Everyone has one form of debt such as student loans, credit card, car loan, a mortgages, phone bills or utility bills. Lenders have rules that you have to follow whenever they lend you money in any form. They give you penalties if you don't follow the rules and you will be rewarded with good interest rate and more credit facilities if you play the game right and obey the rules. You will even get ranked higher if you are a top player! The rankings are your credit scores which the banks/lenders call the beacon scores.
You are a top gamer if you pay your bills on time, don't use over 50% of your credit limit, don't apply for too much credit at once etc( ask your lenders about their rules or lending policies). In simple terms just obey the rules laid out and you will always be in the game. But if you are a good guy who lost your job and couldn't keep up with your payments, you could be penalized for up to 6 years. Because late payments will remain on your credit reports as reported by your lenders. Although the penalties were set to punish or correct the behaviours of bad players that just won't pay their bills but the same punishment applies to a good guy who lost his job.Most lenders will work with a person who calls them as soon as they sense trouble. Therefore, not all lenders are bad :)
How are you ranked?
When you use your credit card for purchases your information is electronically sent to your lender who in turn reports your payment habits to Equifax and Trans Union. Although there is also Northern Credit Bureau Inc here in Canada but the commonly used ones are Trans Union and Equifax. These credit agencies are paid to use the data collected about you to determine if you are a credit risk to the lenders or not. Do you ever wonder if the credit bureaus are on your side or the lender's side???
It is very easy for a lender to report your habits to credit bureaus but if there is an error in your credit report, you will jump through hoops to get it fixed. The reason is because credit bureaus work for the lenders and not consumers. Your credit scores are between 300 and 900. 300-575 is rated as poor, 576-629 is fair, 630-679 is good, 680-750 is excellent and 751-900 is an amazing score. A good credit score gives you the bargaining power on interest rate. Keep in mind that lenders borrow you money in order to make profits. The higher your interest rate, the more money they make. You will pay the lenders less for borrowing if your credit is score is excellent. Well, I don’t know if you can really win this game! Either way, you still have to pay the lender.
The credit game could be fair or unfair depending on your spending habit and the way you play the game. My advice is simple, obey by the rules! The only way to beat the lenders in this game is to pay off your credit card bills before your payment grace periods. Please ask your lenders about lending grace periods which mostly applies to credit cards.
Email me at info@margmortgages.ca with all your credit, money and mortgage questions.
