“Knowing the difference between a trustee and a councilor when it comes to debt could help you hang on to a LOT more of your assets”
Debt Trustees versus Debt Councilors
This week’s show compares the roles and options of debt trustees vs. debt councilors or arbitrators. The difference is way more than just a job description and knowing which you should turn to in times of major financial stress. The difference is super important to both you AND your wallet.
Are you interested in getting real life solutions to your debt problems? Debt Masters is offering you a free consultation in order to determine what options are available in your specific case. With no cost and the debt hounds at your door, why not get as informed as you can? If you want specific answers to your specific needs, Click below:
Financial System Secrets
The biggest secret you need to know, is that credit is not, and has never been, for the good of the people. Credit was devised by those who discovered they could make big money by renting money. Contrary to all the advertisements credit was not created in order to enable people to have everything that they want in life. Credit is marketed as “Buy Now and Pay Later” in such a way as to convince all people that “buying time” is a necessity in the process of getting all they desire. It is not true, credit is not such a necessity, it is an illusion because if we saved and paid cash we would pay far less in shorter time. Think about it; with interest charges by the time we are finished paying we have paid enough to own three homes just like the one we live in. Credit was created to harness each and every Soul into servitude so that a percentage of value of everything you do in life goes directly to the bureaucracy of the money industry.
This is why credit institutions so easily give credit cards to young people who yet have little or no means of payment. They know from statistical analysis that the majority of people, if you can get them started early, get them hooked on credit before they understand it, once they are buried in debt and carrying the payments they have little or no chance to ever get out from under their credit harness for the rest of their lives. For the Rest of their natural lives they will be paying a percentage of everything they make for nothing but some borrowed time that they lost years before.
Unfortunately, the money changers have succeeded in convincing us all that credit is a necessity. They have attached it to our very identity so you can’t move, you can not even rent a car or book a hotel room without credit identification. Like a street pusher selling drugs, they have made us need credit just to survive the policies and procedures they have promoted to govern our lives.
It used to be, that you grew relationships that meant something so your bank knew you and your integrity when it came time to be approved for a loan or mortgage. Now, with ATM’s and inter-branch services no one has time to be human and get to know customers nor do they care. In recent years, most of the major banks have completely removed loan approval authority from branches. In Canadian banks there is absolutely no discretionary lending authority or any ability to authorize credit of any sort in the branch level. As result, your entire financial life and every potential opportunity lays at the cold hard facts; Do you conform to handle yourself and your credit in exactly the way as the contract fine print demands it. And the only knowledge of your integrity to determine your worthiness in life is based on numbers crunched in credit scoring formulas. How well will you do, when the computer is done manipulating your facts?
The only possible answer for the average person is to learn all the rules to this game and play it as smart as you can to stay off of the credit crippled list. If you do not know how they handle your credit file, you are at risk of abuse. You must understand their rules! Stop the way you have been playing their game, get with the program, and handle your credit the way they demand it be handled or get knocked down, again and again.
Credit Scoring History
The credit scoring system became prominent during the 1960’s as a way for lenders to quickly evaluate a potential borrower’s creditworthiness. The system is set with tricky algorithms and number crunching to primarily predict potential financial risk to protect lenders. Thousands of different credit scoring formulas exist today for various evaluation purposes. Now credit scoring is used by lenders, insurers, landlords, employers, and utility companies to evaluate your credit behaviour. From this information they, the employees of such firms may take actions that can have a grave impact on your life.
The Basic Formula
With the basic Beacon or FICO formulas they use, they see in the majority of the population, a direct correlation between certain money habits or credit behaviours and the rate of delinquent debts registered.
The basic credit scoring formula takes into account several factors from your credit profile. The impact of each element fluctuates based your own credit profile:
- Payment history – Being regular about paying credit accounts or utility bills every other month or even being late as result of a damn good reason, will cost you your credit score. A good record of “on-time” payments for all accounts will help boost your credit score.
- Outstanding debt – Just because they give you a credit limit does not mean they expect you to use it. It may sound stupid but if you run your credit up over 50 percent of the credit limit they let you have, your credit score will nose dive as a bad risk. Aim for balances on all accounts under 30 percent of the credit limit.
- Credit account history – An established credit history makes you a less risky borrower. The older the credit account you have is the oldest standing record of your credit worthiness that you have visible. Think twice before closing old accounts especially before you make any loan application.
- Recent inquiries – Every time a lender or business checks into your credit file they must have your authorization to do so, because it causes a hard inquiry to your credit file that spends your credit score like it was your money. Every inquiry costs you score, so if you go shopping around for the best car loan deal or the best mortgage rate and allow each vendor to check your credit your score, it will nose dive to unacceptable levels before you ever get approved for a purchase. Apply for new credit in moderation. When mortgage shopping it pays to use a mortgage broker, because a broker will access your credit profile only once, and then use that report to shop around all the banks and other lenders with only one costly hit on your credit score.
- Types of credit – A healthy credit profile has a balanced mix of “revolving” credit accounts and loans. Remember multiple accounts all kept under 30% of usage is better than a couple of accounts at 75% of credit limit. Notice that a Canadian mortgage in good standing doesn’t help with establishing a positive credit history but a secured line of credit on the house does. The reason is no Canadian mortgage providers report mortgages to the credit bureaus. Home Equity Lines of Credit (HELOC), however, are usually reported. So long as they are paid as agreed, they are a positive influence on credit history. By the way, HELOC’s are becoming the more popular way to finance home purchases these days because of their tremendous flexibility. That said, the fact that they are revolving credit accounts make them unsuitable for many borrowers who will never be able to make a dent in lowering the amount owing because they will constantly draw the account down with each payment made.
Handling Your Credit Score
When you are preparing for a major purchase make sure you check your credit profile and credit score from the two Canadian Credit Bureaus, Equifax and TransUnion. Looking at your profile and score a few months before placing your new loan or mortgage application will help you get a complete picture of your credit health and an opportunity to do something to repair it before you need credit. Worried if your credit score makes the grade? If your credit score is above 650 you will probably qualify for a standard loan. Under 650, you may have trouble receiving any new credit. If that is the case its time to take remedial action or get help to repair your credit in preparation for mortgage renewal or new financing needs.
If your credit score is a little low, pay your bills on time, reduce your debt, remove any inaccuracies and avoid new inquiries for a few months to give it a boost. A DebtMasterS Credit Builder Program will help you rebuild your credit score with the ability to add 90 points in 90 days. Plus, don’t forget that your credit score is not the only factor a lender may look at when they are evaluating your financial standing.
Recognizing the Debt Danger Signals
The saddest truth of unmanageable debt is most people’s inability to see that their debt monster is out of control. People simply don’t want to see that they have a real problem brewing.
Unfortunately, denial of the problem and the refusal to take early measures tends to make the situation worse. It prolongs their suffering and ultimately limits their options later. The biggest advice we can possibly give: Don’t wait until its too late, address your issue NOW.
Look for the early warning signs of financial trouble, and seek debt recovery help sooner rather than later.
Despite the recession, or perhaps as result of covering necessities because of it, Canadians continue to borrow at record levels. From 2001, the level of household debt has doubled.
The average Canadian adult has a record level of over $40,000 in unsecured household debt, including credit cards, bank loans, etc. Many of us are obviously carrying a significant amount of debt when job loss, illness, or other crisis beyond our control strikes.
That’s a staggering statistic. If you are the average Canadian, your debt has doubled but your income has not. Evolving into eventual debt trouble is unavoidable.
|Married or Common-law3|
|Divorced or Separated|
|Average family size3|
|Average monthly income4|
|Total credit card debt5|
|Total unsecured debt6|
Standard Debt Limit Calculations
The monthly disposable income guideline says that spending more than 20% of disposable (net) monthly income on consumer debt repayment is a sign of financial difficulty. If the family is larger than average, or the income is smaller than average, or the family wants are quite high, the 20% guideline is a sign of grave financial difficulty.
Some of us are fortunate to not be facing unmanageable debt. The truth is a lot of families are in serious financial trouble. Our ability to service our debt is a combination of the amount of debt we have (which is high), the interest rates we are paying (which are low today on most forms of debt), and our income (which for many Canadians has decreased during the recession). Our household debt as a percentage of our personal disposable income continues to rise.
In fact, according to the most recent numbers available, the average Canadian adult is carrying household debt of 140.8% of their personal disposable income. That’s the highest level in history and growing by approximately 6% per year. If you are the average Canadian, this means for every dollar you earn, you have $1.41 in debt. Obviously during this recession our debt has increased much faster than our income, and Canadians are spending more of each dollar they earn servicing their debts.
If you have a good job, and if interest rates stay low, you will probably be able to continue to service your growing debts for some time. Remember though… all it takes is a slight change in our situation, one too many debts, layoffs or injury, to knock us over the edge into insolvency.
When the wind changes; if you were to lose your job, or have your hours cut back at work, or go through a divorce, or have a medical problem so you couldn’t work, you wouldn’t be able to continue paying your mortgage, your car loan, your line of credit, and your credit card bills because your survival food, shelter, utilities take all the money you can manage to pay.
The way the credit system and economy has evolved, it is almost guaranteed that a very high percentage of people are going to fall into financial trouble. This kind of trouble is going to be seen as a sign of our times. The fact that so many people will need to cry “Uncle” means that debt or credit problems can no longer be considered a profound personal disgrace or blight on your integrity to be hidden. In the good times you were taught to believe in a “Buy Now Pay Later” credit lifestyle by those who could profit by your ongoing use of credit. No one could foresee this economic shift or considered possibilities of growing out of control in crisis. You will continue to grow into worse financial condition as long as you do not take action and eventually the outcome of action to be taken will be the same or will have worsened. No one should feel disgraced by taking action to stop the bleeding and get on with a happy productive life. So do not delay, if your debt has become unmanageable, take action Today!