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Bad Credit? Yes, it’s a problem

No credit. Bad credit. No problem.

Clearly, I watch too much television because I see this message pop up on the screen way too often. 

It’s usually advertisements for auto financing or payday loans. Even mortgages can be obtained with bad credit these days. 

So, this is great news, right? You don’t need to pay your bills or do anything about your miserable credit because someone will lend you the money anyway.  

Well, not so fast, warns John Eisner, president of Credit Counselling Services of Atlantic Canada Inc. 

I spoke with Eisner last week about these ads and borrowing money with bad credit. 

He agrees there is a concern that these ads are sending the wrong message to people about not paying your bills and getting anything you want.

But moreover, when Eisner sees these ads, one thing that pops in his mind is that, at least for the most part, people are being preyed upon. He explains that borrowing money in these circumstances is accompanied by an extremely high interest rate, which is the last thing mentioned in the sales pitch. The first thing is how much of a payment you can afford. 

If high interest rates were the first thing mentioned, you’d likely reconsider. The problem is you’re likely to run into more financial problems trying to pay back a loan with high interest rates. 

Let’s say you do need a car and you’ve got bad credit. You’re likely only going to be able to afford a used car. But you’re desperate. Eisner says look at the difference between the interest rate you’ll be paying compared to what a bank would offer. Then ask yourself this – can I borrow money from family until I get back on my feet? 

And, getting back on your feet should be the goal. Sure, it’s embarrassing to be in that type of situation. You try to work things out yourself, but it’s not getting you anywhere. You need help. 

Eisner says the sooner the better. There is always a chance that you can restructure your debt and work out a plan with your financial institution. But if the matter is handed over to a collection agency or to the Canada Revenue Agency, then matters become much more difficult to deal with.

What’s my advice? Don’t watch as much television as I do. 

Here’s a better piece of advice – listen to Eisner. He has something else to add – get a copy of your credit report with either of Canada’s two agencies – Equifax or TransUnion. You can request a free copy of the report.  

When it arrives, you might be scared to open it. You might even leave the unopened envelope on the kitchen table for a few days before stirring up the courage to look inside. But you’ve got to. This will let you know where you stand in terms of your credit and debt, but moreover, it will let you know whether your identity has been stolen and someone else has been racking up debt under your identity. It’s bad enough trying to pay off your own mistakes. You shouldn’t be paying off someone else’s under your name. 

terrence.mceachern@theguardian.pe.ca

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