Beware of Using Other People’s Money–CREDITability

The ability to borrow money from a lending institution is a privilege, and not a right. Before lending institutions will allow money to be borrowed, a certain amount of trust or creditability needs to be established between the lender and the borrower. One way to begin building creditability is by using a secured credit card.

A secured credit card is a credit card that is secured by a cash deposit. Secured credit cards are just like regular credit cards, as they each have a credit limit. The credit limit, or the amount of credit available is a predetermined amount set by the credit card lender. The only major difference is the credit limit on the secured credit card is usually a percentage of the amount previously deposited to open up the secured credit card. If a credit card payment is missed, the payment is deducted from the deposit. This missed payment could hinder future borrowing opportunities.

Building credit history often begins when the issuer of the credit card reports payment transactions to credit bureaus agencies. There are two main agencies in Canada; Equifax Canada and TransUnion Canada. These agencies keep track of such things as late or missed bill payments. When we apply for credit to buy things such as a house or condo and we have a good credit history we may be able to negotiate a lower interest rate.

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