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How to Improve your Credit Score in Canada

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Improving your credit score is important for many reasons. First, it could help you get a lower interest rate on your loans or mortgages. Second, it could help you qualify for better rates on car loans, cell phone plans, and other types of loans. Third, having a good credit score could increase your chances of being approved for a job or apartment. Finally, keeping your credit score high can help you avoid becoming financially stressed in the future. Here are some of the ways you can improve your credit score in Canada:

Monitor your payment history

Your payment history is the most important factor for your credit score.

To improve your payment history:

  • always make your payments on time
  • make at least the minimum payment if you can’t pay the full amount that you owe
  • contact the lender right away if you think you’ll have trouble paying a bill
  • don’t skip a payment even if a bill is in dispute

Use credit wisely

Don’t go over your credit limit. If you have a credit card with a $5,000 limit, try not to go over that limit. Borrowing more than the authorized limit on a credit card can lower your credit score.

Try to use less than 35% of your available credit. It’s better to have a higher credit limit and use less of it each month.

For example:

  • a credit card with a $5,000 limit and an average borrowing amount of $1,000 equals a credit usage rate of 20%
  • a credit card with a $1,000 limit and an average borrowing amount of $500 equals a credit usage rate of 50%

If you use a lot of your available credit, lenders see you as a greater risk. This is true even if you pay your balance in full by the due date.

To figure out the best way to use your available credit, calculate your credit usage rate. You can do this by adding up the credit limits for all your credit products.

This includes:

  • credit cards
  • lines of credit
  • loans

For example, if you have a credit card with a $5,000 limit and a line of credit with a $10,000 limit, your available credit is $15,000.

Once you know how much credit you have available, calculate how much you are using. Try to use less than 35% of your available credit.

For example, if your available credit is $15,000, try not to borrow more than $5,250 at a time, which is 35% of $15,000.

Increase the length of your credit history

The longer you have a credit account open and in use, the better it is for your score. Your credit score may be lower if you have credit accounts that are relatively new.

If you transfer an older account to a new account, the new account is considered new credit.

For example, some credit card offers come with a low introductory interest rate for balance transfers. This means you can transfer your current balance to this new product. The new product is considered new credit.

Consider keeping an older account open even if you don’t need it. Use it from time to time to keep it active. Make sure there is no fee if the account is open but you don’t use it. Check your credit agreement to find out if there is a fee.

Limit your number of credit applications or credit checks

It’s normal and expected that you’ll apply for credit from time to time. When lenders and others ask a credit bureau for your credit report, it’s recorded as an inquiry. Inquiries are also known as credit checks.

If there are too many credit checks in your credit report, lenders may think that you’re:

  • urgently seeking credit
  • trying to live beyond your means

How to control the number of credit checks

To control the number of credit checks in your report:

  • limit the number of times you apply for credit
  • get your quotes from different lenders within a two-week period when shopping around for a car or a mortgage. Your inquiries will be combined and treated as a single inquiry for your credit score.
  • apply for credit only when you really need it

“Hard hits” versus “soft hits”

“Hard hits” are credit checks that appear in your credit report and count toward your credit score. Anyone who views your credit report will see these inquiries.

Examples of hard hits include:

  • an application for a credit card
  • some rental applications
  • some employment applications

“Soft hits” are credit checks that appear in your credit report but only you can see them. These credit checks don’t affect your credit score in any way.

Examples of soft hits include:

  • requesting your own credit report
  • businesses asking for your credit report to update their records about an existing account you have with them

Use different types of credit

Your score may be lower if you only have one type of credit product, such as a credit card.

It’s better to have a mix of different types of credit, such as:

  • a credit card
  • a car loan
  • a line of credit

A mix of credit products may improve your credit score. Make sure you can pay back any money you borrow. Otherwise, you could end up hurting your score by taking on too much debt.

 

Credit: Canada

Economy

German Economy Seen Shrinking Next Year Due to Energy Crisis – BNN Bloomberg

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(Bloomberg) — Germany’s economy will likely contract by 0.4% next year due to the impact of the energy crisis, according to the nation’s leading research institutes, who slashed their forecast from April of a 3.1% expansion.

German output will be €160 billion ($154 billion) lower this year and next than projected five months ago partly due to the drastic increase in energy costs, the four institutes predicted Thursday in a twice-yearly report which the government uses as guidance for its own outlook.

“The Russian attack on Ukraine and the resulting crisis on the energy markets are leading to a noticeable slump in the German economy,” said Torsten Schmidt, head of economic research at the RWI Institute and spokesman for the Joint Economic Forecast Project Group.

Germany is one of the countries hardest hit by the energy emergency triggered by the Ukraine war thanks to a reliance on Russian fuel imports built up over decades. Chancellor Olaf Scholz’s ruling coalition is racing to cut back that dependence but Germany still faces a tough winter with the prospect of gas rationing and blackouts.

The government has assembled three packages of aid measures worth nearly €100 billion to offset the impact on households and companies but has also cautioned that it doesn’t have the resources to ease the pain completely.

“Record inflation rates, especially exploding energy prices, are hitting many companies hard,” Martin Wansleben, managing director of the DIHK industry lobby, said Thursday in an emailed statement.

“The consequences are production stops, losses in value creation, the relocation of production abroad and even plant closures,” he added. “The number of companies that either do not receive any energy supply contracts at all or only receive them at extreme prices is currently increasing.”

Although the energy crunch is expected to ease over the medium term, gas prices are likely to remain well above pre-crisis levels, meaning “a permanent loss of prospe­rity for Germany,” the institutes warned.

They cut their growth estimate for this year to 1.4% from 2.7% and said they expect inflation to accelerate in coming months, climbing to an average rate of 8.8% next year — compared with 8.4% this year — before gradually falling back toward 2% in 2024.

Europe’s biggest economy will likely return to growth in 2024, with expansion of 1.9%, the institutes predicted.

The four institutes which compile the twice-yearly forecasts are Munich-Based Ifo, the IfW in Kiel, the IWH in Halle and the Essen-based RWI. The Wifo and the IHS institutes in Vienna also contribute. The government is expected to publish updated economic projections next month.

(Updates with industry lobby comment from sixth paragraph)

©2022 Bloomberg L.P.

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U.S. economy shrinks at 0.6% annual rate in Q2 – Advisor's Edge

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Consumer spending grew at a 2% annual rate, but that gain was offset by a drop in business inventories and housing investment.

The U.S. economy has been sending out mixed signals this year. Gross domestic product, or GDP, went backward in the first half of 2022. But the job market has stayed strong. Employers are adding an average 438,000 jobs a month this year, on pace to be the second-best year for hiring (behind 2021) in government records going back to 1940. Unemployment is at 3.7%, low by historic standards. There are currently about two jobs for every unemployed American.

But the Fed has raised interest rates five times this year — most recently Sept. 21 — to rein in consumer prices, which were up 8.3% in August from a year earlier despite plummeting gasoline prices. Higher borrowing costs raise the risk of a recession and higher unemployment. “We have got to get inflation behind us,” Fed Chair Jerome Powell said last week. “I wish there was a painless way to do that. There isn’t.”

The risk of recession — along with persistently and painfully high prices — poses an obstacle to President Joe Biden’s Democrats as they try to retain control of Congress in November’s midterm elections. However, drops in gasoline prices have improved consumers’ spirits in the past two months.

Thursday’s report was the Commerce Department’s third and final take on second-quarter growth. The first look at the economy’s July-September performance comes out Oct. 27. Economists, on average, expect that GDP returned to growth in the third quarter, expanding at a modest 1.5% annual pace, according to a survey by the data firm FactSet.

Commerce also on Thursday released revised numbers for past years’ GDP. The update showed that the economy performed slightly better in 2020 and 2021 than previously reported. GDP rose 5.9% last year, up from the previously reported 5.7%; and, pounded by the coronavirus pandemic, it shrank 2.8% in 2020, not as bad as the 3.4% previously on record.

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Canada’s economy grew by 0.1% in July, bucking expectations it would shrink

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Canada’s gross domestic product expanded by 0.1 per cent in July, besting expectations of an imminent decline, as growth in mining, agriculture and the oil and gas sector offset shrinkage in manufacturing.

Statistics Canada reported Thursday that economic output from the oilsands sector increased sharply, by 5.1 per cent during the month. That was a change in direction after two straight months of decline, which brought second-quarter growth to 4.2 per cent thus far.

The agriculture, forestry, fishing and hunting sector led growth with 3.2 per cent. Unlike the United States and Europe, both of which are facing drought conditions, Canada has had a good year for crop production said Scotiabank economist Derek Holt.

On the downside, the manufacturing sector shrank by 0.5 per cent, its third decline in four months. Canada’s export market with the United States has softened and global supply chain issues linger, said Holt. The latter are gradually easing, which could create a better picture for the sector in the second half of the quarter.

Wholesale trade shrank by 0.7 per cent, and the retail sector declined by 1.9 per cent. That’s the smallest output for retail since December.

“What happened this summer was a big rotation away from goods spending towards services spending,” Holt said. Activities like haircuts, travel or outings to the theatre, made popular with the lifting of pandemic restrictions, leave out retail.

While the economy eked out slight growth in July, the data agency’s early look at August’s numbers shows no growth.

“The economy fared better than anticipated this summer, but the showing still wasn’t much to write home about,” said economist Royce Mendes with Desjardins. “While the data did beat expectations today, the numbers didn’t move the needle enough to see a material market reaction.”

The performance of Canada’s economy throughout the fiscal year — 3.6 per cent growth in Q1 and 4.2 per cent thus far in Q2 — remains one of the best in the world, Holt said.

Mendes said he expects growth will stay under one per cent this year: half of the Bank of Canada’s two per cent prediction and a third of the growth seen in the first two quarters.

“We’re definitely slowing, and more of that is coming in a lagged response to higher interest rates and all the challenges of the world economy,” Holt said. “But relative to the rest of the world, for the year as a whole, Canada has been in a sweet spot.”

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