Money Management for a New Canadian Citizen

new canadian

Being an immigrant in a new country can be an intimidating experience. In addition to learning a new language (in some cases), you also have to adapt to a new culture and a new way of living. When immigrating to Canada, your previous financial history is unfortunately often also irrelevant. Here are some money management tips for a new Canadian citizen to help you settle into your life in a new country.

Establish a Credit Score

The first thing you’ll need to do is to establish a credit score. Life in Canada often revolves around credit; whether you’re buying a home, a car, or renting an apartment, you’re going to need a solid credit score to convince the bank to lend you money.

So how do you persuade lenders to give you money to establish a credit score if you need an established credit score in order to borrow money in the first place? Your best bet is to apply for one of two things: a secured credit card or a credit card that exists specifically for a new Canadian citizen.

Open a Bank Account (Checking and Savings)

Opening a bank account should be one of the first things you do as a new Canadian citizen upon arrival to Canada. At minimum, you’ll need a checking account (for your day to day transactions) and a savings account (to put aside money in case of emergency, to meet a savings goal you have [i.e. home ownership], or to help pay off any debt you might have accrued in the move.)

Figure Out Your Long Term Financial Goals and Plan Accordingly

Once you’ve got your basic bank accounts set up (credit card, checking, and savings) it’s a good idea to think about and start planning for your long term financial goals. A TFSA is a good multi-purpose long term savings option while an RRSP is specifically to help you save for retirement and an RESP is to help you save for post-secondary education (for yourself or your children). A TFSA is often the best place to start as you can put money away and withdraw from it without penalty (meaning you can choose to use those savings for whatever you’d like without the same restrictions that come with an RRSP or an RESP.) Make sure to speak with a bank teller and figure out which account meets your needs before committing to anything.

Stay on Top of your Finances

Once your accounts have been set up, it’s important to stay on top of them. This means paying your bills every month, keeping an eye out for any suspicious activity, and teaching your kids how to effectively manage their money as well.

Need some additional money management tips? We can help! Fill out our online application here.

How to Stop Overspending

So you get take out or eat at a restaurant once or twice a week, that’s no big deal. And sure, you buy a latte every morning but it’s only $4.00. Maybe the weather is changing and you need to restock your wardrobe – $50 on a nice sweater is pretty reasonable, especially if you plan to wear it a lot. And besides, you can always put it on credit and pay it back later, right? That’s how easy it is to fall into the trap of overspending. $4.00 here and $10.00 there might not seem like much but it’s troubling how quickly things add up. Here are some tips to help you stop overspending before you end up under a mountain of debt.

Make a Budget

The most important thing you can do is make sure you understand exactly where you stand financially. Creating a budget might sound intimidating but it doesn’t have to be complicated. Essentially you need to know exactly how much money is coming in to your bank account, how much money is going out (to pay bills/into savings etc) and how much is left over.

You’ll find that you’re much better at figuring out how much disposable income you have at any given moment once you know how much money you actually have available to spend.

Know How Much Available Credit You Have

Whether you have 1 credit card or 10, you need to know how much available credit you have. In general, you should try not to exceed more than 30% of your available credit (so if you have a limit of $1000.00, you’d want to cap your spending on that card at around $300.00). Of course, life happens and you may need to use a higher portion but you should try to never exceed more than 70% of your available credit.

Why does it matter? Because credit bureaus like Equifax and TransUnion use that information to calculate your credit score. The more available credit you use, the worse it is for your score. By sticking around 30%, you’re showing lenders that you have access to credit but you don’t rely on it to stay afloat.

Check Your Bank Account(s) Regularly

This is a good practice to get into in general because it helps you reduce the chances of being caught off guard by identity theft or credit fraud. Checking your bank accounts regularly means that you always know exactly how much money you in total and exactly how much money you actually have available to you at any given moment. It will help you prioritize your bills and, more importantly, will (hopefully) be the voice of reason in your ear dissuading you from making an impulsive purchase you really can’t afford.

Practice the 24 Hour Rule

Just because there’s a sale on the new iPhone at your local electronics department doesn’t mean you should whip your credit card out. Practice the 24 hour rule and wait a full day before making any big impulsive purchases to reduce your chances of debt and to ensure you don’t have buyer’s remorse after the fact.

When in Doubt, Keep Your Receipts

If you end up with buyer’s remorse, it’s not the end of the world so long as you’ve kept your receipt. Obviously this doesn’t apply to opened items, but if you bought something and have second thoughts when you get home, a receipt means you can almost always return it to the store and get your money back. The window for returns is typically within 7 to 30 days. If you bought something online and want to return it, you can usually return it in person to the store itself if there’s a physical location. For online retailers like Amazon, you can typically return it for free by printing the bar code provided by Amazon and dropping it off at a UPS store or Canada Post.

Be Reasonable

There’s nothing wrong with treating yourself every so often. The key is to spend in moderation. So long as you’re still able to pay your bills, put some money away into your savings, and still have some money left over, you’re doing something right.

How Can You Check Your Credit Score?

check your credit score

Knowing your credit score is an important part of being financially independent and responsible. Your credit score is the key to unlocking personal loans, mortgages, credit cards, and is often required by a landlord in order to rent property. So how can you actually check your credit score? There are a couple of different ways depending on your needs.

Easy Access/Online

If you don’t need your full credit report and just need to know what your actual credit score is (or how many accounts are being reported to the credit bureau), then the easiest option is to use a verified site like Credit Karma. Be aware that Credit Karma only pulls data from TransUnion and not Equifax and that the data generated is not as detailed as the credit report you would get from Equifax or TransUnion.

Sites like Credit Karma are best for Canadians who need to prove their credit score to a landlord or employer.

Contact the Credit Bureaus Directly

For anything more serious/requiring a detailed credit report, your best bet to check your credit score is to order a credit report from both Equifax and TransUnion directly. You can get one free credit report pulled every year and the information included in it chronicles your financial history in detail.

It’s important to look through the credit reports generated to ensure the information is as complete and accurate as possible. Errors can happen and, in the case of your credit report, even one misplaced comma or omitted figure can have a huge impact on your score.

Equifax and TransUnion report separately and don’t share data with each other so it’s important to make sure you request a copy of your report from both of them and review them both independently. It’s not unusual for one credit bureaus’ report to differ from the other credit bureau. You want them both to reflect the same information so that you know your credit score is accurate and up to date across the board.

This is why it’s important not to rely solely on sites like Credit Karma to check your credit score; if Credit Karma only pulls their data from TransUnion and TransUnion has an error in your file, then the score you’re shown is going to inaccurate too.

Remember that your credit score and your credit report are two different things; your score may be a reflection of the information on your report but it’s ultimately still just a three digit number. Your report, on the other hand, is a detailed account breaking down all of your accounts and your financial activity (including slow, delinquent, or missed payments).

Together, your credit score and your credit report work hand in hand to give lenders an accurate idea of your financial standing and your trustworthiness with their money.

Grey Charges – What are They?

grey charges

Have you ever gotten credit card bill and seen a charge for a small amount or for a company you don’t recognize? While your first instinct might be to assume it’s credit fraud or identity theft, there’s another less talked about option: grey charges.

What are Grey Charges?

Grey charges, in the simplest of terms, are charges for services you’ve forgotten about/were not aware of and that you don’t use but that are still charged to your credit card each month. Remember the gym membership you signed up for and totally forgot about? How about that video streaming service with one month free and then they charge you full price every month? Despite not actually going to the gym or using the VOD service, the company could easily still be charging you if you forgot to cancel (depending on the length and terms of your contract).

Grey charges aren’t inherently bad or good, but they are a quick and easy way for companies to keep making money off of you without realizing. How many times are we enticed by a service or product offering a free trial with no commitment to stay subscribed? It’s not hard to see how easy it would be for people to sign up, get distracted by things going on in their real lives, and completely forget to cancel before the trial is up.

What Can You Do to Stop Grey Charges?

Every time you sign up for a service with a free trial, write down the date you signed up and the date you need to cancel by in your calendar. Set up an alert up in your phone to remind you to cancel a day/a couple of days before the billing period starts and check your credit card statement each month to ensure every charge that’s there is 1) legitimate and 2) not a service you signed up for but forgot to cancel.

While prevention is key, it’s not always possible to catch a grey charge before you’ve already paid for a few months of service you didn’t actually use. That doesn’t mean it’s too late to start paying closer to attention to your statements.

If you have any questions or don’t recognize a charge, look at the date the charge appeared and try to remember what you were doing that day. Sometimes a charge will appear for a purchase you did make but the way the company appears on your statement looks unfamiliar. In other cases, it could actually be an instance of theft (in which case you should call your financial institution as soon as possible to report it and get your card cancelled).

If it is a grey charge, try to figure out what service you signed up for and cancel your subscription. Most services will send a receipt to your email so see if you can find something in your inbox that matches the billing date of the current grey charge but from a previous month.

Be cautious about how many free trials you sign up for and remember to cancel anything you don’t use. Also be aware that not all business are forthright and might sneak a subscription fee into your bill without you even realizing until it’s too late.

Grey charges may not seem like that big of a deal as the amounts are often reasonable, but even a monthly $14 charge for a service you don’t use is still going to cost you an extra $168 a year (that you’ve basically just thrown

A Good Credit Score: Become a Credit Superstar

good credit score

Having access to credit isn’t just a fundamental part of how society functions, it’s a requirement for a huge number of important financial milestones. Mortgage, car loan, student loan, you name it: a good credit score is your key to tapping into borrowed money.

So how do you actually obtain a good credit score? Keep reading to learn how to become a credit super star and stay on top of your finances.

Check Your Score at Least Once a Year

All lenders/financial institutions report your spending and repayment habits to two credit bureaus in Canada – Equifax and TransUnion. In theory, your credit report and score should be the same with both bureaus. In reality, errors happen and even one mistake can seriously affect your score.

Order your credit report (from both bureaus) at least once a year to check for any errors, omissions, or falsehoods. The sooner you can get the mistakes fixed, the sooner your credit score will bounce back to where it should be (and the sooner it will be an accurate reflection of your financial history).

Pay Off and Pay Down as Much Debt as You Can

Most people have more than one credit account open. Whether it’s credit cards, loans, or lines of credit isn’t particularly relevant; what does matter is your repayment history and how much debt you’ve accrued.

Look over all of the open accounts you have, find out how much money you owe on each, and try to pay down and pay off as much of that debt as you can. If you have a number of credit cards with a balance on them, try rolling some of your debt over into the account with the lowest interest rate (or consider opening a new account with an even lower interest rate to help reduce how much you’ll be paying back in accrued interest charges).

Don’t Close Old Accounts

That being said, once you’ve completely paid off an account – don’t close it. Leaving the account open is actually better for your credit score in the long run than just wiping it off of your credit report. If you’re worried about being tempted to run charges up on it again, you can always cut your credit card in two and leave the account open in name only.

Don’t Spend More than You Earn

Knowing you have access to credit can be a great quick fix when you’re feeling the pinch in your wallet just before payday but it’s not the end all, be all solution you might think it is. It’s okay to use credit to tide yourself over so long as you know you’ll be able to pay it back. Don’t spend more than you earn and don’t spend money that you can’t guarantee you won’t be able to pay back.

Change Your Mindset

One of the hardest but most worthwhile things you can do is to change your mindset about credit. Remind yourself that the money you’re borrowing isn’t yours and that credit is a privilege rather than an extension of your own income. Everything you buy on credit is borrowed from someone else and will have to be paid back. Credit has many incredible benefits (from giving you peace of mind when shopping online to earning reward points) but at the end of the day it’s not your money and your bank will expect you to pay back every cent (and more) in time.

Need extra help attaining a good credit score? We can help!

Strengthen your Credit

strengthen your credit

Are you considering applying for a car loan, a mortgage, or any other kind of loan that requires a credit check?  Making sure your credit is as strong as possible is the best thing you can do in a world that relies on bank loans and revolving credit. Here are some things you can do to strengthen your credit before you apply for a car loan/mortgage/line of credit etc.

Be Aware of all of your Open Credit Accounts

The first step is also one of the most important things you can do: make a list of every single open account, loan, and line of credit and figure out which ones carry a balance. For those accounts with money owing, you need to make sure you know exactly how much you still have to pay back (as well as what your interest rate is).

Let’s say you have 5 credit cards, a mortgage, an auto loan, and a line of credit. Make a spreadsheet for yourself that breaks each one of them down by: Lender/Financial Institution, Amount Owing, Interest Rate, and Monthly/Bi-Weekly Payment Amount (for a credit card, also indicate the minimum payment).

Once you have everything laid out in front of you, it’ll be easier to wrap your head around exactly where you stand and what you can do to improve your situation. You should also comb over the latest statement for each credit card to see if there are any grey charges you can cut.

Create a Budget

Once you’re completely aware of where you stand debt-wise, it’s time to create a budget. Take a close look at how much money you have coming in each month, how much money goes back out again, how much is left over and crunch your numbers accordingly.

This is a great time to recalibrate your priorities and cut down how much you’re spending on items or services you don’t actually need and/or don’t actually use (hello gym memberships and streaming services.)

Check Your Score/Order a Credit Report

Now that you know the ins and outs of your personal financial situation, it’s time to order a credit report from one of Canada’s two main credit bureaus: Equifax and TransUnion. Your credit report is basically a ‘report card’ of your financial history and credit usage. It also comes with a credit score (a three digit number, similar to a percentage on a test in school; the higher your score, the better your credit).

Comb through your credit report and look for any errors or inaccuracies that could be falsely and negatively influencing your credit score. The sooner you can correct those errors, the better.

Transfer Balances to Cards with Lower Interest Rates

If you’re concerned that your debt is going to keep climbing before you can really get a handle on it, one option is to look into doing a balance transfer. This means that you would open a new account with a lower interest rate and transfer your debt over there instead. You would still owe the same amount of money but would ultimately be paying back less money in interest (and hopefully over a shorter period of time.)

Many banks try to entice new customers through balance transfers offers so your best bet is to look into banks other than your current financial institution and see what they can do for you.

Never Miss Payments or Make Late Payments

No matter what you do, ensure that you are – at bare minimum – making the minimum payments each month. Every time you’re late or miss a payment entirely (also known as being delinquent), you put a negative dent in your credit score. Two consecutive months in a row delinquent is typically when banks will officially report your lateness to the credit bureau.

That being said, if you can, you absolutely should be paying more than the minimum payment. Yes, sticking to the minimum payment is technically something that a bank encourages you to do if you can’t pay the full thing off in one go but that’s only because it benefits them. Sticking to the minimum payment jacks up how much money you’ll owe the bank in interest and, in the long term, is a huge drain on your finances.

Talk to your Bank

If you think you’ll need additional help or won’t be able to stay on top of your payments in the future, then it’s always a good idea to give your bank a heads up. They’re more likely to work with you and to want to help you if you loop them in on the situation before it gets to be too dire.

Bad Credit Warning Signs

bad credit warning signs

Worried your credit is less than stellar but avoiding actually looking into it? The signs that your credit is struggling are easier to identify than you might think. Here are some bad credit warning signs you should be on the lookout for (and what you can do to turn your credit back around again).

You’re Regularly Turned Down for Loans

Getting turned down by your bank (or any other credit lender) for a loan is always an embarrassing experience. If you find it’s happening with a higher frequency than normal? It’s definitely time to take a look at your credit score because that’s a huge red flag and a blatant bad credit warning sign.

Contact Equifax and/or TransUnion and ask to see a copy of your credit report. If your score really is suffering then it won’t be a particularly pleasant exercise but it’s a necessary part of pulling yourself out of a bad credit cycle. It will also give you the opportunity to fix any errors that might be negatively affecting your score.

You Pay Your Bills but You’re Always Late

You do manage to pay your bills, but you never pay them on time. While you might view this as a win, your bank isn’t going to be so pleased. Late payments (especially frequent late payments) have a hugely negative effect on your credit score. This might be a case where it’s worth paying less money back to your bank more often so you’re – at bare minimum – making your monthly minimum payments on time.

You’re Frequently Unable to Make the Minimum Payments

Depending on how often you use (and how much you charge to) your credit card, your minimum payment is going to fluctuate. In an ideal world, you’d be able to pay your entire credit card bill off in one go every time a statement comes in, but that’s not realistic for most people. $500.00 in one go might be too much, but $10.00? That’s a burden that’s not too heavy for the vast majority of credit card holders.

So if you find yourself unable to make the minimum payment, that’s a big flashing warning sign that you’re in financial trouble. It’s time to contact your bank directly, explain the situation, and see if there’s anything they can do to help you get back on track.

You Have to Shuffle Debt Around

If you find that you need to keep pushing your debt around from card to card, you’re in the early stages of what will eventually spiral into a very big problem. There’s only so long you can use one credit card to pay off another credit card before you find yourself in over your head.

You Borrow More Money Than You Make

Do you feel like you’re trapped in an endless cycle where every time you do get paid, it immediately goes right out of your account again to pay off your other bills? Do you notice the interest rates on the money you’ve taken out rising faster than you can stay on top of them?

If you find that you’re relying on your credit card and/or line of credit to survive, you’re spending outside of your means and you need to do everything you can to slam on the brakes immediately. Sit down and come up with a monthly budget for yourself; ask yourself what your necessary expenses are each month (rent/mortgage payments, food, transportation, utilities, etc) and make sure those are your number one priority. Beyond that, try to cut out or cut down on any expenses that are weighing you down and causing you to spend more than you make. Yeah, Netflix and Spotify and a monthly gym membership are great  – so long as they’re not putting you in debt. If they are?  It’s time to cut your losses.

Now that you’ve identified your bad credit warning signs, do you need help getting back on the right track? Fill out our online application right here.

Payday Loans: Are They Worth It?

payday loans

If you’re running short on cash at the end of the month and need a small loan to tide you over, it can be tempting to look into applying for payday loans. So what is a payday loan exactly? And is it worth it?

What is a Payday Loan?

Payday loans are small loans that do exactly what they sound like – tide you over monetarily until your next pay cheque. Payday loans might not seem like that big of deal (especially because the loan amounts tend to be on the smaller side) but they’re notorious for their painfully high interest rates.

Once you start taking out payday loans, it can be hard to break the cycle. The Payday Loan act (put in place in Ontario in 2008) stipulates that you can’t be charged more than $21.00 per every $100.00 you borrow in a 2 week period, but it’s not hard to see how quickly those fees add up. A $300.00 loan ends up costing you $363.00 (which you have to pay back in full immediately to avoid even more interest being piled on top).

Most people desperate enough to take out a payday loan don’t have the money to pay back the loan period – let alone right away – and get stuck in the cycle of taking out payday loans to pay back their debt while simultaneously accruing more debt.

Payday Loan Alternatives

A payday loan is typically the last resort for someone looking to borrow money. With such high interest rates and constricting terms, there’s no reason anyone with access to a line of credit, overdraft or a credit card would willingly choose a payday loan.

Most people who use payday loans have low or no credit and find themselves turned away by the banks and other traditional money lending sources. That doesn’t mean getting a loan from another source is impossible, it just means you have to be patient and willing to do the work necessary to prove that you’re a trustworthy borrower.

One of the best things you can do to improve your credit is to apply for a secured credit card.

A secured credit card is often the first step for people who need access to credit but who haven’t proven their reliability to the bank yet. With a secured credit card, you give your bank a certain amount of money upfront (typically between $300.00 and $500.00) and then you’re given access to the same amount of credit from the bank. Your secured credit card operates like a normal credit card: you can make payments online or in store the same as you would with any other credit card. The only difference is, if you’re late or absentee on your payments, the bank will take the sum you owe from your deposit. It’s a no risk situation for thre bank because you’ve already paid them the maximum sum you can max out on your card in advance.

Once you’ve used a secured credit card for a long enough period of time and have established (or re-established) your credit, you’ll be eligible to trade up for a standard credit card (hopefully eliminating the need for a payday loan in the future).

This is the ideal solution in the short term and the long term because you have access to credit immediately. The trick, of course, is finding $300.00 you can use for your deposit when you’re already in a cycle of payday loan debt. It’s not an easy situation when you’re already strapped for cash, but if you can put aside even $5.00 from each paycheque and cut any extra expenses, hopefully you can gradually save up the money you need for a secured card.

Need additional help figuring out your finances? You can read more about payday loans here and you can fill out our online application right here.

Getting a Bad Credit Car Loan

bad credit car loan

Can buying a car help you rebuild your credit? Yes. That being said, it’s important to understand that getting a car is just one step in a longer process towards living a debt free life. Unfortunately, if you already have bad credit, the mere thought of getting a car loan might seem impossible. In order to understand how you can get a bad credit car loan, you need to understand how your credit score and rating are calculated in the first place.

How is Your Credit Score Calculated?

Your credit score is calculated using a variety of factors:

  • your payment history (whether you pay on time and in full or if you just make the minimum payment each month or fail to pay at all)
  • your debt utilization (how much of your available credit you actually use each month – surprisingly the more you use [even if you pay it off right away], the worse it looks on your credit report)
  • the length of time you’ve had credit available to you (the longer you’ve had open accounts and the more responsibly you’ve used said accounts, the better)
  • recent inquiries (to learn more about the difference between a soft and a hard inquiry click here)
  • credit diversity (the more variety in the types of credit you use/have available to you, the better)

How Does Buying a Used Car Help?

Credit diversity is the main point to focus on where a bad credit car loan is concerned because it falls under the category of installment loan. An installment loan is any kind of loan you make regular payments towards (monthly/bi-weekly etc). A mortgage and a student loan are two other common examples of installment loans.

A credit card, on the other hand, is an example of revolving credit. The amount of money you charge to your card varies month to month and you can choose to pay it all off right away without penalty.

The best way to achieve and maintain a good credit score is by having a mix of installment loans and revolving credit.

Unfortunately, if you have bad credit, it can be tough to get a bank to trust you with either of these kinds of loans. Which is where buying a used car and getting a bad credit car loan comes in.

We can help you get a reasonable car loan within your budget to help you show your bank that you are responsible enough to be trusted with their money. So long as you continue to make your car payments in full and on time, your credit score will rise. We can also help you get a credit card so you can show your bank that you are able to manage and handle installment and revolving credit at the same time (which will also help increase your credit score).

Want to learn more about how we can help you? Check out our ‘apply online’ page right here!

Road Trip Tips

road trip

Ready to get behind the wheel and explore parts of the world you’ve never seen before? We’ve got some tips and tricks to help you make the most out of your road trip.

Start Saving Early

You don’t even have to know when and where you’re going; the moment you know you are definitely going to be going on vacation period, you should try to put at least a little bit of money away from each paycheque. Vacation costs add up quickly, and the sooner you can start adding to your savings, the better.

Get a Card that Rewards you for Driving

If you know you’re going to be spending a lot of money on gas, you might as well benefit from it. It’s definitely worth looking into a rewards card that benefits you every time you fill up at the pump. Shell, Esso, and Petro Canada all have their own rewards programs that offer different types of points based on your needs.

Keep an Emergency Kit in the Car

No one wants their car to break down on vacation but it’s an unfortunate potential reality that you should do your best to prepare for.

From water bottles and non-perishable food items to flares, make sure you’ve got everything you’ll need in an emergency situation packed and ready to go in your trunk. Want to know exactly what should go in your car emergency kit? We’ve got you covered

Plan ahead

Do your research and try to figure out what your game plan is for your vacation before you leave. You don’t need to plan out the entire trip but you should have a rough idea of where you’re going and when you’re doing it during your trip. Come up with a flexible skeleton outline of what you’ll be doing to maximize your time and energy during the trip.

Never Underestimate the Power of Google Maps

It’s easy to get lost on a road trip (especially when you’re driving around an area you’ve never been to before.) Enter Google maps. If you’re worried about missing your exit or finding your hotel, take the time to study the virtual map before you leave so you have a general sense of what direction you should be going in and how far you’ll actually be driving.

It’s common knowledge that you can use Google Maps just like you’d use a portable GPS unit when driving, but did you know you can also use it as a pedestrian? Give it a try next time you’re planning on walking over to that museum or restaurant you can’t quite seem to find on your own. Google will give you step by step directions and will tell you how long it’ll take to arrive at your destination.

Bonus: Don’t Ride your Brakes

This is important regardless of if you’re on a road trip or not but the easier your are on your brakes, the more gas you save and the less often you have to replace your brake pads. Ease into turns and slow down earlier and more gradually than braking as you drive to save money in the long run.