Credit Decisions

In a perfect world, you would never need to borrow money. Still, most people will eventually need a loan of some kind. Credit, if used wisely, can be used to your advantage. The key is to know your borrowing options and avoid borrowing more than you need.

The Basics:

  • There are lots of reasons to borrow money, such as paying for education, buying a house or car, paying for major purchases over time, making investments or using a line of credit or credit card when your cash flow is low.
  • Borrowing money can be a useful tool for building your assets. For example, education can help you to get a better paying job, while buying a house gives you a place to live and a valuable asset. However, borrowing to buy consumer goods can become a major drain on your finances if you have to pay a high rate of interest.
  • Before applying for a loan or credit card, shop around for the best interest rates and payment terms. Research now could save you a lot of money later.
  • Read the fine print on your loan or credit card agreement before you sign it! Knowing the terms and conditions in advance could save you a lot of money and grief later on.
  • Beware of payday loans, which are small loans that a borrower usually is required to pay back on or before his or her next payday (whether that payday is from a job or from some other income source, like a pension). These loans are one of the most expensive ways for a consumer to borrow money.
  • Credit agencies keep track of your credit history - how much you have borrowed in the past and whether you have paid it back. If you have ever taken out a loan, used a credit card, signed up for utilities, such as hydro, water or cable television, you will have a credit history. Your credit history is used by banks and businesses to decide whether or not to lend you money and how much interest to charge.
  • If you're having trouble getting credit or are suddenly billed for things you did not purchase, you can check your credit history to see if a mistake has been made.
  • Know how much you owe and how much interest you are paying.
  • Borrow money with care and always have a plan for paying back the money that you owe.

Helpful Web Sites:

  • Use Industry Canada's Cost of Borrowing Calculator to see just how much borrowing money is going to cost you.
  • The Financial Guide for Post-Secondary Students can help you to determine what type of credit is best for you.
  • Get the facts on payday loans, including potential interest rates, from Financial Consumer Agency of Canada.
  • Know the warning signs of debt from Canada's Office of Consumer Affairs before you get yourself in too deep to repay.
  • If you are struggling with your credit, get to know more about hiring a credit counselling agency with help from the Financial Consumer Agency of Canada.
  • Understand your credit report with tips from the Financial Consumer Agency of Canada.
  • There are two main credit reporting agencies in Canada: Equifax Canada Inc. and TransUnion Canada. These private agencies collect information about borrowers from other credit grantors and will sell you a report on your credit status.