BC Debt Counselling Services Debunk These Persistent Myths about Debt
Recently, it has been reported that the number of households finding themselves sinking into debt has increased over the past few years. In a recent report from the McKinsey Global Institute, Canada was named as among the six countries with the worst debt problems in the world, but is the debt problem faced by most people nationwide really that bad? When seeking help from BC debt counselling services, here are some widespread myths that you need to stop believing in.
Debt among Households is Skyrocketing
While it’s true that more households are finding themselves slowly sinking into debt, this does not necessarily mean that the state of debt nationwide warrants for widespread concern. According to economist Sal Guatieri, this could’ve been true during the past two years, but now that Canadians are borrowing at the slowest pace within the decade, debt is now rising only slightly faster than income. This is due to stricter mortgage rules and tougher warnings from the Bank of Canada, making the process of borrowing money tighter.
Canadians are More Indebted than Americans
By the end of 2014, the Canadian household debt totalled 161 per cent of disposable income, only slightly below the peak of 165 per cent recorded by the United States back in 2007. When properly adjusted to the way the U.S. calculates the ratio, however, the household debt in Canada drops to 151 per cent, a far cry from the peak record from the U.S.
Being Debt Free is Equal to a Perfect Credit Score
Undoubtedly, it’s great to finally have your debt off your back, but this does not mean that your credit score will immediately reflect this. Remember that your credit score is based on your credit behaviour and payment history, meaning your financial habits can heavily influence your score. Once you’re able to use your credit card sparingly, the credit scoring system will then see that you’ve been using your credit responsibly.
What is the Truth?
In the end, Canadians aren’t exactly facing the same problem Americans faced during the 2008 financial crisis, but this doesn’t mean that you can let your guard down and see your household sink into bankruptcy when you have options for debt settlement like a consumer proposal. Under this legally binding debt proposal, your unsecured debts, ranging between $10,000 and $250,000 can be paid through monthly payments or lump sum payment. If you wish to undergo this alternative for bankruptcy, you can seek help from a debt counselling expert like Blair Greenwood from 4 Pillars Debt Consolidation & Credit Rebuilding.
Sources:
Four myths about Canadian household debt — and a few unpleasant truths, Financial Post
7 Common Credit Score Myths, My Money Coach