MILLENNIALS IN DEBT: 7 TIPS TO BUILD YOUR CREDIT

Did you know that nearly 80% of Millennials have difficulty planning for their financial obligations? Additionally, 30% report severe anxiety over their debt and finance.

Today, many young people start their adult lives saddled with immense student loan debt and will struggle to save as they dream of affording new homes, new cars, or vacations. Having a good credit score is the foundation of financial independence. Maintaining good credit is essential; sometimes, a single significant expense can snowball into considerable debt.

Here’s how young people can start building their credit early.

As a first step, ask your parents or guardians whether you can become an authorized user on their card. Working with your relatives will give you a head start in building a credit history.
Start with a low-limit card. When you are ready to have a credit card, get a low limit one first. Use it to pay for small items and pay it in full each month. Low limits and good habits will improve your credit rating quickly.
Develop good habits. Get in the habit of making a budget and sticking to it. Sticking with a budget will make it easier to avoid overspending and accumulate savings, just as important as having a good credit score.
Set up automatic payments. Late payments are the enemy. Ensuring you make your payments on time and in full is crucial to establishing your credit. Setting up automatic payments means you will never forget one.
Build your credit history. Once you are comfortable with your budget and your existing credit card, consider getting other cards and loans. Focus on small, low-interest credit that you can repay in full and on time. Paying back loans will help you build a solid credit history.

Do not use your debit card. Leave the debit card in your wallet and start using your credit card for day-to-day expenses. If you make sure to pay off your balance every month, doing this will help you build credit early on with minimal risk. Also, some credit cards offer a range of cash rewards and benefits if you use them regularly.

Don’t carry a balance. Maintaining a balance on your credit card can lead to the accumulation of debt. Over time, interest accrues, and you may end up paying twice the value you bought. Keeping up with interest rates is a common cause of late or missed payments, which can tank your credit score.

CREDIT COUNSELLING SERVICE IN EDMONTON

If you are struggling with poor credit or are finding that you cannot keep up with payments, consider asking for help from a licensed insolvency trustee. Fox-Miles & Associates Inc. provides reliable credit and debt counselling to Edmonton, Fort Saskatchewan, Sherwood Park and the surrounding areas! So, if you need a hand, be sure to contact us today.

WHY PAYDAY LOANS ARE NOT A GOOD OPTION

Back in 2016, the government of Alberta passed legislation to protect consumers from predatory lending practices. The new law targeted payday loan companies and lowered the maximum fee for these loans from $23 to $15, an amount that must include any service fees. Despite these changes, customers should remain wary of resorting to these loans. Here is why.

WHAT IS A PAYDAY LOAN?

Simply put, a payday loan is a short-term loan meant as a bridge between paycheques. Some people think it seems fine in theory. Still, most payday loan providers’ enormous interest rates mean borrowers must take out additional money to cover the interest payments on previous loans. While provincial law now protects consumers from paying unreasonably high-interest rates and fees, you should avoid payday loans if possible.

LOWER FEES DON’T MEAN YOU SHOULD BORROW MORE

The 2017 report on payday lending in Alberta shows that lenders issue about 65% of payday loans to customers who had previously borrowed money from the same company earlier in the year. While the new legislation protects borrowers from excessively high fees, repeat borrowing can still become a problem, primarily because some lenders have found ways around the new regulations.

LENDERS ARE DIVERSIFYING

Many payday loan companies have started offering other financial products, such as installment loans. These are short-term loans designed to solve an immediate financial crisis; in this respect, they are similar to payday loans. However, they are not subject to the same regulations as payday loans. Lenders targeting low-income customers likely to have lower credit scores can charge high-interest rates on these loans.

THERE ARE OTHER OPTIONS

Some financial institutions are now offering alternatives to payday loans. These include small consolidation loans that allow borrowers to repay payday loans and small bridge loans meant to deal with a one-time financial crisis.

SHORT-TERM LENDING CAN HELP, BUT NOT ALWAYS

While more and more sound short-term lending options are available to Albertans, you should only use these loans to deal with a temporary problem. If your debt is overwhelming and you think you need help, your best bet is to seek a licensed counsellor’s assistance.

CONSULT Our team

Fox-Miles & Associates Inc. can help you gain your financial independence back. Whether you need a credit counselling service or are considering filing for bankruptcy, a licensed insolvency trustee will help you understand your situation and your options. Contact us today to set up a free consultation or visit one of our offices in Edmonton, Fort Saskatchewan, Spruce Grove or St. Albert.