What Should Your Credit Score Be?

Most of us depend on credit for many things such as buying a car, house or getting a loan. Your credit report is your credit history wrapped up in three digits. It measures your ability to make payments on time and is designed to help lenders determine your credit worthiness.

Credit scores in Canada can range from 300-900. The higher your score, the healthier your financial record is and lenders will view you as less of a risk to them. The interest rates you receive will be determined by your score. Maintaining a good credit score is essential to your financial well being.

What is a good credit score?

You are considered to have good credit if you have a number of 700 and up on your credit scale. This score will allow you to have fewer problems applying for loans and getting better interest rates.

You are in the okay range if your credit score is between 450 and 650. You may be viewed as a risk but one that is acceptable to most organizations depending where you fall between these 2 numbers. The closer you are to 650, the better.

Anything under 450 is considered bad credit. You will be looked at as a high risk to the lenders. You will have significant trouble acquiring loans. Nowadays, there are plenty of places that will approve you for a loan but the downfall is that your interest rates will be sky high.

There are other factors that contribute to your credit score. The major factors contributing to your score is made up of the amounts that you owe and your payment history. The lesser factors are the type of credit you are using, the percentage that is new debt and the length of your credit history. These are all factors that are considered when determining your credit score.

You have a right to see your credit report. No one can have access to your report unless you allow it. Remember that every time you apply for a loan or credit card, you are allowing the company to check your credit report.

Knowing your actual credit score is a great start. You should understand the key factors that affect your score and learning how to increase and/or maintain your score over time is also important.

For more valuable tips and information please visit www.prudentcreditrepair.ca

Smart Things to Spend Your Tax Return On

With many people anxiously awaiting their refund from the Canada Revenue Agency, now is a great time to think about how you can spend that tax return. The biggest mistake one can make is to look at the refund as free money. A tax refund is NOT free money, it’s YOUR money! When you view your refund as something other than a paycheque, you’re more likely to spend it on treating yourself. Of course, there’s nothing wrong with treating yourself but here are just a few smart ways of spending your tax refund.

Credit Card Debt – If you’re getting collector calls then you know that ignoring them won’t make them go away. Use your refund to take care of those late payments. If you’re current on your bills, why not bring down or pay off your credit card debt balance. This way you have the chance to increase your credit score and be free of interest accumulating.

Mortgage – If you have a mortgage loan every extra payment you make reduces the length of your loan and the amount you pay in interest. Every extra payment will allow you to pay more in principal and less in interest in the long run.

Auto – If you have a car loan, this is a great opportunity to make an extra payment. If you are planning on selling your car, then use your refund or part of your refund to get your car detailed. Getting your car detailed can make a huge difference when you’re putting your car up for sale. You can also use the money to service your car properly. Many just put off servicing their car so this is a good time to get that oil change you’ve been putting off, check your tires and get that long awaiting tune-up. A well maintained vehicle with properly inflated tires burns less gas and saves you money in the long run.

You – Hopefully your tax refund is enough to cover one of the above and give yourself a little treatment but remember there’s always a balance. They key is to take care of your responsibilities first and then enjoy your money. If you and your family have been stressed because of daily life chores and haven’t had the time or money to enjoy a nice family meal at a restaurant then now is a good time for that. Buy tickets to a show or enjoy a day at the spa with your child. Buy yourself that one good suit you’ve always needed.

There are so many things you can do with your tax refund, you just gotta take care of your obligations first. For more valuable information and tips, please visit www.prudentcreditrepair.ca

Credit Cards – When You Should Reduce Your Credit Limit

When you apply for a credit card, a credit limit is determined by your creditor. This is evaluated on how risky they think it is to lend to you. Your income and your credit score are two major factors in determining your limit. You can increase your limit by calling into your institution and asking for the increase and the same goes for reducing your limit but at what point do you reduce your credit limit?

If you’re a compulsive shopper, it’s extremely beneficial for you to reduce your credit limit. If you are likely to continue to spend excessively then reducing your limit on your credit card will limit the damage you can cause to your finances. Reducing your credit limit is a great way to manage your spending but it also leaves you with no available credit should you need it in case of emergency so you should remember to be diligent. The focus should be on your outstanding debt and not on your available credit so it’s necessary to have a low credit limit and make all your monthly payments on time.

Credit card companies are very aware of how human psychology plays into our spending behaviour. Credit card companies make money when you are in debt so if you find that they are increasing your credit limit even after you have decreased the limit, don’t be fooled as this is a ploy to keep you in debt and having you pay as much interest as possible.

Does reducing my credit card limit hurt my credit score?

When you reduce your credit limit, this changes your credit utilization ratio which is the percentage of your credit limit that you’ve actually used so if your balance on your credit card is $300 and your credit limit is $1000 then your credit utilization ratio is 30%. This means that if your balance is $300 and you reduce your limit to $500 then your utilization ratio will jump and this will likely hurt your credit score. If you are responsible with your debt then it is wise to keep a high credit limit. If you spend money on a credit card because you have a high credit limit then you can help your credit score by reducing your credit limit. When your credit limit is low then your debt is more manageable. Missed payments and accounts in collection status can actually do more damage than a high utilization ratio.

Personal impulse is dangerous so if you don’t have the discipline then cut up those cards and close those accounts. For more valuable information and tips, visit http://www.prudentcreditrepair.ca

I Can’t Afford To Pay My Tax Debt

After you file your tax return, you will be sent an assessment notice from the Canada Revenue Agency (CRA) which shows the balance of the tax owing. If it is in a refund balance, this is money that the CRA owes to you but if it shows a balance owing then you must pay the CRA those monies by the payment deadline. After the payment deadline if the balance is not paid, interest will accrue and will be compounded daily.

What if I can’t afford to pay the balance owing to the CRA?
If you are already neck deep in debt and can’t afford to pay off the balance owing with the CRA, you have options:

Negotiate a payment plan with the CRA – You can contact your nearest CRA office and explain your circumstance and offer them a payment schedule that you can manage. So for example, if you have a balance owing of $1200, offer them $100 for the next 12 months. The CRA is aggressive and will always try to get you to pay the balance of in full but if they do accept the repayment plan, they will continue to charge you interest and penalty until the debt is paid off. If the CRA doesn’t accept the offer, they will take further action against you to try and collect the money owing.

Get a personal loan – These loans have become the premiere loan choice during a temporary financial problem. It is one of the quickest ways to pay off your debt. The interest rates will likely be less than what the CRA rates are and if you choose the proper financial institution to borrow from, they will even help you rebuild your credit rating through regularly reporting all payments.

In order to avoid this problem in the future, you must determine why you owe the money, whether it’s due to cashing out RRSPs, if you’re self employed or just not contributing enough from each paycheque. In either situation, you must acknowledge where the problem is and find a solution so that you don’t find yourself in this situation again where you have to pay a lump sum at the end of tax season when you really can’t afford to. There is nothing more frustrating than working hard to maintain your daily finances only to get slapped with another debt.

For more information about personal loans to pay off your tax debt, visit www.prudentcreditrepair.ca