The promise to pay money in exchange for the right to receive goods and services now. Examples Personal Loans Mortgages. Credit Cards Lines of credit. Overdraft protection High-cost loans Payday loans, some deferred payment plans Any service you are granted before you pay for it Rent Cell phone

Borrow only what you can repay Read and Understand the contract It is a legally binding agreement Make the payments as agreed to Track your own history. It is your responsibility to check for errors

Good Debt Borrow money to buy things that increase in value Houses, starting a business, getting an education Bad Debt Borrowing money to buy things that decrease in value. Buying a car, furniture, credit cards Most people cannot avoid all bad debt, the key is to keep it to a minimum!

Advantages Able to buy needed items now Don’t have to carry cash Creates a record of purchases Consolidates bills into one payment Required for some purchases Emergencies Paying Interest (higher cost of items) May require additional fees Easy to lose track spending Increased impulse buying may occur If not used wisely can cause long-term financial problems Disadvantages

Your ability to obtain credit is based on your credit rating Risk Score an indicator of how risky it is to loan you money. Scale from 300 – 900 A high score is good!

Credit rating is determined by the “3-C’s” Character Will you repay the debt? Is your life stable? How often do you move? Change jobs? Capacity What can you afford? Rule Never have more than 20% of your net annual income in debt. Monthly payments shouldn’t exceed 10% of your net monthly income. Collateral What can they take from you if you don’t repay! Assets such as real estate, savings, or investments

Personal information Risk Score with Special Messages or Alerts Residential History Employment History Record of your borrowing history Applications for Credit Total available Payment histories

Trans Union and Equifax 2 companies that maintain credit histories in Canada Reports are updated every 30 days All records are kept 6 years. Any late payment or application for credit sticks with you for at least 6 years.

Credit history is deleted if you have declared bankruptcy This declaration stays on your report permanently. As a consumer you are responsible to check your own credit report for mistakes.

Your payment history Do you carry over a balance on your credit card from month to month? Have you ever missed a payment on any of your debts?

Any collection or bankruptcy recorded against you Has a collection agency had to collect an unpaid bill from you? Have you ever been bankrupt?

Your outstanding debts What is the limit on your credit card? Is your spending close to your credit limit? Your account history How long have you had credit?

The number of recent inquiries made about your credit report How many times has someone asked about your credit report? The type of credit you are using Do you only have credit cards? Do you have a mix of credit cards and loans?

Apply for it and use it wisely! Student Credit Cards Student Loans Cell Phones