debtcare.ca

Category: Rebuilding Credit

  • What’s the ‘Right’ Debt-to-Income Ratio?

    When it comes to managing your personal finances, it is essential to keep a track of your debt-to-income ratio.

    This helps you keep an eye on your debt levels and take corrective measures if your debt seems to be going on an upward trajectory.

    This is particularly true during a global pandemic!

    So, what is the debt-to-income ratio?

    This ratio measures the amount of debt held by a person or household against the amount of disposable income they have.

    It can be calculated monthly or yearly. You just need to add up all your monthly debt payments and then divide them by your gross monthly income to arrive at the monthly ratio.

    Some of the common sources of income and debt are mentioned below:

    • Income

    a)  Total household income;
    b)  Child care benefits;
    c)  And retirement benefits.

    • Debt

    a)   Mortgage;
    b)  Other personal loans;
    c)  Vehicle loans;
    d)  Credit cards;
    e)  And monthly bills.

    A low debt-to-income ratio indicates that you have lesser debt and that’s almost always a good thing.

    Though, how bad is a high debt-to-income ratio?

    Well, an important thing to note is that higher levels of debt can make you financially vulnerable. For instance, if you lose your job or are faced with an unexpected expenditure, it will become hard for you to manage your finances as you already have significant debts to pay off.

    Similarly, high debt-to-income ratios are worrying for policymakers too. In June 2020, Statistics Canada reported that the household credit market debt as a proportion of household disposable income rose to 176.9%.

    High ratios are concerning because high levels of debt can reduce the economy’s ability to withstand economic shocks in the long-run.

    Coming back to personal debt, what is the best debt-to-income ratio?

    While there is no specific number and everyone’s situation is different, it is advisable to keep your debt-to-income ratio below 40%. If the number you calculate is higher than this, it is prudent to get rid of high-interest debt such as credit cards and work towards reducing other types of debt.

    Also, it matters what type of debt you have accumulated over time.

    If your debt is primarily due to a mortgage, on a property that has high equity, that is better than having a debt that’s not backed by an asset.

    If you are unsure of how to manage your debt or are contemplating how to consolidate your debt, a personal debt management plan could be helpful. Working with a debt consultant can enable you to create a tailored plan that helps you gain better control of your finances and maintain a healthy debt-to-income ratio.

    We offer a free consultation to explore what options are available to you.

    To learn more about our services call or text us on 1-888-890-0888 or visit www.debtcare.ca.

  • Rebuild Your Credit in 2020 Using These Simple Steps

    Happy 2020! We’re just over a month into the new year. How are your resolutions going? If you’re anything like the majority of Canadians, they might have fallen by the wayside…

    A 2018 survey from Strava found that most New Year’s resolutions only last until the second Friday in January… In 2020, that was January 10.

    If your goals have been put on the backburner, please don’t beat yourself up. Recognize that it’s completely normal and the issue likely says more about the process than it does about you.

    In this blog, we’re looking at simple techniques to stick to your 2020 resolutions – specifically rebuilding your credit.

    Why do most New Year’s Resolutions fail?

    Some people say that resolutions never last. But the problem is often in the intention vs. the action. Many people enter the new year with big goals and big plans – that prove to be difficult to stick to.

    They try to do too much at once or only set vague goals (like save more money) without thinking about what the daily actions will be.

    There’s a better way. Through simple, clear, consistent action you can make big progress on your goals in a way that isn’t overwhelming.

    You can also pick goals that give you more bang for your buck. For instance, resolving to fix your credit is a great goal because in turn it:

    • Helps you plan your budget.
    • Creates awareness around your financial habits.
    • Deals with debt.
    • And has far-reaching consequences – it’s a goal that will serve you well into the future and can extend into other good financial habits.

    If you aren’t achieving your financial goals, ask yourself – how can I make those goals more achievable and realistic for my schedule?

    How to Rebuild Your Credit in Three Simple Steps

    Want to fix your credit this year? Here’s how to do it.

    Step One: Get your credit report

    To begin, you need to know where your credit currently stands. Request a copy of your credit report from one of the Canadian credit agencies – Equifax or TransUnion.

    When you know your score, you will know your starting point.

    Learn more about the credit score range: https://debtcare.ca/credit-reports-101-the-credit-score-range-and-you/

    Step Two: Get rid of debt that is harming your credit

    While there are several steps you can take to fix your credit, remember that we are focusing on the most impactful actions. You want to take the steps that are going to garner the most improvement in the simplest ways.

    For rebuilding your credit, that is getting rid of debt.

    When you’re carrying problem debt, it’s incredibly hard to rebuild your credit score even when you practice other good habits, like paying your bills on time and in full. That problem debt will still be dragging your score down.

    So, step two is finding a way to get rid of that debt.

    You could consider:

    • Making a settlement with your creditors.
    • Paying the debt in full (if you have the funds or can get them).
    • Consolidating debt through a debt consolidation loan.
    • Filing for a consumer proposal.
    • Filing for bankruptcy.

    Your method may vary and the method you choose may affect your credit score longer (for instance, filing for bankruptcy leaves you with an R9 credit rating) but the point here is to clear your problem debt through the best option for you.

    Learn more about debt consolidation options: https://debtcare.ca/your-2018-debt-consolidation-options/

    Step Three: Deal with debt that has already gone into default

    Beyond current debt that you’re carrying (and hopefully dealt with in step two), you might also have old debts that were never paid – these are called default debts.

    And while they may be in the past, they can still be dragging your credit score down.

    Your credit report will reveal whether you have default debts. Some of the same methods used in step two can help deal with it — such as a settlement with the creditor or filing for a consumer proposal or bankruptcy (depending on the type of debt).

    It’s also a good idea to talk to a debt counsellor to find the best way to deal with any default debts. They can assess your situation and offer advice on what methods are best for your situation.

    Learn more about what happens when you default on debt: https://debtcare.ca/will-a-creditor-actually-sue-you-when-you-default-on-a-debt/

    Moving Forward

    Once your old debts are taken care of, new credit habits will be much more impactful. Focus on building good habits, such as always paying your bills on time and in full and not taking on more credit than you can afford.

    This mindset will help take your 2020 credit repair resolution and make it a life-long behaviour.

    What’s your financial resolution for 2020? Share with us on social media. DebtCare is on Twitter, Facebook, and LinkedIn.

    Contact us for help with rebuilding your credit or achieving your other financial goals. We’ve helped thousands of Canadians get out of debt, fix their credit score, and more.

    Call 1-888-890-0888 or visit www.debtcare.ca for a free consultation.

  • Holiday Financial Planning… Steps to Start 2020 on a Strong Financial Footing

    The holiday season is an expensive time for many! Between gifts, decorations, parties, and travel, the costs (and credit card charges) can quickly add up. To keep your budget and debt in check, holiday financial planning is a must.

    According to PwC Canada, the average Canadian consumer will spend $1,593 during the 2019 season — up 1.9% from 2018. That number increases with the type of shopping consumers choose to do. The average online-only shopper plans to spend $1,053 while the average multi-channel shopper (in-store and online) plans to spend $1,726.

    And that is just on shopping costs alone. This doesn’t factor in travel expenses, décor, food, and beyond.

    Overall, PwC reports, 17% of Canadian consumers are worried about credit card debt. Millennials and Gen Z are even more concerned: 22% and 24% respectively think too much debt might build up.

    Going into the new year with debt — especially high-interest credit card debt — is stressful. You need a plan to pay off your holiday purchases and leave 2019 on better financial footing than you started the year with!

    Holiday financial planning is the key to both preventing overspending during the holidays and making 2020 your most successful financial year yet. Here’s how to go about it.

    Assess Your Budget

    A budget is important for planning your holiday spending. Knowing how much you can afford to spend will help determine what you spend it on!

    • If you have a regular monthly budget, review how much you can realistically set aside for your holiday expenses.
    • If you don’t have a regular monthly budget, review your past month of spending. How much income have you brought in and what savings are left over?
    • Are there any areas in your budget or spending habits you could trim back on for your holiday spending?
    • Decide on the figure you are comfortable spending this season and that you are able to comfortably repay into 2020.

    Plan Your Holiday Spend

    • Make a list of everyone you are shopping for, food-related items, decorations, travel plans, and other expenses you will encounter this season.
    • Estimate how much you plan to spend per list item. Even just the act of doing this can be illuminating!
    • At this point you may see that you have planned for more than is in your budget estimate.

    If you’ve found that you plan to spend more than you can afford, you can try to either reduce what you plan to spend (looking for ways to save money) or you can go back to your budget and look for more wiggle room. To that end…

    Clean Up Your Debt

    One of the biggest hijackers of your budget is debt payments. If you owe money, you know just how much the interest payments alone can take out of your monthly budget. And even if it’s only a little bit, why not use that money for something else?

    Consolidating your debt can free up room in your budget for holiday spending and start you on the right financial footing for the new year. If “get out of debt” is your New Year’s resolution, you’ll already be a step ahead.

    Don’t Finance Your Holiday Spending 

    If you’ve found that you plan to spend more than you have, you might be tempted to make up the difference with financing — credit cards, lines of interest, a payday loan, and so on.

    Don’t do this! If you don’t have the income available now or won’t be able to pay off the expenses in full in the next month, it can create a stressful financial future. While you might profit in the short-term, you’ll have to make up the difference in the long-term. This can lead to lingering debt and credit score issues that you’ll still be trying to fix next holiday season.

    Instead, look for ways to make the holidays great on a budget. Your financial future will thank you!

    DebtCare Canada helps our clients with holiday financial planning, debt consolidation, budget planning, money saving, and more.

    Contact us for a free consultation to set yourself for success during the holidays and beyond. Call 1-888-890-0888 or visit www.debtcare.ca.

  • 12 Days of Christmas – How to Rebuild Your Credit and Finances DebtCare Style

    debt1The holiday season is upon us, and in the spirit of the season we’ve created our very own version of the 12 Days of Christmas, based on how to rebuild your credit – with Mr. Ebenezer Scrooge as the gift-giver (after all, who better to give financial advice than one who is good with their money). It may not sound as catchy or rhyme as well as the original, but when you follow the advice, you can really cut down debt and start rebuilding your credit! Enjoy – and good luck!

    On the first day of ChristmasMr. Scrooge gave to me, an app to organize my expenses!

    On the second day of Christmas Mr. Scrooge said to me, log everything you spend your money on!

    On the third day of Christmas Mr. Scrooge said to me, create a realistic budget from that log!

    On the fourth day of Christmas Mr. Scrooge said to me, now reduce those expenses by 10%.

    On the fifth day of Christmas Mr. Scroogesaid to me, request your credit report!

    On the sixth day of Christmas Mr. Scroogesaid to me, stop applying for new credit!

    On the seventh day of Christmas Mr. Scroogesaid to me, try not to use your credit to finance your Christmas shopping!

    On the eighth day of Christmas Mr. Scroogesaid to me, be as real about your debt as you can be (look at your total debt and divide it by 48 – that is what you would have to pay monthly to be out of debt in 4 years interest free. If you fell off your chair at the size of this monthly payment you may want to review consolidation options.).

    On the ninth day of Christmas Mr. Scroogepresented to me, several viable debt consolidation options.

    On the tenth day of Christmas Mr. Scroogesaid to me, find a financial professional you can trust.

    On the eleventh day of Christmas Mr. Scrooge said to me, vet that professional to make sure they’re legit (he also suggested looking at a representative -not a bankruptcy trustee – someone who will represent YOU – not your creditors).

    On the twelfth day of Christmas Mr. Scrooge said to me, take all of these tips and start to rebuild!

    Ok, we get it – this was a rather unconventional way of presenting our best advice on how to rebuild credit – but the advice is real. Taking a good, hard look at your debt, figuring out where you can cut expenses, and taking the steps to find the best debt professional and the most viable debt relief options, including a mortgage, a consolidation loan, a consumer proposal or bankruptcy, really are the best ways to get back on track financially.

    At DebtCare Canada, we are committed to helping you regain control of your money. If you are looking at ways to rebuild credit, call us today at 1-888-890-0888.

     

  • Creating a Plan to Repair your Credit in 2016

    debt12015 is coming to a close, and the past year has likely been full of change – such is life. For many Canadians, this means more debt accumulation, followed by a concern regarding bruised credit. So, why not get started on your New Year’s resolution early and get a plan in place to repair your credit for 2016?

    The first step is to request your credit report from Equifax AND Transunion – sometimes they report different information. This will give you a clear picture of where you stand credit-wise – as well as highlighting any issues with your credit, and should give you a good idea regarding how to start repairing it.

    Generally people have credit problems which fall into a few different groups. Your plan to repair your credit will be based on what the problem is, but typically the problem is bad credit history – defaulted debts and late payments.

    How you deal with this will depend on 3 factors:

    • Whether you owe the money or not – if you don’t owe the money, see below regarding inaccurate items.
    • Whether you have the ability to pay the debt – if you don’t have the ability to pay, see below regarding too much debt and maxed out credit cards.
    • If you owe the money and can pay in full or settle in full, you are about to start a long and arduous process that will involve documenting what the creditor will accept to settle the account, paying it, collecting acknowledgement from the creditor that it has been paid and ensuring that your credit report is updated.

    Something to keep in mind: R9s and collection items come off the credit report 7 years from last activity or when they were settled or paid – that said, you can begin rebuilding right away.

    Old items and inaccurate items on the report:

    In this instance you will need to file a dispute with the appropriate consumer reporting agency and be able to prove the error. This may include providing copies of letters or documented exchanges with your creditor, proof of payments, settlements, etc… This is a formal process – being represented is a good idea. If the agency doesn’t follow the law, a complaint to the government may need to follow.

    Too much debt and maxed out credit cards:

    In this instance you have to deal with the debt before you can fix the credit.

    If there is a lot of debt and no reasonable way you can pay it off, even over a long period of time – making minimum payments, no assets or assets like a home with limited equity – a consumer proposal may be the answer.

    Benefits of a consumer proposal:

    • Stops interest and debt from growing
    • Stops collection action
    • Allows for one monthly payment
    • Can be paid in full at any time – and because payments are generally much lower than the total of all minimum payments to your creditors, you can double and triple up on payments, use income tax refunds and other credits and get the total owed down!
    • Comes off the credit report 3 years from the date it is paid in full

    Once the proposal is filed, it should be independently reported to the credit reporting agencies immediately – the same should also occur once it has been paid.

    Creating your 2016 plan to rebuild and repair your credit should not be stressful – you just have to sit down, be realistic about your credit and finances and make it happen!

    Want to get started? Call DebtCare Canada today – we can help you through the entire process: 1-888-890-0888.

     

  • Repairing Bad Credit – What to Do When Old Items Just Won’t Go Away!

    deb2When money is tight, and bills can’t always be paid, choosing one bill over another may seem like the lesser of two evils. What can it hurt, letting a bill go unpaid, then planning to pay it the following month? Then next month’s statement comes, and the amount owing has doubled, so you opt to pay it and leave a different bill unpaid. What originally seemed like a solid plan has quickly turned into a nightmare. When this is the case, repairing bad credit becomes incredibly difficult.

    However, once you regain control of your finances, those items listed on the credit report should just disappear, right? After all, you are managing your money more effectively and not missing any bills. Unfortunately this isn’t how it works. This is especially true when items are sent to collections.

    Evolution of an erroneous collection item on your credit report:

    • You get behind with bills, and when bills are not paid monthly, these are reported to your credit report, causing trade lines for the credit product to go into default.
    • Eventually that account is assigned to collections and a second item for the same debt is registered.
    • Over time the account is cancelled with the collection agency and then assigned to another one, but the first one didn’t remove their item. The new collection agency now registers an item.
    • Fast forward 7 years – when you would assume everything should be gone – but all 3 items are still on the credit report and it feels like they are impossible to get rid of! So what can you do as far as repairing bad credit?

    Credit reporting agencies are regulated and have to follow the Consumer Reporting Act. They are regulated by the Ministry of Government and Consumer Services. According to the Act, after 7 years of no activity on an account (activity is a payment, using the account, writing off the account, etc.) it should be removed from the credit report. However, sometimes this does not happen.

    What are your options? Should you just continue to wait and hope for the best? No. There is no guarantee that the agency even knows about the mistake – they probably do not. This means you have to get your credit report, prove that no activity has taken place, and then start the battle with TransUnion and Equifax.

    Great, a battle has to take place? The pen may be mightier than the sword, but that doesn’t necessarily mean these agencies are apt to read whatever you’ve written. Sometimes it takes a bit more pushing and shoving to get the job done. What you need is someone in your corner who can take up arms in your defense, a representative with the knowledge and understanding of both how these agencies function as well as the importance this issue holds for your financial stability.

    Bad credit makes it almost impossible to do anything, things like financing a home or car, and if you get the financing interest rates will be sky high! Don’t let the prospect of repairing bad credit scare you – it needs to be done.

    DebtCare Canada has a brand new program that places a representative in your corner – someone with the ability to deal with TransUnion and Equifax and have old items removed from your credit report. When it comes to repairing bad credit, call us for help: 1-888-890-0888.

     

  • Rebuilding Credit: Bad Credit Rating Doesn’t Always Just Disappear After a Few Years

    rebuilding credit pngIt is a very common misconception that bad credit just “disappears” once debts are paid and your credit behaviour improves. However, past credit activity doesn’t just evaporate into thin air with a few months (even a few years) of good behaviour. Rebuilding credit takes some work.

    For example, if you file for bankruptcy in January of year one, pay on time, every month, and are discharged in January of year 3, that bankruptcy will remain on your report for 6 years following the date of discharge (January of year 9) – not from the time that you declared.

    When it comes to consumer proposals, these stay on for 3 years following payment in full, as does any credit counselling.

    Periods of inactivity can also impact your credit rating. For example, if a lender assigns debt to collections, this results in activity, and negative activity at that. However, if you don’t have any activity, this is not necessarily a good thing either.

    When it comes to activity, a tip is to continually use credit and to repay that credit on time, all the time. A secured credit card is a good way to do this without being tempted to start relying on credit again or getting back in over your head.

    So, if you have bad credit and want to clean it up, here are a few steps you can take to get the process started:

    • Step 1 – Get your credit report and see what it says. These are available online from both Equifax and TransUnion. Some lenders use one, whereas some look at both.
    • Step 2 – Deal with the bad credit debt on your credit report by paying it off. Better yet, settle it for far less than you owe with a consumer proposal to stop interest and reduce overall amounts.
    • Step 3 – Document EVERYTHING. Any time you settle a debt, get a letter re: settlements and arrangements and copies of proof of your action. It can take some time for these payments to register, but keep on top of it.
    • Step 4 – Make sure the credit reporting agency knows these debts have been paid – don’t count on your lender to tell them. Send the above noted documents via registered mail to ensure they reach their intended destination.
    • Step 5 – Begin the process of rebuilding. Consider a secured credit card to show you are committed to maintaining positive history.

    When it comes right down to it, the only way to improve a poor credit rating is to pay your debts and allow time to pass to show that your payment habits have improved.

    For more information about how to rebuild your credit effectively, call DebtCare Canada today at 1-888-890-0888.

     

  • Rebuilding Credit Doesn’t Have to be Like Climbing Mount Everest

    Rebuilding CreditDebt, for many Canadians, is an everyday issue. But it isn’t only debt that can be problematic – even when you get rid of your debt! If debt has caused your credit score to plummet it might be time to think about getting it back in shape. There are a number of ways that you can work on rebuilding credit, but we thought we’d provide you with some of the best ways to do so.

    Here are some good strategies for rebuilding credit:

    • Keep balances low on all credit products. When you pay off a credit card, or pay it down significantly, keep it that way. However, if you can’t pay off a big chunk at least try to keep the balance low. The typical rule of thumb is no more than 65% of your total available credit. This shows that, although you have access to the credit, you are not relying on it, demonstrating that you are not necessarily living outside of your means.
    • Avoid applying for too much credit. When you apply for any type of credit product, this gets reported to your credit report, and when you continually apply for credit this negatively impacts your overall credit. This is because it looks as though you are a credit seeker – someone who can’t afford to live without credit, but also has a hard time qualifying for it. Try to limit the number of applications you submit, including those done by current creditors (ie. credit limit increases).
    • More than minimum payments. Minimum payments are mostly interest, so in an attempt to rebuild credit try to make more than the minimums, even if it is only a little more than what is required. This has the added benefit of helping you pay off the total balance faster.
    • Keep an eye on your credit report – but don’t go overboard. It is always smart to know what is going on with your credit report, so checking it periodically is a good idea. With that said, checking it every other week is largely unnecessary, and even though your own inquiries are reported to your credit report as ‘soft’ inquiries, they are still reported, and any activity can have an impact on your score. Resist the temptation to check on too regular a basis – perhaps limit it to quarter-annually.
    • Get a secured credit card. With a secured card you, as the cardholder, make a deposit onto the card and this becomes your limit. At the same time, you are required to make regular payments to the card (to pay off your ‘balance’), but if you default the money comes from that initial deposit. Keeping up the regular payments helps to rebuild credit as it shows positive credit activity.

    Rebuilding credit can take time, but it doesn’t have to be difficult. Don’t just assume that because your debt load has decreased, your score has increased significantly. Use these strategies to bring that score back up.

    For more about methods for rebuilding credit please contact DebtCare Canada today at 1 (888) 890-0888 or visit us online at www.debtcare.ca