Solutions de prêts personnels.

The past year has not been easy. Many people have had to go into debt to make up for a job loss or reduced employment income. If you’re hyperventilating when your credit score goes down, we have some tips for you.

First of all, remember that your credit score is a number that lenders typically use to decide whether or not to offer you credit. If you want to buy a property, a car, or even a new cell phone plan, your credit score will be checked. 

WHAT CONSTITUTES A GOOD SCORE?    

Your credit score is somewhere between 300 and 900. If your score is below 500, you may have trouble getting a loan. If it’s over 700, you are considered an excellent payer. The average credit score is usually between 500 and 700.

SIX TIPS TO INCREASE YOUR SCORE    

To improve your credit score, you will need to gain the trust of lenders by showing that you quickly pay back your loans. 

1- Keep your credit card balance below 30%

Paying your minimum balance every month is not enough. If you want to improve your score, be sure not to leave large amounts sitting on your statement. If you have a credit limit of $1,000 on one of your cards, try not to leave a balance of more than $300 at the end of the month. Ideally, pay off your credit card in full every month.

2- Pay BEFORE the deadline

Whether it’s your electricity, internet, cell phone bill, or even your credit card, try to pay before the deadline, not on the date itself. Some people have a habit of setting a payment reminder on the due date, but this is a delay…and every monthly delay affects your credit score.

3- Don’t close your unused accounts

If you have several credit cards, try to pool your balances on one or two cards at the most, ideally on the one that offers the best interest rates, and pay off the full balance of the other cards. However, keep the unused accounts open for as long as possible. The same goes for your lines of credit. This strategy will help show that you are a stable payer.

4- Make a budget

Good old budget advice. Not only to keep tabs of money in and out, but also to know what to pay off first.

Be sure to pay off the accounts where the interest rates are higher, since they cost you more. Your budget will also allow you to determine a precise amount dedicated to paying off your overdue accounts.

5- Avoid multiple financing requests

Whether it’s for buying a car, new furniture for your living room, or even a simple loan request, too many credit applications will affect your score. The more you apply for financing, the more you will appear to be living beyond your means. Basically, only apply for the credit that you really need

6- Diversify your credit

If you have different products, like a line of credit, a car loan, and a credit card, you are proving that you can handle your borrowing well. If you can pay them on time, of course. If you only have one or more credit cards, your score may be lower.

Sources : Gouvernement du Canada, Transunion, Raymond Chabot, Sun Life

L’article How to Quickly Improve Your Credit Score est apparu en premier sur Simple Credit - simple-credit.ca - Solutions de prêts personnels.

I was going to draw your attention to the irony of it, but the financial services industry is no stranger to contradictions, is it?

Equifax and TransUnion, the two best-known personal credit reporting agencies, have been ordered in the United States to pay more than $23 million USD in penalties and refunds to customers. They are criticized for having advertised a credit reporting service for $1 per month (or free) when in reality it cost members more than $200 per year.

Basically, the Consumer Financial Protection Bureau (CFPB), an American government agency that is comparable to our Office de la protection du consommateur (Office of Consumer Protection), says above all that the credit score for which the consumer pays is not very useful. According to the CFPB, the two agencies mislead people by allowing them to believe that the credit score they are selling is that which is used by lenders to determine loan terms.

As I explained here, Equifax, for example, communicates the FICO score to consumers while lenders rely on the Beacon score, another calculation method. With a good FICO score, a person might think they have access to advantageous loan terms, but they could quickly become disillusioned if their Beacon score was less admirable, which is not exceptional.

But what led to the convictions of the two agencies is the marketing around their package which allows you to view your credit report and know your credit score at all times. This service is also offered in Canada by the two agencies on their website. At Equifax, this subscription costs $19.95 per month and at TransUnion, $16.95. The companies are not advertising free months or a $1 starting offer here. Conversely, an internet user who wants to obtain their credit score and report just once, which costs about $20, can easily end up with the subscription without wanting to.

On the Equifax site, the user will think this is the only option available. This service offer takes up the entire home page. On the TransUnion site, one could accuse the company of trying to mystify the customer. It invites you to click a big button to know your credit score. This will bring you to a form to purchase the monthly subscription. On the right of the page, it says in a small box “You have chosen: TransUnion credit monitoring for $16.95 per month,” while this is not at all what you intended to choose – you just wanted to get your score.

I don’t know if a customer can easily get rid of this subscription, whether they signed up by mistake or knowingly. Looking at the tricks deployed to get you subscribed, I doubt that they will let you go easily. But this is an impression, and I have no desire to test it. That said, Equifax and TransUnion were forced to review several of their practices in the United States following the American CFPB ruling. In particular, the two agencies must ensure that consumers can easily cancel their subscriptions.

We have not yet discussed the service we get in return. I don’t know about you, but I have never woken up with a start during the night wondering, “What the hell is my credit score?” I don’t feel the need to know this information all the time, especially when, knowing that it doesn’t match the score given to lenders, its usefulness is highly questionable.

The subscriber also has the right to a monitoring service that will notify them when important changes affect their report in order to prevent identity theft – in other words, never. Equifax also offers “identity theft insurance.” I haven’t analyzed the policy offered, but anyway, on the priority scale, this product is far from the top. I would say it’s at groundhog level, underground. Banks bear the most frequent costs of this type of crime, credit card fraud.

TransUnion, for its part, offers “powerful tools” that allow you to know “the impact of your debt on your finances with your debt-to-income ratio” (phew!).

Excel is powerful too, much more powerful than is necessary to do a little math that a high school student can do by hand.

Both agencies pretend to want to help you improve your financial situation. The best decision in this regard is to, first of all, ignore their offers. You can obtain all your credit report information free of charge by requesting it on the Equifax site, but the report will be mailed to you. This is sufficient to check that your report does not contain errors or anomalies, and to request corrections if necessary.

However, this free service does not give you access to your score. If you want it, you can also get it free of charge from ratehub.ca. And this does not guarantee anything about the conditions under which you can borrow.

DANIEL GERMAIN

L’article Never Pay for Your Credit Score Again est apparu en premier sur Simple Credit - simple-credit.ca - Solutions de prêts personnels.

I’ve paid interest on my credit card before, but I don’t remember when. I have always paid off the balance in full every month, except for rare exceptions over a decade ago. I have a line of credit that is used occasionally and that I never leave debt on for more than a few days. I don’t neglect any invoices. My mortgage is being repaid without a hitch by direct debit.

I am far from perfect in managing my money. But when I ordered my credit report 10 months ago, I breathed with the confidence of the little kid in class who finishes their chemistry exam 30 minutes before everyone else. Then I received my score: 778 out of 900. I was disappointed.

The score is excellent and allows me easy access to credit on favourable terms. But on a scale out of 100, how much is that? 86%. That’s good, but nothing for your parents to show off in front of their friends: “My Daniel got 86% in chemistry.” Below 90%, you just satisfy yourself by saying that your little prince is doing well in school without going into detail, and follow up with a comment on the changing climate: “It seems like summer is shifted, don’t you think?”

My Equifax report says my credit score is better than 55% of Canadian consumers. Which means that it’s worse than the other 45%. It’s relatively average. You know how it is, we usually find satisfaction in comparing ourselves to others, like those rare times when our line goes faster than the next at the grocery store.

So, I’m precisely paying off my bills and debts, and almost half of Canadian consumers score better than me. This suggests that the financial situation of households in the country is not as bad as it seems, but more importantly, it raises a question: how are they doing it?

Calculating a credit score, unlike chemistry, is an occult science. Apart from those who trade in it, nobody knows exactly how it works. Equifax and TransUnion (the two companies that compile credit reports in this country) do not disclose their formula under the pretext of trade secrets.

We do not know the exact details of the calculation methods, but we know the main principles nonetheless. Here are the factors that are taken into account:

• Payment history. Paying off your debts and bills, like cable or cell phone, before the due date is good for your credit score. Delays of 30 days will mar your file, even more so if you exceed 90 days.

• The level of debt in relation to credit capacity. Credit rating agencies view full credit cards and lines of credit with suspicion. Ideally, it is best not to exceed 50%.

• Credit applications. The more applications you make, the more your record is likely to be affected. If you’re shopping for a mortgage, be sure to focus your efforts within a tight timeline. The system will then only count one application.

• The types of credit used. The more you use different means of borrowing, the better. If you have a credit card, a line of credit, and a mortgage, your record will be better.

• Credit experience. The longer you have used credit, the easier it is to determine your borrower profile and your ability to manage your debts.

• Bankruptcy and consumer proposals. These are to be absolutely avoided, because they mar a record for six years, even more so in the event of a recurrence.

I excel on all factors, especially the most important: payment history and amount of debt. While my mortgage balance may seem high to some people (it’s the norm today), I am using a tiny fraction of my consumer credit capacity.

I’m losing points on small details. For example, my credit experience does not exceed 30 years.

My prudence also works against me. I only have one credit card and I have an aversion to those offered by stores. Rating agencies favour those who have more than one active card. Beyond six, it starts to work against you. Four seems to be the optimal number, as long as you don’t use more than 30% of their capacity.

Moral of the story: to reach the perfect score, it is not enough to be studious, you also need to have a slight bad boy side. You have to take risks and demonstrate that you know how to deal with them.

***

The credit score is assessed on a scale of 300 to 900 points. The higher it is, the more lenders trust you.
Above 700: you can negotiate favourable conditions.

From 500 to 700: you will get a loan if you apply for one, but at a higher cost.

Below 500: Lenders will be reluctant to lend to you. And if they do, your negotiating room will be next to nothing.

DANIEL GERMAIN

L’article How Do You Get a Perfect Credit Card? est apparu en premier sur Simple Credit - simple-credit.ca - Solutions de prêts personnels.