Many people attach particular importance to their “name”. You will understand that by “name” I do not refer to the one given to them at birth by their parents, but rather to the credit rating. Is it right to do as much for his “name” or is it an illusion that banks and other lenders are happy to promote?
If you are researching the importance of your credit rating, you will probably be told that this is an indicator you should keep an eye on and that without a good credit score, all the doors are closed. will close in front of you. This explanation is unfortunately misleading and could even cost you a lot.
What does your credit rating say about you?
To start on a solid foundation, ask yourself what your credit rating really says about you. The answer is relatively simple: it is an indicator of the likelihood that you will make your payments on your debts on time. That’s it, nothing more. Contrary to what many people think, this is not an indicator of your financial health.
The credit rating was invented to serve banks and other lenders to determine the risk of giving credit to a person. The goal has never been to measure a person’s “financial success”. Your credit rating will not tell you if you are heading for a golden retirement or if you will be able to go grocery shopping tonight.
What I am going to say may surprise you. It is possible to have an excellent credit record while being in an insurmountable financial mess. Many people go bankrupt despite an excellent credit score. The opposite is also true. It is possible to have a bad credit record while having financial security well above average.
Why stop worrying about your credit rating?
The first step is to say, “I’d rather be debt-free than having a perfect credit score . “
Then, if you are currently in a difficult financial situation, you should have three simple goals:
- Have a budget surplus: you should spend less than you earn each month
- Eliminate your debts: you should reduce your debt, starting with the most expensive debts
- Saving: you should put money aside in case of unforeseen circumstances, for your projects and for your retirement
From now on, the important thing is to make financial decisions that will benefit you, your couple and your family. If you succeed in implementing the three previous financial goals, you will never have to worry about your credit rating again.
Living within your means and saying no to credit
Wait before going to get the scissors to cut your credit card! I do not necessarily recommend that you no longer use your credit card as a method of payment, but rather make sure that you will be able to make the full payment when you receive your statement of account.
If you live by this principle, you will be well positioned to achieve our three fundamental financial goals and, indirectly, your credit rating will be very good.
What if you are overwhelmed by your debts?
Sometimes, despite all his good will, his debt level is too high and it is not possible to get by without help. If you feel that way, I invite you to read about the following solutions that will allow you to eliminate or reduce your debts quickly:
- Debt consolidation
- The voluntary deposit
- The consumer proposal
- Personal bankruptcy
To know everything about credit rating
If after reading this article you are still hungry and would like to know everything about the credit rating, I highly recommend the guide “Understanding your credit report and your credit score” (PDF) offered by the Agency. financial consumption of Canada . To my knowledge, there is no more complete resource.