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Review Your Credit Options

If you are watching your budget, then you can avail yourself of more credit, but you don’t want to overdo it either. Credit should be used responsibly or not be used at all. So, review your credit options and see how they can fit into your overall financial plan. Naturally, once you develop a budget, you will want to stay away from credit that is defined by high rates of interest or any exorbitant fees. The Payday Loan – A Good Credit Option for a Short-term Expense For example, a payday loan is a high-interest loan, but is a manageable lending option if you do have a budget and run into an emergency. It’s just not a good idea to take out this kind of loan if you are going to use the money for a quick getaway or for a frivolous pursuit. Use a payday loan for taking care of an unanticipated expense, such as a plumbing problem or a car expense.  

The Car Title Loan

  Usually, it’s a good idea to perform some research and use some caution before you apply for credit, such as that represented by a car title loan. To secure a car title loan, you must provide the title of your car as collateral in case of default. So, if you make a payment late, your car could be repossessed – not a good loan to take out if you are using the vehicle for getting to work or picking up your kids from soccer practice or school.  

Use Credit to Upgrade Your Standing

  Therefore, the credit you choose to obtain should help build your credit history or your reputation financially. Use the credit your obtain to show lenders that you are a responsible payer – that your bills are paid on time and that you can stay within your credit limit. Don’t apply for credit and mar your standing by defaulting on a loan. Use the credit you secure to establish a noteworthy history.  

How Your Credit Raing Affects Other Areas of Your Life

  Since your credit record is the main criteria used for getting a loan, it also extends to other activities – such as getting a job, purchasing or renting a home, financing a car, or applying for a credit card.  

Follow a Budget Plan that is Realistic and Responsible

  However, even if you don’t possess a glowing financial record, you can still continue to improve your credit history by practicing financial discipline and good budgetary practices. When you use credit wisely, you get into the habit of assessing your spending habits so you are careful about the purchases that you make. So, building and establishing a good credit history requires that you follow a course of budgeting that is realistic and responsible.  

Establishing a Credit History

  If you have not established a credit history, apply for a bank credit card or a retail charge. Pay the bill each month by its due date to show that you are a reliable manger of your money. Make sure that the issuer of the card sends your information to the two credit reporting agencies.  

What to Do if You Have Had Credit Issues

  If you have had credit issues, consider applying for a secured card, which works just like a regular credit card with respect to its use. However, the money of a secured card is backed by a deposit that you make into a bank account set up by the issuer of the account. The money is used to cover any unpaid debt.  

Re-establishing Your Creditworthiness

  Paying your bills on time can help you re-establish yourself as a good payer and assist you acquiring  credit cards that offer lower APRs and rewards. So, when you are shopping for a secured credit card, always look for one that has a low yearly fee and no up-front costs for processing, application, or membership. Try to find one that allows you to put the security for the card into an interest-bearing account.  

An Annual Fee

  Any discussion of credit is not complete without reviewing some of the terms that are associated with maintaining a credit card. For example, most cards levy an annual fee, which is a yearly charge, similar to that of a membership fee.

The Annual Interest Rate – Added to Cash Advances and Balanace Transfers

  The annual interest rate is the yearly interest divided by the borrowed amount and expressed in terms of a percentage. The interest is charged on balance transfers and cash advances from the day of withdrawal. If you take out a cash advance, you usually are also assessed a fee, which is typically about three percent of the money advanced.  

Non-revolving and Revolving Charge Accounts

  Cards can be issued as non-revolving or revolving accounts. Non-revolving accounts represent those cards, such as Diner’s Club or American Express, where the full payment is due each month. Revolving accounts include such cards as MasterCard or Visa or retail store accounts – cards which permit consumers to make minimum monthly payments or revolve or rollover the leftover balance into the proceeding or following month’s balance.  

Transferring a Balance

  A balance transfer is a transfer of a card balance from one credit card to another, frequently between two cards that are issued by different financial institutions. Most people transfer their balance onto a card with a lower rate of interest. However, the lower interest rate usually lasts no more than six months. Plus, if you happen to make a payment late, that low rate is generally supplanted with a much higher rate.  

Convenience Checks

  Credit card issuers also offer convenience checks to their customers. Treated like a personal check, a convenience check is looked at the same way as a cash advance. Therefore, interest is charged from day one of the initial check transaction.  

The Grace Period

  The grace period for a credit card begins from the time that a charge is made and goes until the time a charged amount starts accumulating interest. Grace periods vary from 15 to 26 days and denote an interest-free period. Therefore, the period does not apply if you carry a balance or take out a cash advance. It is only applicable to Canadians who pay off their cards each month. Purchases are only charged interest if the balance is not fully paid by the specified due date.  

Deadbeats and Revolvers

  A deadbeat is a term used for anyone who pays his card balance in full each month. Close to 70% of Canadians are considered “deadbeats” while the remaining card users are called “revolvers” – people who carry a balance on their cards from one month to the next.  

The Minimum Payment

  The minimum payment on a credit card is the minimum amount due each month on the balance. Card issuers typically set this amount at around 2% of the debt.  

Penalty Interest Rate

  A penalty interest rate is the measure used to determine charges for penalties.  

The Prime Rate

  The prime rate is a a preferred, lower rate of interest that is assessed on credit cards of preferred card users.  

A Reference Rate

  A reference rate is the underlying index which is utilized in the calculation of variable interst rates for credit cards.  

The Equifax Credit Reproting Agency – The Largest Credit Bureau in Canada

  In Canada, Equifax is the biggest credit reporting bureau in Canada. Using the FICO score algorithm to determine credit scores, the agency holds the files of more than 20 million Canadians.  

The FCAC

  The FCAC or Financial Consumer Agency of Canada was established to educate and protect financial customers who take out credit cards and loans. So, if you want to understand more about short-term and long-term funding options and how credit is utilized and works, this is a good reference point.