Bankruptcy just one cure to money woes

As a licensed insolvency trustee, Dawn Golding helps people get back on their financial feet. She wants people to understand all the available options so they can make the best choices for their financial future.

“Unfortunately, people are often scared to call us because they think if they do, they have to file bankruptcy, which is not the case at all,” explains Golding, who has operated the business Golding & Associates Limited, with offices both in Kentville and Halifax, for almost a decade.

The goal is to help people find other solutions to their debt problems that do not involve their business. Sometimes, she says, it’s as simple as someone needing budgeting help or direction in restructuring. But when more help is needed, Golding says they help debtors understand their rights and options.

It isn’t just people who are facing financial hardships that need to think about debt, budgeting and credit ratings. Everyone should have some background knowledge.

HOW CREDIT RATING WORKS

The terms credit rating and credit score are often used interchangeably, but they are not the exact same thing, explains Golding.

Those who lend money report how much you owe, your monthly payment, your credit limit and if your payments are current. The rating for each individual debt is based on your payment history and goes from one (payments on time) to nine (uncollectable), she says.

Each month you are behind lowers the number. If you fall behind and then get caught back up, your credit rating will go down, then back up.

Your credit score is a number between 300 and 900 which is calculated by the credit reporting agency to determine your creditworthiness, explains Golding.

According to Equifax Canada “credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.”

A good credit score means that you will be eligible for better interest rates on money you borrow, she says.

WAYS TO IMPROVE

Pay your debts on times — This one is obvious, but is very important, says Golding. Paying your debt on time every month is essential to a good credit rating. Your payment history accounts for 35 per cent of your credit score. It factors in how often you have been late, how late you were and if you made full or partial payments.

Reaching out for professional help with financial struggles could help find solutions that avoid filing for bankruptcy.

Keep debt well below credit limits - Only using 35 per cent of the maximum of the limit is ideal, she says. Most people do not realize that being over your limit on a credit card affects your credit as much as if you are late making payments. The amount of debt you have accounts for 30 per cent of your credit score, explains Golding.

Don’t apply for credit needlessly - When you apply for credit and the lender checks your credit report, the inquiry shows up. The number of inquiries on your report affects

your credit rating if you have multiple inquires in a short period of time. Inquiries account for 10 per cent of your credit score, so this is an easy one to keep in good shape.

Time - This is one you don’t have control of, but it affects your credit rating, says Golding. The longer your credit history is, the better the rating will become. Creditors want to see your ability to handle credit over an extended period of time. Credit history accounts for 15 per cent of your credit score.

Be wary - There are companies that claim to repair your credit for a fee. Simply put, this is something that cannot be done. No one can remove factual information from your credit report and make it better, so don’t waste your money on this type of service, advises Golding.

You can request a copy of your credit report from both Equifax and Transunion free of charge, she adds. Review it for errors. If anything is incorrect, they provide you with a form to ask for corrections.

Consider the other factors Lenders also look at your debt ratio (the amount you owe relative to the amount you earn) and your employment when deciding to lend you money. Lenders must be confident in your ability to repay the debt, not just that you have a good credit score.

If you need help, or want more information, do not hesitate to reach out to the experts for help. They can help you on a path to debt relief and a better financial future.