Credit and Consolidation
Understanding the importance of your current credit rating, and what it really means to consolidate debt, is essential in navigating your financial journey. On Let’s Talk Money this week, Dave and Reb define credit, credit scores, and what consolidation means.
If you are interested in buying a house through a lender in Canada, having a good credit score is important. Two organizations – Equifax and TransUnion – are among those who monitor the ability of individual Canadians to pay off their debt. The higher the credit score the better your chances at borrowing more money. But as Dave and Reb point out, debt repayment is a growing problem in Canada. Missing payments can greatly affect your score and your ability to get a mortgage.
To take the pressure off financially, many people consolidate their debts into one payment, usually at a lower interest rate. While it may appear to be a smart answer to many money problems, Dave says, consolidation is not always the answer.
“People think there debt is gone, and the pressure is off when in fact it is still there and needs to be paid down,” he says.
With tighter mortgage regulations, consolidating consumer debt onto your mortgage is also getting more difficult.
“Many people may be surprised to discover they will no longer qualify with a lender, if they want to roll their debt onto their mortgage,” Reb says.
Sometimes the stress of debt causes people to pursue financial rehabilitation. So depending on the situation, financial coaches will encourage people to create a debt repayment plan without consolidating. To get advice and discover your options, contact the More Than Enough Financial Fitness office, or tune into this week’s show.