Credit Score = How You Manage Your Money

Controlling your finances can be very stressful and overwhelming.

It is really tough to make financial goals and keep to it. But the long term benefit will give you security as you move through life.

Let's talk about your credit score.

A credit score ranges from 300-900 and all banks, phone companies, landlords, and trust or insurance companies make a judgment about how well you are managing your money.

Do you know how your credit score is calculated?  Do you know the impact of your money management on your credit score? Do you understand the importance of a good credit score?

The things included on your credit report contain but not limited to:

• Credit cards
• Loans
• Lines of Credit
• Student Loans
• Utility Bills
• Phone Bills
• Collection Items
• Legal Action

Here are some tips to follow if you plan on improving your credit score:

•  It is very important that you pay your bills in full every month or at least pay the minimum payment. If for any reason you are not able to make your payment in a timely manner, talk to your lender or the company that you owe. Most of the time, they will make an arrangement with you
•  Make sure that you don't use more than half of your credit limit. Using more than half or maxing out your credit is an indication that you might have a spending problem or cash flow issues
• Avoid applying for too much credit. The more inquiries you do, the less your credit score gets

It is very stressful and challenging to rebuild credit once you have a problem. My advice is that you pay close attention to your monthly statements, spend what you have and avoid using too much credit.

This is how your credit score is calculated

1.     Your payment history is calculated as 35% of your credit score. Lenders worry more about how well you pay your current debt. Lenders also want to know if you will repay any new loan granted to you.This is a good way to determine your credibility and character as a borrower. Keep in mind that payment on your credit facilities are reported separately.

2.     How much you owe is weighted at 30% of your credit score. Lenders want to know how much debt you currently have and the impact your debt has on your budget. Maxing out your credit cards will have a negative impact on this factor.

3.     The length of your credit history weighs 15%.  The longer your credit history, the better your credit score will be. It takes time to really determine how responsible an individual is with their credit. If you've had credit for 10 years and you make your payments as agreed, then you have earned the right to get lower interest rate. How long and how well you've had and used your credit is always a good negotiating tool when applying for any kind of credit facility.

4.     Credit application weighs 10%. Avoid applying for too many credit cards or lines of credit because it could be an indication that you need cash flow. Applying for credit often will also impact your credit score negatively. This factor considers credit that you recently applied for or opened. It also looks at the number of times that your credit was checked in the past 5 years.

5.     The type of credit used is 10% of your total score. A credit card and a line of credit are considered revolving credit. This means that you will always have access to the credit limit as long as you make the payment. While a loan goes down as you pay it and cannot be reuse. I like telling my client to take a loan for their major purchases so that they are sure when the payment will be completely made. It is easier to get in trouble with revolving credit than with a loan.

Your money management skills have a lot of correlation with your credit score. Your credit score is a reflection of how well you manage your available liquid fund.

Please follow me on my blog, leave a comment and send me an email at margmortgages@gmail.com or call 780 901 8060 if you have any question.

Debt and Credit

Credit is used to make purchases that an individual cannot afford  under normal circumstance.

Credit is also a source of stress for many households, especially families with growing kids.

There are people who make $50 000 net income but owe $60 000 in credit card debt. On the opposite side, there are people with a net income of $50 000 who has little or no debt and a savings portfolio of over $30 000.

Having 4 or 5 credit cards including lines of credits at every bank could get anyone into debt easily. In my opinion, 4 to 5 credit cards are excessive.

Let’s keep in mind that one of the bank’s main source of revenue is through credit cards, loans and lines of credit.

The bank employees also have sales targets allotted to them. Therefore, when you go to the bank for a savings plan and you are presented with a pre-approved credit facility, stop and think before you say yes. Do you need another credit card or line of credit?  The risk of using credit is higher when you have access to it. Therefore, only accept what you need and say no to extra credit

A few pieces of advice I can offer, based on experience are:

·         Keep only 2 credit cards, one with high limits for your big purchases such as travel or vacation and the other with just a $500 limit as a backup

·         Keep one line of credit open at all times, remember anything more than one is generally considered excessive

Keep this in mind, if you need to use a credit card for a purchase it usually means you cannot afford it. If you have reached the point where you are using your credit card to supplement your income, you could be put into a situation that could result in a level of financial and mental stress.

Please send me an email or give me a call to discuss options that can help you with the situation.

Why do two people with the same income, assuming that their life stages are the same.

One has a very high debt ratio while the other has a high net worth. Is this the difference between a spender and a saver?

Feel free to email me directly at margmortgages@gmail.com or call 780-901-8060 with all your personal finance questions.

Financial Literacy

Financial literacy is when an individual uses their education, experience, and skills to make an informed decision when it comes to money management. Financial literacy includes but not limited to:

1. Balancing your chequing account monthly: Spend the time to look into your monthly spending.
2. Being aware of your credit usage: Are you using more than 50% of your credit limit? 
3. Savings strategy : Do you have a savings plan? 

Financial literacy entails a wide range of money topics from daily skills to monthly budget and retirement planning.  Understanding your personal finance will give you the ability to accumulate wealth and achieve your financial goals.

Feel free to email me directly at margmortgages@gmail.com or call 780-901-8060 with all your personal finance questions.

Is it really hard to save money regularly or are we spending too much?

I was at a speaking event on April 30th and on May 21st and I was asked to talk about Personal Finance as it relates to monthly savings.

Saving money on a monthly basis is one of the most challenging things to do when you are a mother, father, caregiver, or even single folks.

I like to tell my clients that the best way to accumulate savings is through payroll at work or by setting up  direct deposit into TFSA, RRSP or a regular savings account. But the reality is that most people take out the saved funds whenever they are out of their budgeted monthly spending.

I think the ability to save money on a regular basis depends on your life stage or your knowledge about personal finance.

I have seen a 20-year-old man with over $20 000 in his RRSP because his parents taught him about personal finance at a very young age.

Based on my experience as a financial consultant, there is a correlation between our spending habit and our savings habit. It is not about how much you make, it is about how much you spend on a daily, weekly or monthly basis.

Why is it so hard to save? Please share your savings experience. 

Let's help each other learn. Let's talk Finance!

Feel free to email me directly at margmortgages@gmail.com or call 780-901-8060 with all your personal finance questions.