Let’s Talk About Your Credit!

At FORVAN Financial Firm Inc., we are constantly told by clients how valuable information around the topic of credit management is; especially as it relates to the impact on daily financial issues. The number one question that we get from our clients is; why has no one ever told me this before? Yes it is true that credit is thought to be a taboo subject. FORVAN Financial Firm Inc., is here to create a forum to educate you on credit.

The fact remains that 80% of all spending habits revolve around credit. This may be directly associated to crediting appliances, furniture, vacation, or indirectly when applying for a loan to purchase an automobile, house or boot. Unless you have the financial ability to purchase all items cash, you are being charged high interest rates or denied credit cards, loans, car insurance and the opportunity to rent based on your credit report and your credit score.

It’s time to talk about credit! Whether you have 345 credit score or 655 credit score there is always room for improvement. Let FORVAN Financial Firm Inc., guide you to the 850+ credit score, live the life that you want to live now without the high interest.  Free you from the burden associated to poor credit start building your credit the right way.

Here are some tips to help you get off on the right track:

1.     Keep your credit card and line of credit balances below 35% of your advanced credit

If your credit advanced = $5000.00 you should not exceed $1750.00

2.     Always make your minimum monthly payment on time

If your minimum monthly payment is $30.00 due on the 15^th of each month ensure to pay

the $30.00 on or before the 15^th of the month.

If you make a payment of $400.00 on the 15^th of November this does not mean that on the 15^th of December you should miss making a payment. Missing a payment would negatively impact your credit. You must still make your minimum payment of $30.00.

3.    Check your credit every 6 months by ordering a copy of your credit report from Equifax and Transunion credit reporting agencies

Every credit report will have a minimum of 5 errors on it. These errors may be costing you a lot in interest charges.

Identity theft is a major concern in today’s society, it is important to ensure that you have not fallen victim to identity theft

The average person has never read a copy of their credit report. It is time to learn how to read your credit report!

Stop using Credit for the WRONG reasons!

Why not leverage credit to create wealth instead of creating more debt to finance liabilities?

The fact is that Canadians are very comfortable carrying high debt loads to service their lifestyle.  The average Canadian will carry $50,000.00-$95,000.00 in credit card and personal debt; while comfortably carrying an additional $400,000.00-$600,000.00 in mortgage and auto finance debt.

From the outside looking in the average Canadian appears to be doing quite well based on what you can physically see. However the reality is that the average Canadian is carrying $405,500.00-695,000.00 in liabilities with little to know assets. 

Home owners with a mortgage truly believe that they own a home when really they are paying rent to the lender until the debt is paid in full.  The "debt paid in full" generally will not happen due to the fact that; Canadians either use the equity in their home as a vending machine by consolidating the debts, or upgrade to a bigger house.

This cycle will continue until retirement at which time the average Canadian will then obtain a reverse mortgage to finance retirement years. The next generation will then inherit a debt estate instead of a wealth estate to build on.  If the next generation is not taught how to do something different, the debt cycle continues from generation to generation.  

Canadians must learn how to leverage credit to create wealth instead of service debt to manage liabilities. FORVAN Financial Firm Financial Solutions OUTside the Box!

Financial Services Underwriting Basics Understanding the 5 C’s of Credit!

Management of your credit is
essential to building wealth!

1.       Credit

• What is your credit score?
• How well do you manage the credit that is advanced to you?
• Do you make your minimum payments on time?
• Do you remain under 35% on your revolving credit trade line balances?
• Do you have accounts in collections?

2.       Capacity

• Your ability to repay loans
• The most critical of the 5 C’s
• Screening through application of debt service ratios
• Careful review of your payment history on existing credit relationship

3.       Collateral

• The guarantee i.e. the vehicle, the property
• The value, location, characteristics of the property

4.       Character

• The general impression of how trustworthy you are to repay loans
• Your length of employment by component of borrowing character

5.       Capital

• The amount of money that you have invested in the property

The History of Credit

Credit is not taught in College or University.  The fact is that most hard working people in society do not have the basic foundational education necessary to make informed decisions around managing their credit. When educating people about credit we start from the foundation which is the History of Credit. 

The History of Credit Timeline:

In 1730, Christopher Thompson, a furniture merchant, created the first advertisement for credit by offering furniture that could be paid off weekly.

The 18^th century until the early part of the 20^th century Tallymen kept a tally (thus the name tallymen) of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments.

Overdraft protection was introduced during the rise of the British middle class, one of the first forms of credit

In 1914 the system of credit took a real turn and “Metal Money” was created Western Union, in the interest of good customer service, gave some of their more prominent customers a metal card to be used in deferring payments-interest free- on services used

In 1924, General Petroleum Corporation issued the first metal money specifically for gasoline and automotive services.  Metal money was first offered to their employees, then to select customers and because the system worked so well they offered the metal money to the general public.

In the 1930’s, American Telephone and Telegraph (AT&T) introduced the “Bell System Credit Card.”

1950 marked the real beginning of the credit cards most of us are familiar with today.  Diner’s Club, Inc. introduced the first credit card that could be used at a variety of stores and businesses. 

In 1958 American Express introduced the “Don’t leave home without it” card.  The state of California Bank of America issued the first revolving-credit card The BankAmericard

In 1951 Franklin National Bank was the first bank to implement the system.  Applicants approved for credit were issued the Charge-It card.

In 1967, four California banks formed the Western States Bancard Association and introduced the MasterCharge program.

By 1969, most independent bank charge cards had been converted over to either BankAmericard or MasterCharge cards. Banks interested in issuing cards became members of either BankAmericard or MasterCharge. 

By mid 1970s, the credit card industry started exploring international waters but the name “America” caused problems. 

In 1977 BankAmericard became VISA and In 1979 MasterCharge became MasterCard.

In 1979 the improvement of electronic processing, electronic dial-up terminals and magnetic stripes on the back of credit cards; allowed retailers to swipe the customer’s credit card through the dial-up terminal which accessed issuing bank cardholder information a lot faster.

There are five leaders in the credit card industry today:

•          Visa International

•          MasterCard

•          American Express

•          Discover

•          Diner’s Club

Gareth Marples is a freelance writer providing valuable tips and information on the history of credit cards.