Debt-Free Forever by Gail Vaz-Oxlade (the beginning after the end read novel .TXT) 📕

the temptation to spend money you don’t have. If you want to cancel your credit cards, you should be aware of three things:

1. The balance must be zero.

2. Cancelling a card will mean you lose the credit history associated with that card.

3. Cancelling a card does not always stop pre-authorized transactions from being approved on that card. So while you may have thought that closing the account would put an end to anything going through on that card, you would be wrong. If you want an account to actually be cancelled, you must report that card lost to ensure no further charges go through and, once you receive your new card, call and close the account.

When you are reducing your credit limits, do not reduce your limit to the point where your balance is greater than 60% of your limit. Part of the credit scoring system looks at how much of your limit you’ve used up. The more often you bump your head against your limit, the lower your score. That’s why paying off $50 and then immediately lowering your limit by $50 can do more harm than good.

When it comes to cancelling a card, first make sure you’ve redeemed all your rewards (cuz they are hi-sto-ry) and also make sure there is a zero balance on the account. If the sales rep promises you her first-born to keep the card, stand your ground. Remember, you’ve already chosen the card (or two cards, at most) that you’re going to keep.

Send written confirmation of your request to cancel to the card issuer and keep a copy on file. Fax it if you can so you have a record of its receipt. Ask for written confirmation of the account being closed.

Once you receive confirmation that the card has been cancelled, wait six to eight weeks and then check your credit report. Remember, it’s your responsibility to verify that your credit report is accurate.

GAIL’S TIPS

You’re entitled to review your own credit history for free once a year. Contact:

• Equifax Canada

www.equifax.ca

Tel.: 1–800–465–7166 or Fax: (514) 355–8502

• TransUnion Canada

www.transunion.ca

Tel.: (905) 525–0262 or Toll-free: 1–800–663–9980 (except in Quebec)

Tel.: (514) 335–0374 or Toll-free: 1–877–713–3393 (Quebec residents)

If you decide to order your report through these companies’ websites, don’t use a public computer and always double-check the URL to make sure you don’t fall for an impostor site—there are lots of them. If you’re receiving a credit report by mail, have it sent to a secure address where curious eyes and sticky fingers can’t get at it.

While it can be pretty dramatic to simply cut up your cards, doing so does nothing to close the account. However, if you want to avoid the temptation to use a card you’re committed to cancelling, nothing beats a pair of scissors!

CHECK YOUR CREDIT HISTORY

Whether you pull a copy of your credit report to verify a closed account or to identify areas in your history that may be causing problems, everyone should check their credit report at least once a year. Your credit history is recorded in your credit report maintained by Canada’s two major credit-reporting agencies: Equifax Canada and TransUnion Canada.

A credit report is a “snapshot” of your credit history and is the primary tool lenders use to decide whether to give you credit. Your credit score is a judgment about your financial health. It indicates the risk you represent for lenders, compared with other consumers. Most credit-reporting agencies use a scale from 300 to 900. The higher your score, the lower the risk for the lender.

One way credit-reporting agencies report on your credit history is by using a scale of 1 to 9. A rating of 1 means you pay your bills within 30 days of the due date. A rating of 9 means that you never pay your bills or that you have made a consumer debt repayment proposal to the lender. A letter will also appear in front of the number: for example, I2, 02, R2. The letter stands for the type of credit you are using.

• I: instalment loan, such as for a car loan, where you borrow money once and repay it in fixed amounts, on a regular basis, for a specific period of time until the loan is paid off.

• O: open credit such as a line of credit, where you borrow money, as needed, up to a certain limit and the total balance is due at the end of each period. Student loans can also fall into this category because the money may not be owing until you are out of school.

• R: revolving credit, on which you make regular payments in varying amounts depending on the balance of your account, and can then borrow more money up to your credit limit. Credit cards are revolving credit and R ratings are most commonly used.

GAIL’S TIPS

Accumulating too much revolving credit—lines of credit or credit cards—makes lenders nervous because they know that you can access that credit whenever you want. If you lose your job, hit a rough patch at work, split up with your spouse, or just go nuts shopping your little heart out, all that revolving credit is yours for the using. So they treat it as if you’ve already used the maximum when they’re working out whether to let you borrow more money. That can be a big problem when you really need to borrow for something like a car or a house.

If you always pay on time, your account will be coded an R1. If an amount was written off because you never paid it back, it will be coded R9. Here are the ratings most often used.

• R00: Too new to rate; approved but not used.

• R1: Pays (or paid) within 30 days of payment due date or not more than one payment past due.

• R2: Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more