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    credit score
    credit score
    Shannon from Peterborough Asked:

    I’m trying to raise my credit score, is getting a loan for an RRSP (retirement contribution) a good idea?

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    Credit score questions are best addressed by our Mortgage Agent, Shawna Thompson:

    The real question is, how do you raise your credit score?

    We received the following question:

    “I’m trying to raise my credit score, is getting a loan for an RRSP (retirement contribution) a good idea?”

    This is a loaded question.

    You see your credit score is calculated using 5 major criteria balanced against each other.

    1. You payment history. This is inclusive of: Bankruptcies, late payments, past due accounts and wage attachments, collections and judgements. Basically… what payment patterns have you demonstrated in the last 2-7 years?

    2. Amounts Owed. Note this means the amount you owe or use vs the amount available to you. Are you showing restraint? You show restrain by keeping your balance below 75%, paying on time and making more than the minimum payment.

    3. Length of credit history: The amount of time you have had your credit products. The key word here is history. This is a great way for lenders to have an indication of your character as a borrower. The best indicator of future behaviour… is past behaviour.

    4. New Credit: The number of credit inquiries you have had within the last year. Are you desperately looking for new credit or are you keeping inquires below 6 per year?

    5. Types of credit accounts (Credit Cards, Retail Cards, mortgage lines of credit, Loans and etc.) Technically speaking… and to make things confusing, there are 2 types of credit accounts: Fixed and revolving.

    A fixed account would be a loan with a fixed payment schedule. This is like a car loan. It has a fixed payment set by the bank that you pay over time. Also you don’t gain to access to credit as you make your payments.

    Revolving accounts are like credit cards. These accounts have a standing limit that becomes available to you to use again, as the payments are made.

    Revolving accounts can have a faster positive effect on your credit. They give you the chance to show “fiduciary responsibility”. This means you show restraint, by not using all the credit available to you. You also build character by making sure your payments are made on time. It’s also good to exceeding the minimum balance owed as a demonstration of good character.

    You are caring for your credit and repayment, instead of following a payment plan.

    The five elements above are used in a equation that calculates your FICO score. This is also known as your Credit score.

    So in answer to your question: “…is getting a loan for an RRSP (retirement contribution) a good idea?…” the long and the short is… it depends. It depends on the current state of all of the outlying elements on your personal credit report.

    Unfortunately savings and contributions to your savings accounts don’t have any effect on your credit score. And while it is advisable to contribute to your RRSP for the financial security of your future, the act alone will not affect your credit today.

    However, taking out a loan may have a positive effect on your credit depending on the existing state of your report.

    I would suggest that you have a credit specialist look over your existing credit report. They can highlight any problems you need to address. They can also let you know if taking out the RRSP loan is likely to help you improve your credit.

    Finally, it is important to remember that a credit score is like a bolder on a hill… it’s not a problem if it’s at the top as it’s easy to keep it there…

    But, if it starts to fall it can gain momentum and it takes a lot to stop it and more to push it back up.

    That said credit care is an important practice. So take an active interest in your financial education and keep a watchful eye on your score.

    Answered on October 2, 2016 Ask Another Question
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    Rebecca from Winnipeg Asked:

    Should I pay off my debt or invest?

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    Wondering whether to pay off debt or invest is a common question and a great one!

    I wish I had a one size fits all answer for you. Pay off debt or invest should really be evaluated on a case by case basis, and really depends on your objectives.  Generally, my thoughts are that if you can pay off your debt in a few months to a year, you should focus on it primarily until your debt is paid off.  This is especially important if you are paying high interest rates.

    If you have a large amount of debt and it will take you a number of years to pay it off, I would suggest creating a small emergency fund in your savings account.  The purpose of an emergency fund is to have funds available to you should unexpected costs arise. This would help to avoid further debt accumulation, which may come with an even higher interest rate.

    If it will take you a number of years to pay off your debt, you may not want to wait that long to start investing. If you do, you will be giving up the advantage of time to grow your investments (think compound interest).  Therefore, I would recommend starting with small contributions to an investment portfolio.

    Don’t forget to take into consideration the interest you are paying on your debt and compare it to the kinds of returns you’ll be able to make on your investments.  To me it doesn’t make sense to pay high interest on debt when you only make a few percent return on your investments. Pay off debt or invest is something you should think about from a few angles before you decide your approach.

    Hope this gives you a factors to take into consideration.

    For more on the topic, you may want to watch the LimorTV episode on The Magic of Compound Interest.


    Limor Markman
    Answered on February 7, 2016 Ask Another Question
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    Credit Card Debt
    Credit Card Debt
    Emily from Calgary Asked:

    I have credit card debt on a few cards, how do I pay it off?

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    The first thing before paying off your credit card debt is for you to know exactly how much debt you have, where it is and what interest rate you are paying. It would be optimal (or preferable) to consolidate your credit card debt to one place ideally with the lowest possible interest rate.

    If it isn’t possible to consolidate your credit card debt,  I recommend you start by paying off your credit card debt with the highest interest rate. While you are paying off this debt, make sure to pay all the minimum balances on all the other credit cards.

    Regardless of whether you are able to consolidate your debt or not, you need to take the pay off very seriously!   I urge to look at your spending and if you’re not tracking it, now is the perfect time to start.  Work on establishing where you can cut back.  I don’t just mean cut back on the luxuries, take a look at all aspects of your life.

    While it really is not an easy thing, to start cutting back, you have to realize that your spending got you into this situation and you need to make changes to get yourself out! To me paying interest is like throwing your hard earned money into the garbage.

    Allocate as much as you can to paying off credit card debt for a short period of time, so you can get back to saving and investing.

    Take a look at this helpful LimorTV episode Living Within Your Means.

    Limor Markman
    Answered on February 4, 2016 Ask Another Question