Be Informed About... Debt

Text transcript

This information is presented by the the Federal-Provincial-Territorial Consumer Measures Committee. Do you struggle with debt? Do you have piles of unpaid bills? Do calls from a collection agency make you jump every time the phone rings? If so, you are not alone. Lots of Canadians have the same worries you do. And very often these worries are caused by debt. In fact, almost 70% of Canadians have debt. This presentation will help you find out if you have a problem with debt, and where to go for help if you do.

There are many ways to be in debt. The most common types are:

• Credit Card Debt
• Tax Debt
• Bank Loan Debt
• Student Loan Debt
• Payday Loans Debt
• Leasing Debt
• Rent-To-Own Debt
• And Buy-Now-Pay-Later Debt

If you think you have problems with debt, keep watching for tips on how to take control of your debts.

What if you're not sure if you have a problem with debt? The first step is to recognize the warning signs of debt. You know you have a debt problem when you:

• Often pay bills late
• frequently bounce cheques
• pay only the minimum amount owed every month on your credit card
• take money from one credit card to pay another
• get calls from collection agencies
• Often ask friends or family for loans;
• or you have your utilities cut off, such as telephone or hydro

Other warning signs include:
having to cut back on expenses such as recreation and regular items such as clothing and sometimes even food.

There are several things you can do to take control of your debt problem. What you choose depends on your personal situation.

If you are in debt, talk to a budget or credit counsellor. Anyone can use a budget or credit counselling service. Many different organizations offer budget and credit counselling services, some even offer services free of charge.

To learn more on how to choose a counsellor, visit Take Charge of your Debts available at www.ConsumerInformation.ca.

The counsellor can help you make a plan for managing your money and offer suggestions to help you get out of debt. These are some of the things that a credit counsellor may advise you to do:

• Rework Your Budget
• Prepare a budget and stick to it. By following a budget you'll find it easier to manage your money.
• You will learn to pay for essentials like food before anything else.
• You will also free up some money each month to repay your debts.
• Combine your Debts
• You may combine or consolidate your debts into a single loan from a bank
• or other financial institution.
• You can then use this loan to repay all of your various debts at once.
• You are then left with only one unpaid loan and one monthly payment to make to the bank.
• Contact your Creditors
• Contact the companies or agencies you owe money to.
• Suggest a payment plan that you know you can stick to.

Most of them will be willing to work with you. They may even be willing to reduce your debt, or reduce the interest on it. if you show that you are committed to paying off the debt.

However, they do not have to accept the plan you suggest. Sell something you own. Not everybody has something of value to sell, such as a house or a car, and nobody ever likes to be forced to sell their valuables. but sometimes this is a solution to a debt crisis.

A collection agency is a company that your creditors hire to get back the money you owe them. Here are some useful tips about collection agencies:

• If you receive a notice that your file has been given to a collection agency - don't panic.
• The agency is trying to get back the money you owe its client.
• If possible, pay the amount you owe.
• If you can't, then contact the agency and explain your situation.
• If you reach an agreement with the collection agency, get it in writing.
• Never send cash, and always get a receipt for your payment from the agency.
• Know Your Rights!

Collection agencies have strict rules to follow. For example, someone from a collection agency cannot harass you or your family. These rules differ depending on where you live in Canada If you feel you have been treated unfairly by a collection agency contact your provincial or territorial consumer affairs office.

It's important for you to know your credit status. For example, you need good credit to get a mortgage. Your credit status is made up of your credit report, your credit score and your credit rating. Your credit report is a "snapshot" of your credit history. Along with the credit histories of millions of other people, your credit history is recorded in files by one of Canada's major credit-reporting agencies.

Your credit score tells you about your financial health. It shows how much of a risk you could be to a lender. There are many different ways to work out credit scores. Your credit rating is another way to tell you about your financial health. Ask for a copy of your credit report every year. This will allow you to keep track of your credit history. You can start by contacting one of the credit-reporting agencies in Canada: Equifax, Trans Union, Northern Credit Bureau.

Sometimes credit reports have mistakes. Common mistakes may include:

• Someone else's information on your file;
• debts listed that aren't yours; and,
• debts listed that you have already paid in full

You have the right to get any mistakes fixed. If you see any mistakes, contact the credit reporting agency right away. Over time, you can improve your credit score.

Here are some tips, from the Financial Consumer Agency of Canada (FCAC) on how to improve your credit score:

• Always pay your bills on time.
• Try to pay your bills in full by the due date. If you aren't able to do this,
• pay at least the required minimum amount shown on your monthly credit card statement.
• Try to pay off your debts as quickly as possible.
• Don't go over the credit limit on your credit card.
• Try to keep your balance well below the limit.

To learn more about your credit report and credit score, visit Understanding Your Credit Report and Credit Score produced by the Financial Consumer Agency of Canada(FCAC).

Once you have gotten yourself out of debt you need to make sure you stay out. Here are a few tips: Keep a close eye on your finances. Watch your budget. Get rid of credit cards if you can. Get a lower limit on your credit cards so it will be easier to pay them off. Put some money aside each month for unexpected bills or expenses

If you need more information about how to get out of debt and stay out of debt, visit Take Charge of your Debts! at www.ConsumerInformation.ca