Wise Habits
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Pay your bills on time. If you are unable to pay your bills as agreed, contact your creditors and explain your situation. If you need advice, contact a not-for-profit credt counselling service, like Mosaic at 519-743-6333.
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Read and understand a credit contract before signing. If you don't understand it, ask questions until you are satisfied.
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Don't use credit cards as your emergency fund.
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Try to pay off any debt quickly. Avoid those prolonged low monthly payments and avoid having to refinance at higher interest rates.
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Avoid owing more than 10% of your income (excluding your mortgage).
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Deal with known, respected and established companies.
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Make sure you understand the total cost of your purchase.
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Never sign a blank sheet. Your signature is your promise to pay and a contract is a legal document.
Understand Your Credit Options
|
Option |
Interest Rate |
Pros |
Cons |
Cost of Financing
a $1000 Purchase
Over 12 Months |
|
Bank Loan |
4 - 12% |
-lowest interest rate
-payment flexibility |
-loose assets tied to the loan if payments are delinquent
-affect credit rating |
$54.99 (10% interest, paid annually) |
|
Line of Credit |
4 - 12% |
-quick access to emergency funds
-payment flexibility |
-build up debt load quickly
-affect credit rating if delinquent |
$66.19 (12% interest, paid monthly) |
|
Major Credit Card |
9 - 18% |
-convenience
-payment flexibility
-air miles & other incentives |
-affect credit rating if delinquent |
$94.46 (17% interest, paid monthly) |
|
Store Credit Card |
27 - 29% |
-convenience
-payment flexibility
-air miles & other |
-affect credit rating if delinquent |
$158/07 (28% interest, paid monthly) |
|
Finance/Credit Companies |
29 - 33% |
-less stringent qualifying criteria |
-high interest rate
-affect credit rating if delinquent
-loose assets tied to loan |
$175.76 (33% interest, paid monthly) |
|
Pay-Later Plans |
29 - 33% |
-balances may be paid before interest is charged |
-high interest rate if not paid by due date |
$0 (paid in full before interest is charged) |
