Take charge of your cards A high credit card limit can be a benefit or a trap – if it influences you to buy more than you can afford. Spend more than you can pay off each month and the interest – often at rates more than 20 per cent – really builds up on the balance.
The key: pay off your credit card balance each month. You’ll avoid debt and take full advantage of any reward points offered by your card(s).
Check your impulses That giant TV certainly looks great – but do you really need it?
The key: Think before you buy, weigh your options and make prudent purchase decisions. You’ll avoid escalating debt and lingering buyer’s remorse.
Take command of your life Establish a realistic strategy for saving toward your most important life goals.
The keys: First, reduce ‘bad’ debt (credit cards). Explore debt consolidation and a monthly debt reduction plan. Second, start an emergency reserve fund, perhaps in a Tax-Free Savings Account (TFSA). Third, protect your income and family with life, critical illness, and disability insurance. Fourth, fund your children’s education with Registered Education Savings Plans (RESPs). And a very important fifth, fund your retirement by contributing to a Registered Retirement Savings Plan. You can even pay off some of your debt or add to your savings with the tax refunds you’ll get.
Protect your credit rating Be sure the information in your credit report is accurate by checking it at least once a year and reporting any inaccuracies. (The two major Canadian credit rating/reporting agencies are Equifax Canada, Inc., www.equifax.com. and TransUnion Canada, www.transunion.ca.)
The keys to maintain a good credit score:
- Establish a credit history by, for example, applying for a credit card that you use for monthly expenses and paying off the balance each month. Married couples should have credit arrangements for each spouse so they have their own credit history.
- Be careful about co-signing another person’s loan. By doing so, you accept responsibility for the debt and the information is included on your credit report.
- Pay bills on time. Pay just one day late and it appears on your credit report as a late payment. It’s better to pay the minimum than miss a payment.
- Limit your credit. Every time you apply for credit it is noted on your credit history, even if you never use it.
1The Daily, Monday, December 13, 2010.