Like many things in life, knowledge is power. Until we go out to get a loan, many of us don’t even know that we may be in a bad credit situation. Part of coming to terms with this is learning about managing personal finances from an early age. We spoke to Christopher Burns from This That and the MBA, about his observations of current personal finance behaviours, how individuals can improve on them and his views on the future state of accumulating credit.
Generally speaking, many of us in North America do our best to pay off our debts on time and keep our spending in check. However, if you’re like a number of Canadians in today’s world you may find yourself in a situation that you never thought you’d be in – a time when you are accumulating debt. After speaking with Christopher Burns, we learned that he experienced this personally and talks to many people on his website This That and the MBA about similar experiences. Let’s take a look at our interview with Christopher to hear about his own experience as well as discuss some of his observations on what’s going on across North America when it comes to managing debt.
Bad Credit Loans: Thanks for speaking with us, Christopher. Tell our readers a little bit about yourself.
Christopher: My name is Christopher, I live in the States and I’m 32. I have a small mountain of student loan debt and about $10,000 in consumer debt. My wife and I have two children with a third on the way. We are slowly working ourselves out of credit card debt, we took on some planned debt when our first child was born and have been working hard since to pay it off.
Bad Credit Loans: We’ve found through our research that in Canada, it seems like more and more people are taking out debt. At Bad Credit Loans, we are trying to find ways to help them manage this better and improve their credit rating over time. Are you finding a similar trend in the States?
Christopher: I think the situation is that more and more are finding it easier to get access to credit and so many cards out there that have only a $1,000-2,000 credit limit per card can really add up quickly. This is exactly how we found our situation with a few grand on each but when you looked at it in totality it was quite a bit. The trend for a lot of younger people is to live for the moment. Partnered with that is that they do not seem to have basic knowledge around their finances as it is not taught in elementary or secondary schools. It really is sad that it is not taught at a young age.
Bad Credit Loans: Do you find in your business that you spend a lot of time educating people that it is actually possible to manage debt?
Christopher: Yes. I do find myself spending a lot of time talking about debt and coaching others. My friends and family utilize me as a resource to help them with their major decisions and just as a soundboard for ideas. For a while my friends and family did not know the situation that we were in with credit card debt but it came to light within the last few years. It feels so much better to have it out there in the open so others know. Debt does not discriminate and it affects all walks of life. The best part is that we can all learn from one another.
Bad Credit Loans: What are some strategies you suggest for people who read your blog that want to genuinely improve their situation?
Christopher: Make a list of all the bills or expenses going out the door. Then keep an inventory of what is coming in the door. If what’s coming in is less than what’s going out you really need to look at your spending. Sit down and track a few months of expenses to see where you are actually spending your money. I bet you will be quite surprised how much money you are wasting on that morning coffee or that snack at the gas station. Reign in that spending and repeat. Soon you will find yourself really aware of your own situation and you can then develop a strategy to pay down your debt. It’s best to achieve small milestones and that’s what I often tell people as small wins are great for motivation.
Bad Credit Loans: At Bad Credit Loans, one of the aspects we’ve found it hard to get information on is how bad a person’s credit can be for them to still be able to get a loan. What factors do you see that contribute to an approval or rejection?
Christopher: Banks and other lenders make their money off interest rates. They may take on some riskier loans that have higher interest rates but they offset that with being very selective on other loans they offer. They are in the business to make money and generally the riskier loans pay more but they also have that risk associated with them. So, the banks perform a careful dance with risk and reward.
Bad Credit Loans: Do you feel that it is easier or more difficult to get a loan these days?
Christopher: I think that it is easier because there are so many varieties of loans out there, payday or just common personal loans.
Bad Credit Loans: We hear a lot about high interest rate with payday loan companies and that is typically a negative association when we discuss bad credit loans. Do you have any views on payday loans?
Christopher: I think that if you are responsible with how you use them they can be a great asset to have. They allow you quick access to money but having a high interest rate is the down side. You really need to weigh the pros and cons of your individual situation before pursuing one.
Bad Credit Loans: If you could give our readers one way to improve their credit score, what would it be?
Christopher: One way to improve your score is to simply check it. It is incredible about how many people do not even check their score or even know where to check it. Looking at your credit report, you will see whether or not you are in good standing, giving you a baseline to work from. If you have a credit card and you know you have not been paying it on time, you can guarantee that it is going to be on there. Just make sure that your payments are timely, making a late payment even if there is no late- charge penalty does not mean that they did not report it to the credit bureaus. This, in turn, will impact your rating.
Bad Credit Loans: Finally, do you see things improving generally for bad credit in the future?
Christopher: Unfortunately, I see it worsening as more and more things are being tied to credit. For instance you go to apply for your dream job, they do a credit check and you do not get the job. This doesn’t really help you as now you don’t have a job to pay off your bills. That mortgage is just going to be out of reach now because lenders are pickier as they have been burned by the subprime mortgage mess a few years back. I would like to see it improve but we need education early on so we are aware of the dangers. Educating young people about personal finance is the first step and the most important one, which is what I’m trying to play part in at the moment.
Speaking with Christopher was interesting indeed and reinforced the importance of learning more about credit, even when you are facing a pile of debt. Learning more about something as important as your finances is up to you. The best part of all of this is that you have the power to educate yourself and get yourself on the path to a positive credit standing.
