What is a Credit Builder Account?

What is a Credit Builder Account?

With bad or little to no credit history getting a loan may seem impossible. A Credit Builder Account is designed to help you boost your credit score which makes approval for loans, mortgages and credit cards, more likely.

A Credit Builder Account (also known as Credit Building Loan, Fresh Start Loans, Credit Rehab Savings Program) is one way you can start building a strong credit history. The amount borrowed is held in a secured account while you may payments towards the total amount. Every payment is reported to the Credit Bureau which results in establishing positive credit. When the loan is paid off, the money is deposited into your account.

Having a good credit score is more important than you think. Lenders will always take into consideration your credit score before approving you for a loan or mortgage and to determine affordable interest rates. While it seems like a hassle, it is necessary to take the time and look for ways to can improve your credit score.

How a Credit Builder Account Helps Boost your Credit Score

A Credit Builder Account helps consumers build their credit history by providing the opportunity to make small monthly payments into a secured savings account. By making scheduled payments, positive monthly reports will be sent to the Credit Bureau, resulting in an increased credit score.

Once the Credit Builder Account is paid off, the initial amount is released to you and deposited into your bank account.

Most Credit Builder Account loan amounts are on the smaller side, ranging from $1,000 – $10,000, which means small monthly payments are manageable. Interest rates can range from as low as 5% all the way up to 17.99%.

The Credit Builder Account terms also vary depending on the lender, ranging from 12 months all the way to 60 months.

For the Credit Builder Account to help boost your credit score, you MUST repay the loan on time. It is with positive payments that the lender will file good reports to the Credit Bureaus which in turn will lead to improvement of your credit score.

How to Find a Credit Builder Account Provider 

Credit Builder Accounts are generally offered by smaller financial institutions and online lenders. Be sure to compare different loan providers and choose a Credit Builder Account that you can easily afford. It is important that you commit to repaying the loan on time so that you can register good ratings on your credit score.

Also, try to look for lenders with added benefits. Climb offers free Credit Consulting to anyone. Their goal is to help Canadians build better financial futures and start the process with a Credit Bureau and Budget Assessment. If you are looking for a customized plan to help you get back on track, Climb is the place to go.

Capital One also offers a Secured Credit Card to help boost your Credit Score. Similar to a regular credit card except that approval is guaranteed as you secure the card with some of your own funds. Monthly payments are also reported to the credit bureaus, impacting your credit score.

Pros of Credit Builder Account

  • You will develop good savings habits, as a Credit Builder Account forces you to save money
  • Easy to apply for
  • When you have paid off the loan amount, the money is deposited into your account
  • As you make monthly payments, you will learn financial discipline
  • With a higher credit score, you will be more likely to be approved for a loan, mortgage or credit cards and receive better interest rates.

Cons of Credit Builder Account

  • Late or missed payments will be reported to the Credit Bureau and will negatively affect your score
  • Credit Builder Accounts are not free, so be sure to ask about fees. They could be referred to as set up, admin or application fees and vary from lender to lender.

Is Perfect Credit Necessary?

Guest written by our friends at LoansCanada.

Is Perfect Credit Necessary?

Getting by without credit is rare for most people these days, especially in Canada, where credit cards and loans are two of the main ways that people deal with unexpected costs and sometimes even day to day expenses. So, when it comes to the health of your credit, is good credit enough? Or should we all be striving for perfect credit?

Check out these five healthy credit boosting tips.

What Are Your Credit Score and Credit Report?

In the world of credit, your credit score and credit report are important when you’re trying to get approved for most credit products, such as installment loans, lines of credit, and mortgages. That’s because both elements showcase your ability as a credit user.

When your first credit product gets activated, your creditor will send your information to either one or both of Canada’s major credit bureaus; Equifax and TransUnion. Typically, both bureaus will have a slightly different version of your credit score and credit report on file. When you apply for a new credit product, your lender may ask to pull your credit as a way of calculating your creditworthiness.

Your Credit Score

A three-digit number ranging from 300-900, your credit score is one of the first things that any potential lender will look at when considering you for new credit. Like a grade-point-average, your score is a basic way of depicting your credit health. Every good credit action you make will elevate your credit score, leading to all sorts of possibilities and benefits down the line. The further your score climbs toward 900, the better your approval results will be.

Your Credit Report

In many ways, your credit report is even more important than your credit score. That’s because your report is a detailed file that contains a history of all your credit usage spanning over a predetermined number of years. Essentially, if your score is like your grade-point-average, then your credit report is like your report card.

Although your credit score gives a lender a simplified look at your creditworthiness, your report is used to get a detailed picture of the way you have handled credit in the past and the way you might handle it in the future. Your report also details your status of residency, social insurance number, and other kinds of personal information. For the best approval results and interest rates, it’s best to have a clean and healthy-looking credit report.

Why Good Credit is Important

Generally speaking, good credit qualifies as having a credit score that falls somewhere between 700 and 900, although it’s important to keep in mind that what passes as good credit will vary from lender to lender. A good credit score implies that you have been and will continue to be responsible with all your active credit accounts. Good credit is also important because:

  • Less risk is imposed on the lender, so you’ll be more likely to qualify for a lower interest rate. The lower your interest rate is, the more money you’ll effectively be saving over time.
  • Good credit means you are responsible and gives you the best chance at being approved for any credit product.

Is Perfect Credit Necessary?

Having perfect credit, often represented as having a credit score above 800, is a surefire way of getting approved for any credit product on the market and saving money on interest. However, whether perfect credit is necessary really depends on what kind of credit product you’re applying for, how much credit you’re requesting, and the type of lender you’re applying with.

For example, if you plan to apply for a mortgage through your bank, your credit health would need to be next to perfect, because banks have high approval standards and a mortgage involves a significant amount of money. The more of a risk you pose as a client, the less likely they’ll be to approve you. On the other hand, applying for a small loan or traditional credit card poses far less risk, so perfect credit isn’t necessary.

All this said, there are plenty of other organizations that you can apply with if your credit is less-than-perfect, such as alternative, privately funded, and bad credit lending institutions. Just know that while your approval would be more likely with such places, your interest rate may be less affordable. This is one of the main reasons why all Canadian consumers should keep an eye on their credit and implement healthy financial habits so that they can build and nurture a good credit score.

Is Perfect Credit Worth Being in Debt?

The simple fact is, the more credit you use and the more loans you take on, the more opportunities you create to build and improve your credit. For those consumers who are looking to grow their credit, it is all too easy to become fixated on the idea of perfect credit. It’s important to keep in mind, while good or even great credit can help you achieve financial goals and creates opportunities, racking up excessive debt just to see a three-digit number rise, is not worth it.

Learn how to improve your credit score without increasing your debt, click here.

When All is Said and Done…

Perfect credit, while it may seem beneficial, is not necessary. In fact, it can be quite difficult to obtain “perfect” credit in the first place. So, if your credit score isn’t in the high 800’s, there’s no need to worry. Instead, aim to have healthy financial habits that lead to good credit.

The Good Side to Loan Denial

Being turned down for a loan can be emotionally and financially straining.

While it is not easy to always look at the positive side, being turned down for loans can be a good thing. Loan denial tells you that there is a problem with your credit and financial situation. It should be a warning sign that it is time to learn more about your financial situation and understand why you were denied. Understanding how lenders view your credit report is critical and will set you up for success the next time you apply for a loan.

You’ve been Denied. Now What?

1. Understand why you were denied

You can contact the lender, and they will provide you with an explanation as to why you were denied a loan.

Common issues of what went wrong with your loan application:
  • Poor Credit Score: Your credit score is the number one reason a lender would deny you a loan and is the backbone of your overall credit history.
  • Errors in your credit report: Review your credit report of any errors. If you can identify an issue, you can dispute it with either of the two credit bureaus in Canada: Equifax and TransUnion.
  • Limited credit history: If you have little or no credit history, lenders are more likely to deny you a loan. To build your credit score, consider applying for a Credit Building Program/Account or a secured credit card. Both products are highly recommended for people with poor, little or no credit.
  • Incorrect information on your application: Double check all your information before applying.
  • Perceived high financial risk: If your expenses are higher than your income, a lender may view this as high risk.
  • Did you meet basic requirements: Most loan applications come with a minimum age, income level, and other conditions. Make sure you meet the requirements.

Your Credit Score
Five main factors are impacting your credit score:
  • Payment history
  • How much credit you have available
  • Credit history
  • Types of credit (loans, credit cards, etc.)
  • Too many inquiries on your credit profile

2. Review your Credit Report

You can see where you stand with your credit score by getting a credit report, which is a summary of your borrowing history. You should review your credit report for accuracy.

Several online sources do this at no cost, as well as TransUnion and Equifax.

You should review your credit score at least once a year to make sure the information is correct. If you are planning an important financial decision over the next few months, be sure to review your report ahead of time and make any necessary steps to ensure your score is optimal.

3. Address your Finances

Once you’ve gone through the process of understanding why you were denied for a loan, review your credit report and have a clear picture of where you stand financially, you can now move on to developing a plan on how to rebuild your credit to help prevent another loan denial.

Focus on improving your financial situation, paying down debt and improving any other issues that are affecting your credit report.

If you are not sure of next steps on how to rebuild your credit, some companies focus on helping Canadians boost their credit score and develop customized plans for you to get you back on track. Climb is an online Credit Building Service with the goal of building better financial futures. They review your credit report, educate you on your credit score (what it means and how to improve) and develop a customized plan to boost your credit score and hopefully, get you approved on your next loan.

Another solution, if you are looking for a quick fix, could be the Capital One secured card. Using this card responsibly will help boost your credit score and result in positive payments on your credit report.

If waiting to rebuild your credit score is not possible because you need money now, you could consider using savings, borrowing from a family member or a friend or asking your employer for an advance and working out a payment plan.

Being turned down for a loan can be discouraging, however, take this opportunity to take a hard look at your credit and financial situation and put a plan in place to improve your credit score. By doing so, you will improve your chances of being approved for a loan in the future.

Christmas Budgeting Tips: How to Avoid Overspending

The holiday shopping season is in full swing and so should your Christmas budget. According to the RBC 2018 Holiday Spending & Savings Insights Poll, four in ten Canadians (42%) admit they overspent on their budgets – spending on average $530 beyond what they planned.

To avoid the adverse effects of your holiday shopping in January, get ahead of it and set a Christmas budget to prevent overspending.

Christmas is a fantastic time of year; decorations, entertaining, buying gifts for friends and family – who doesn’t love Christmas? However, the real question to ask is ‘Who loves debt’?

Here are some Christmas budgeting tips to avoid overspending this holiday season.

1. Set A Budget

Sit down with the key decision makers (Partner, spouse, etc.) and decide how much you will be spending. Think about how much you have spent in previous years and where you will like to increase or decrease.

Take into consideration all of the areas of the Holiday season, not just gifts. These include:

  • Entertaining
  • Food
  • Holiday cards
  • Family photos
  • New decorations
  • Santa experiences
  • Travel
  • Charitable giving

Ensure you add these items to your Christmas budget.

2. Limit Self-Gifting

One of the most significant holiday trends which always result in overspending is ‘self-gifting’ – people treating themselves to presents when they are out shopping for others. Avoid buying gifts for yourself when you are out shopping. It is not about you it is about spreading the Christmas cheer with others.

3. Create a List of Who to Buy Gifts For

Make a list of who you are buying for and write down how much you are spending on each, including taxes. While most of the gift giving will go to your immediate family, think of other gifts that pop up along the way, including teachers, neighbours, secretary, dog walker and grandparents, etc.

Once your list is complete, start thinking about if you can afford to buy gifts for everyone on your list. While it is fun to buy gifts, there are so many ways to spread holiday cheer without an actual tangible gift.

4. Create a Shopping Plan

Now that you know who to buy for and how much to spend on each, it is the time to strategize about the shopping plan. Start by writing down a few gift ideas for each person and how much you plan on spending.

As you think through what gifts to buy, think about how you will be purchasing (online/in stores) and where. As you identify where you can source these gifts from, you can start looking for deals, including:

  • Friends and Family weekends
  • Black Friday
  • Free shipping

There are hundreds of deals to be had leading up to the holidays, and the sooner you know what gifts to buy and where, the earlier you can take advantage of the deals and save money.

5. Track Spending

One key component to ensuring you stay within your holiday budget is to track your spending daily. Practicing due diligence during the holiday season is essential. Every penny counts because of the extra shopping, so buying the daily latte can add up and affect the money you have available to spend.

While there are several free apps available, you don’t need anything fancy to accomplish this. Use a simple piece of paper and pen and at the end of each day, record the items you spent that day and compare it regularly with the budget you created.

6. Alternative ways to spread Christmas Cheer

While it is nice to buy gifts, we all know that there are several other easy and frugal ways to spread the Christmas cheer without breaking the bank. Below are some examples of how you can experience the holidays while keeping your wallet in check:

  • Be a savvy shopper. Not only look for deals but find stores that have a selection of gifts at a very reasonable price. For example, head to the Dollar Store and find a holiday-themed mug and fill it with treats for teachers, assistants or others.
  • Bake extra Christmas cookies to make a special treat platter.
  • Gather the kids together and create simple Christmas crafts, cards or ornaments.
  • Replace a tangible gift with time. Think about experiences you could do with loved ones where spending time together is the gift – the real reward.

It is essential to be realistic about what you can afford this Christmas and not be influenced by media on how you should experience Christmas. It is tough when magazines, social and TV have beautiful photos of how your house should look or what the ‘perfect’ gifts are for your friends and family. To overcome the pressures, think about what is realistic with your budget, what is important at Christmas and how overspending on your budget will affect you in the New Year.

How to Set up your Christmas Budget

One of the most significant stresses during the holiday season and probably the one that most people avoid talking about or thinking about until January is overspending on their Christmas budget.

If you are worried about overspending this Christmas, the solution is easy – set up a Christmas budget!

Here’s How:

Step 1

Decide how much you can realistically spend on Christmas gifts. Now is the time to think about all the people you realistically buy for, not just immediate family. What about teachers, assistants, secretary, neighbours, your dog walker, the crossing guard, work Secret Santa, etc. Your family situation will determine the total budget, which might be a lot or not enough.

Step 2

Think about how much you can realistically spend on each person, given the budget you have earmarked.

Step 3

Create the actual budget. While there are several free apps available, you don’t need any fancy software to accomplish this.

  • Use a simple piece of paper and pen and write Christmas Budget at the top.
  • Have three different columns with the following headings: Gifts Required, Planned, Spent and Remaining.
  • Under Gifts Required: Write down all the names of people you would like to buy for.
  • Under Planned: Write down the amount you want to spend on each.

Your Christmas budget might look like this:

Christmas Budget

[table id=10 /]

Step 4

Track your Spending

The last two columns are the most important ones, as this is where you will track your spending as you shop.

  • Under Spent: Write down every dollar you have spent for each person
  • Under Remaining: This will be the difference between what you Planned and what you have Spent

Your working budget might look like this:

Christmas Budget

[table id=11 /]

Things to remember:
  • Don’t forget to adjust based on how much you spend. If you find something on sale, change the Planned Budget to what you paid and move the extra money to another gift or don’t even spend it.
  • Have Fun. Have fun with the budgeting and shopping. Make it a goal of yours to have remaining dollars left in every category!

Happy Spending!

Ten Tips for Holiday Entertaining on a Budget

The holidays are an exciting time to host friends and family; however, with all that is going on in November and December, our budgets can be spread very thin.

With the joy of the season and the need to save money, below are Ten Tips for Holiday Entertaining on a Budget:

1. Plan

Sit down and plan out all of your holiday entertainings. Think about all the categories required to host and entertain:

  • Food
  • Decorations
  • Invitations
  • Parking
  • Entertainment
  • Gifts
  • Childcare
  • Cleaning

2. Set a Budget

Once you have outlined all the categories, set a budget. Set a reasonable amount of money for each of the items, then stick to it!!!

3. Shop Smart

Avoid getting the necessary entertaining essentials at the most expensive stores. Hit up your local Dollar Store for some household essentials, including paper napkins, paper plates, and plastic utensils. No one is going to know the difference.

4. Buy in Bulk

Great deals are available when you buy in bulk, especially at places like Costco Wholesale. It is always good to have extra on hand especially if you host throughout the year. That said if space is an issue consider splitting with a friend. Not only will that save you on space, but you can also split the cost.

5. Borrow

Instead of buying items needed for hosting, consider borrowing the things you need from friends and family, including extra tables, chairs, tablecloths and serving trays. In the end, this will save you a great deal of money. Make a list of the items you need and reach out to your contact list to see who has them available.

6. DIY Greenery/Centre Pieces

Consider making your greenery for holiday decorating with what you have in your backyard.

7. Basic drinks

No guest is expecting a fancy cocktail, so cut down the extra costs by choosing to serve only a few drinks.

8. Simple Decorations

Avoid spending a ton of money on new decorations. Use what you have on hand to create a festive ambiance. Candles, greenery, a Christmas Tree are all available to set the mood.

9. Plan meals ahead

Set the menu weeks in advance. Consider any dietary restrictions or allergies. Once your meal plan is confirmed, make a list and plan your shopping to hunt down the best deals.

If the budget is tight and you still want to entertain there are a few options, you can consider:

  • Potluck Party – ask guests to bring a side or dessert to share. You provide the place, drinks, main dish, and utensils.
  • Plan a simpler menu – Think easy, limited-ingredient main dishes. A creamy pasta dish is a great way to use what you have in your kitchen. For the appetizer, think about whole roasted nuts or seed crackers with a smear of cream cheese and a dollop of red pepper jelly.
  • Skip dinner – Skip dinner altogether and serve an appetizer and dessert buffet vs. a costly and timely sit-down meal.

10. Music

Christmas music is a great way to set the mood. If you don’t have access to a free streaming service, many radio stations play round-the-clock Christmas music leading up to the holidays.