Build a history of good credit

03.OCT.08

This series of articles is published to celebrate Financial Literacy Month – October 2008. This year the theme is “Manage Your Money… Live Your Dreams”.

Start to achieve your dreams by building a history of good credit.

We all have dreams. Some large, some small, some achievable and others just that…a dream. Very few of us take the time to analyze our dreams for our future, dissect them, plan and then execute the relevant actions to nurture them into reality.{{more}} For those of us who take the time to do this, one very stark truth becomes obvious. We need money to do it! Dreams are lovely vehicles but money is the gas that revs their engines.

Most of us go through the next logical step and proceed to the financial institutions with full proposal in hand. All documents crisp, business plans sharp, numbers perfectly balanced, excitement barely contained. A dream finally within reach. Application unsuccessful. Why? Bad Credit.

Your credit history shows how well you pay your debts. It is your financial footsteps across the various lending institutions, not just Banks but at Credit Unions, hire purchase stores, utility and telephone companies as well. If your credit history is good, you have paid your debts on time with no late payments.

When we sign a promissory note, mortgage or hire purchase agreement, we must realize that we are in fact entering into a legal contract. This contract states our lenders would provide us with the monies, goods or services requested and we in return must pay back based on the agreed terms. Once we receive the money, goods or service our lenders have fulfilled their responsibility with respect to the contract. We as borrowers must now uphold our end of the bargain and repay as per the agreed terms.

Of course, unavoidable things happen along the way that may hinder our ability to repay. In this case, the onus is on us who have not yet met our responsibility to our lenders to contact them, advise them of the situation and make alternative arrangements if possible.

If you are, however, just starting out and have no credit history or you are in the process of repairing a bad history, there are a few things you can do to.

1. Get a secured credit card from your Bank. Secured meaning that the card is backed by the money in your savings account. Pay it back on time every time.

2. Find someone to co-sign a loan for you. A friend or relative with good credit who is willing to take the chance is a good choice. If you do this, make sure that you make the payments when you are supposed to as not paying on time can also damage the credit record of your co-signor.

When a financial commitment is well serviced and there is a healthy respect for the terms in your contract, a clear message is sent to your Lenders. It says that you are a man/woman who appreciates the value of your word. You are mature and committed enough to handle your financial responsibilities and you are equipped with the necessary discipline to prioritize your spending. In short, you have just become a smaller risk to your Lender. This augurs very well for chances of successful borrowing in the future.

Easier successful borrowings mean easier access to money. Easier access to money means more revs in your dream engine. More revs mean more power to go the distance. So keep your credit in good standing …and dream on.

Article written by:
Alisa .K. Best-Ledger
Recoveries Officer
Bank of Nova Scotia
For Financial Literacy Month October 2008