How the Impact of the HST Will Differ Between Ontario and B.C.

By Keith Leslie

TORONTO — The harmonized sales tax about to take effect in British Columbia and Ontario is proof of Benjamin Franklin’s assertion that “in this world nothing can be said to be certain, except death and taxes.”

Funerals are just one of many services and goods previously exempted from provincial sales taxes that will be subject to the HST starting Canada Day, as governments in both provinces switch the tax burden from corporations and to consumers.

However, exactly what’s going up in price and what’s not depends entirely on which province you live in.

The single sales tax, which combines the five per cent Goods and Services Tax with provincial Retail Sales Taxes, will be 12 per cent in B.C. and 13 per cent in Ontario.

Energy costs will be the biggie for most Ontario consumers, with an immediate jump in the cost of electricity, natural gas and home heating oil because of the HST.

Ontario motorists will be among the first to feel the pinch when they fill up at the pumps. Gasoline and diesel fuel, which had been exempt from the province’s eight per cent sales tax, will be subjected to the 13 per cent HST.

British Columbia is maintaining its exemption for the provincial sales tax portion of the HST on gas and diesel, and won’t apply the HST to electricity or home heating fuels. However, B.C. has a carbon tax on energy that will rise to 4.82 cents a litre on July 1.

The tax on alcohol is actually decreasing, but the prices won’t. The provincial taxes of 10 to 12 per cent will be lowered under the HST, but other fees and taxes will rise because of what the provinces say is their social responsibility to maintain minimum prices for liquor.

The HST will not apply to purchases of resale homes in either province, but will apply to new homes costing over $400,000 in Ontario and those over $525,000 in B.C. New home buyers in Ontario will receive rebates up to $24,000 to lessen the impact of the HST.

There are so many other differences to the way B.C. and Ontario are harmonizing sales taxes that retailers who operate in both provinces will need two rule sheets to figure out what’s taxed and what’s not.

Internet fees will now be subject to the HST in Ontario, but were already hit with both taxes in B.C.

British Columbia will apply the HST to cable television fees and local residential phones, both of which were already taxed with the GST and PST in Ontario.

Green fees at golf courses will be subjected to the HST in Ontario but not in British Columbia.

Ontario has exempted newspapers and prepared meals and drinks costing under $4 from the HST, but British Columbia did not.

B.C. will apply the HST to snack foods, catering services, over-the-counter medications and food-producing plants and trees.

Ontario will apply the HST to legal services but they will remain exempt in B.C.

B.C. will subject shoe repairs, tailoring, wedding planning services and veterinary bills to the HST while those services remain exempt in Ontario.

Taxes will go up in both provinces on services such as lawn care, snow removal, dry cleaning, hair cuts, massages, personal trainers, gym memberships and home service calls. Home renovations and real estate commissions will also rise because of the HST.

Home insurance was exempt from the GST so it will not be hit with the HST, but will still be subject to the provincial sales tax.

Other items previously exempt from the PST but now subject to the HST include hotel rooms, taxis, domestic air, rail and bus travel along with campsites and hunting and fishing licences.

Also rising will be the tax on magazine subscriptions, some theatre tickets, ski lift fees, rental fees for hockey rinks and banquet halls and lessons for everything from ballet to soccer. However, music lessons will remain exempt from the HST.

Music and videos downloaded as MP3 files will also be subject to the HST after previously being exempt from the provincial sales tax.

Cigarettes and other tobacco products — and nicotine replacement products — will also be subjected to the HST after being exempt from the provincial sales tax, as will vitamins.

There will be no HST on vital documents such as health cards and birth certificates or on driver’s licence and vehicle plate renewals, although personalized vanity plates will be subject to the HST in Ontario.

Used cars, which were previously exempt from the five per cent GST when sold privately, will now be subject to the 13 per cent HST in Ontario and a 12 per cent provincial sales tax in B.C.

Both provinces negotiated some exemptions from the HST with the federal government, which wanted the tax applied as widely and with as few exemptions as the GST.

Consumers will continue to pay only the five per cent GST on children’s clothing and footwear, children’s car and booster seats, diapers, books and feminine hygiene products.

The HST will not be charged on basic groceries, rent, condo fees, prescription drugs, some medical devices, child care, municipal public transit, most health and education services, tutoring, most financial services and legal aid.

However, even though condo fees are exempt from the HST, purchases by condominium corporations will be subject to the tax, so condo fees are expected to rise.

The price of going to the movies or a sporting event in Ontario is actually expected to drop with the introduction of the 13 per cent HST because those outings were hit with a 10 per cent PST plus the GST.

The Canadian Press http://news.therecord.com/Business/article/737079

How the Impact of the HST Will Differ Between Ontario and B.C.

Risk & reality

Helen Morris, National Post · Saturday, Jun. 26, 2010

There is a lot to consider when deciding whether to go for a fixed or variable rate mortgage -- not least, your tolerance of risk and your ability to sleep at night. Generally, fixed rate mortgages charge a higher rate and cost more, but payments are fixed for the term of the mortgage so you know what amount is coming off your principal. Variable rate deals, on the other hand, have generally cost less over the term of a mortgage but payments rise -- and fall -- with rate changes, so while your payment stays the same, the amount that goes toward the principle could vary.

In recent years, a number of lenders have begun offering mortgages that feature a fixed and variable combination.

"You would have multiple mortgage segments attached to the same home," says Marcia Moffat, head, Home Equity Financing, RBC Royal Bank. You could set up a mortgage where, for example, you have "half your mortgage as a five-year fixed rate, a quarter of your mortgage as a two-year fixed rate, and you could take a variable rate mortgage for the other part."

A number of brokers have seen increased interest in these umbrella products.

"Combination or hybrid mortgages are growing in demand," says Rosa Bovino, a mortgage broker with Invis, "... mostly because people are unsure where the market is going. For those who are not comfortable locking in the full amount and want to play with the prime rate, there are some great variable rates out there where you're ... paying 1.9%, which is phenomenal."

As well as being exposed to different interest rates, the amortization period for each segment can also be different.

"If you think of the other side of your balance sheet, with your investments, you would typicallydiversify-- you wouldn't take a single approach to all your assets," says Ms. Moffat. "This is applying the same mindset to the credit side of the balance sheet."

The hybrid mortgage has one other hidden asset, Ms. Bovino says. It can help households in which the mortgage holders have different risk tolerances.

"You do get couples, one is more conservative [and] the other one wants to gamble," says Ms. Bovino. "That's where you see a larger percentage of the clients taking on [hybrid mortgages]."

As with all mortgages, it pays to ask questions and read the fine print.

"There are a lot of nuances with those mortgages, and you have to be very careful with the lender you choose and the different ... options and terms," says Kim Gibbons, a broker with Mortgage Intelligence in Toronto. "I disclose up front what the risks are for those mortgages and when I do...for the most part, (clients) usually choose to go either fixed or variable. I am able to provide them with a better rate on either fixed or variable as opposed to the hybrid."

Whether or not you pay a rate premium for a hybrid mortgage may depend on how it is structured.

"If they're working with a mortgage broker, they're going to get the wholesale rate so there is no upping any interest rate because you're splitting your mortgage," says Ms. Bovino. "Overall, by doing the combination mortgage you will probably pay less over the life of a mortgage ... if a component of it is at the lower variable rate."

Advisors also suggest thinking ahead to renewal time.

"When the mortgage comes up for renewal, there may be two portions of it that are up for renewal at different times," says Ms. Gibbons. "This makes it very difficult to break the mortgage ... you would have to pay penalties on the part that is not matured."

While you cannot readily switch lenders mid-way through a hybrid mortgage, "the nice thing about them coming up at different times is that you're not 100% exposed to any one particular rate environment. This is a way to hedge your bets," says Ms. Moffat. "With a five-year and a two-year, you'll be exposed to whatever the environment is in two years and the other in five years. It's a bit of a laddering approach."
Read more: http://www.nationalpost.com/Risk+reality/3203814/story.html#ixzz0s9CnDjOv

Carney Says Don't Take Rate Hike For Granted.

By Ka Yan Ng

CHARLOTTETOWN Prince Edward Island (Reuters) - Bank of Canada Governor Mark Carney cautioned investors on Wednesday not to take another interest rate hike for granted, saying volatile global conditions meant no particular path for monetary policy was preordained.

The central bank raised its key rate by a quarter point on June 1 to 0.5 percent, becoming the first in the Group of Seven wealthy countries to do so, and markets are pricing in a second rate hike on July 20.

"The bank must balance the competing influences on Canadian activity and inflation of momentum in domestic demand and the increasingly uneven global recovery," Carney said in a speech in Charlottetown, Prince Edward Island.

"In light of the scale and volatility of these conflicting forces, it should be evident that no particular path for monetary policy is preordained."

Carney said the bank will need to be agile and take a subtle approach to monetary policy.

The central bank's next rate announcement is on July 20.

Yields on near-term overnight index swaps, which trade based on expectations for the Bank of Canada's key policy rate, showed markets see an 83.08 percent chance the bank will tighten rates further in July. This was down from 83.49 percent just before Carney's speech.

The Canadian dollar rose to its highest level since May 14 just after Carney's speech was released. It climbed to C$1.0224 to the U.S. dollar, or 97.81 U.S. cents, then pared gains to sit almost unchanged from Tuesday's close at C$1.0251, or 97.55 U.S. cents.

Canada's economy has recovered faster than predicted, fueled largely by consumer spending, and the bank expects it to be the fastest-growing G7 country over the next two years.

A cornerstone of the Canadian economic recovery had been a sturdy residential housing sector, but statistics earlier in the day showed the sector was cooling further. Sales of existing homes in Canada fell 9.5 percent in May from April, data showed.

Carney noted that the central bank's most recent forecast projected housing market activity would slow "markedly" for the balance of the year and that the latest resale numbers are consistent with that.

He also reiterated that growth would be handed off to the private sector as government stimulus winds down.

One of the key risks to the economic outlook lies externally as the Greek debt crisis and increasingly multi-speed global recovery could have spillover effects in Canada, Carney said.

"Canada is not an island ... The biggest risks we face are from abroad. Those are the biggest swings," he told reporters following his luncheon speech.

CARNEY TO G20: BE BOLD

To prevent the global recovery from derailing or creating crippling imbalances, Carney urged the G20 group of developing and advanced economies to commit to bold policy changes at their summit in Toronto this month.

"The fiscal challenges that face a number of advanced economies are addressable, but they are addressable with bold action and that was part of the point of the speech. That is very much part of the point of one of the core objectives for Canada at the G20 summit," Carney said.

The required changes include more flexible currencies and reforms to boost domestic demand in emerging economies like China, as well as reducing deficits and enhanced productivity and growth potential in advanced nations.

They must also follow through with their G20 pledge to reform the financial sector to avoid future meltdowns and to resist trade and financial protectionism, he said.

"These are all big decisions. How quickly and how effectively they are taken will influence activity and inflation in Canada and, therefore, the stance of monetary policy," he said.

Carney Says Don't Take Rate Hike For Granted.

Maybe Your Mortgage Needs a Check-up.

Andy Holloway, Financial Post ·

While about 80% of Canadians visit a doctor at least once a year to help ensure they remain physically healthy, the number of people who check their financial health by regularly reviewing their mortgage is far less.

Plenty can change in someone’s life in a year, never mind during the standard five-year mortgage a lot of Canadians sign up for. A career change, kids, retirement or new found money or it could be that such a major event is on the horizon. All can affect the type of mortgage that fits just right.

“A lot of people don’t like to face up to it but, doing an annual financial check-up is a very smart thing to do,” says Peter Aceto, CEO and president of Toronto-based ING Direct Canada. “Managing your financial lifestyle is just as important as managing your diet and exercise.”

Aceto says people often just wait for a renewal letter before they look at their mortgage, and even then they’ll likely send the contract back without considering if it is meeting their current needs because they feel changing providers or the terms is futile. But they should put just as much thought into a renewal or a review as they did when they signed the initial deal.

Kelvin Mangaroo, founder of RateSupermarket.ca, which compares mortgage rates and brokers across the country, agrees. “Canadian consumers tend to become complacent about their mortgage payments and they could be saving a lot of money.” He says home owners should annually review three main things: their current and expected future risk profile and net income as well as rates.

For example, the more adverse you become to risk, the less likely a variable mortgage will be right for you. Aside from comparing rates, Ratesupermarket.ca has a few other online tools that can help consumers figure if a change is a good thing, such as a mortgage calculator and a mortgage penalty calculator that will show how much you can expect to pay to break your existing mortgage. You can also sign up for e-mail alerts that tell you when rates change.

Rates are an obvious thing to pay attention to. If they’re going up, make sure you can make the higher monthly payment that may come at renewal time, or lock into a fixed rate if you’re on a variable. If rates are dropping below your existing rate, you might want to refinance or renew early.

“You’re making a commitment to be mortgage free in 25 years so you should have a longer term view of what interest rates will look like over that period, says Aceto. “Make sure you’re comfortable with them and comfortable making those payments.”

Even though banks are in the business of getting as much interest from you as they can, many will allow people to pay a lump sum of the principal on the mortgage’s anniversary and increase their monthly payments. An extra $100 a month on a standard $200,000 mortgage could save almost $18,000 in interest and shorten the amortization period by about four years, according to Aceto.

Paying down your mortgage faster may seemingly put a crimp into your future finances if something happens and you need the money — unlike, say, putting it into a tax-free savings account or other low-risk liquid investment. But many financial institutions have a re-advance clause that allows you to retrieve some of the money spent accelerating mortgage payments, says Peter Veselinovich, vice-president of banking and mortgage operations at Winnipeg-based Investors Group.

Of course, it may become more difficult to get those funds back if there is a dramatic downward change in housing values and you haven’t built up enough equity. But that’s where understanding your entire financial situation, not just your mortgage, can help. “Most of us don’t like to think about debt, says Veselinovich. “It’s just something that somehow comes up and ends up as part of our personal balance sheet and we make payments.”

Even something simple such as making renovations could affect the type of mortgage desired. For example, topping up or refinancing an existing mortgage can pay for renovations, providing you’re comfortable with a blended interest rate. If you’re buying a new home, you may be able to port your current mortgage. Or maybe you just want to consolidate higher-interest unsecured debt into your mortgage. “Rolling that into your mortgage can significantly save on interest costs and that will help you get out of debt sooner,” says Feisal Panjwani, a Surrey, B.C.-based broker with Feisal & Associates under the Invis Inc. umbrella.

A mortgage can also help you become more tax efficient if you’re thinking of investing in a business, buying a rental property or putting some money into mutual funds or the stock market. That’s because the interest paid on money borrowed on a principal property can be written off against revenue from those investments.

But the biggest reason for making changes to your mortgage mid-stream may be because it could be a lot easier to do something before your situation changes. “Making changes to your mortgage before you go into a new venture or before you retire would allow you to qualify much easier rather than waiting for your mortgage to come up for renewal,” says Panjwani. Read more: http://www.financialpost.com/personal-finance/mortgage-centre/Maybe+your+mortgage+needs+check/3141368/story.html#ixzz0qpeNQxZh

Maybe Your Mortgage Needs a Check-up.

The New Face of Debt

Andrew Allentuck, Financial Post · Friday, Jun. 11, 2010

For James Kennedy, a federal civil servant before he retired, and his wife, Jane, who retired from the Calgary civil service, the golden years have become a series of tough compromises. Both 59, they live in Qualicum Beach, B.C., a five-minute walk from the Strait of Georgia on Vancouver Island. They enjoy the mild weather, long walks on the beach and their beautiful home.

Trouble is, a lack of employment income combined with debt stalk the good times they thought they would have after they left their careers.

Their jobs paid them a total of about $100,000 per year. Today, as a result of too much house and the repairs it entails — repainting, new floors, new electrical circuits, new kitchen counters, custom French doors and other elegances — they carry a debt of almost $70,000, nearly twice their retirement income of $37,000 a year.

If they pay off the debt, James and Jane would face a cash shortage. They could do it, but it would wipe out all of their RRSPs and other retirement assets built up over their working lives. A tough choice.

“We used to think that our house would go up enough in price to cover our debts,” Mr. Kennedy explains. “But I don’t think you can rely on that.”

Their situation could be resolved by selling the house, yet they fear that having paid too much in renovations, even downsizing might leave them house broke — with a nice abode and nothing else.

“As I approach the age of 60, I don’t want to carry so much debt. There has to be an end to the debt. I want my mind to be clear that when we get our Canada Pension Plan and Old Age Security, we will be able to keep those benefits. We don’t want to go into our sunset years paying off our debts.”

See The Kennedys are not alone. A flurry of recent studies show a significant increase of retirees in debt. First was Investors Group, which said 62% plan to carry debt such as a mortgage into their golden years. Then Royal Bank of Canada came out with its Ipsos Reid poll, which found four in 10 Canadians retired with some form of debt, and one in four began retirement with a mortgage on their primary residence.

“More and more, Canadians are carrying debt into retirement,” said Lee Anne Davies, head of retirement strategies at RBC.

Just this week, BMO Financial Group noted less than half of Canadians 55 and over have a post-retirement income strategy in place and only a third have considered that they might outlive their savings.

It’s a new and dangerous trend.

Unlike their parents and grandparents, who remembered the Great Depression and regarded debt as a first step toward ruin, today’s retirees, especially Baby Boomers born between 1947 and 1966, grew up comfortable with owing others. Indeed, for many who grew up in the expansionary years of the 1960s, it was a normal and expected to have a credit card, fund a university education with loans, graduate to readily available mortgages and then to handy lines of credit from accommodative banks.

“Retirees, especially Boomers, are less averse to debt than their parents were,” says Peter Drake, vice president for retirement and economic research with Fidelity in Toronto. The contrast with earlier generations is stark, Mr. Drake adds. “They lived through a sustained period of strong economic growth and have adopted the idea that they will be well-off.”

Boomers have always had a major influence on consumer trends, and now they are changing the face of retirement as well.

“Boomers don’t have the same sense of saving for bad days that their parents had,” explains Charles Mossman, a finance professor at the Asper School of Business at the University of Manitoba. “When they retire, former workers, especially those who don’t have defined-benefit pensions that provide a guaranteed and sometimes even an indexed cash flow, wind up with more debt service charges than they can afford.”

According to a special report by The Office of the Superintendent of Bankruptcy that was released in 2008, 15.3% of all individual bankruptcies in Canada in 2003 were of individuals 55 and over, up from 6.9% in 1993. “Those over 65 are less likely to be able to recover economically and socially from the bankruptcy,” noted the OSB.

The risk of senior bankruptcy grows with age. A study for the Canadian Institute of Actuaries released June 2007, shows that longevity risk — the chance of living to a very ripe old age — poses the problem of running out of personal savings.

Given Canadians’ extending life expectancy — currently 78 for males, 83 for females — a person retiring at age 55 has a 40% chance of running out of personal savings by age 85 and a 90% chance of being flat broke by age 95. It should be noted the data shows that women, who outlive men on average and tend to have lower lifetime incomes, have even greater reason to fear poverty caused by longevity.

Compounding the longevity problem is the trend, promoted by some financial services companies, to early retirement. Remember Freedom 55? But retiring at that age means giving up what may be one’s most financially productive years. Indeed, if the average retiree has paid down most of his or her debts, and delays retirement to age 62, he or she can live in reasonable financial security, says demographer David Foot, an economist on the faculty of the University of Toronto and author of the 1996 bestseller Boom, Bust & Echo.

It would be wrong to label all debt foolish and all debtors in peril of financial catastrophe, argues Tina DiVito, head of retirement solutions at BMO Financial Group. “There is bad debt and good debt. Bad debt may be what one borrowed for a transitory pleasure, such as a vacation, after which the borrower has to pay high interest rates and gets no tax breaks.

“Good debt bears moderate rates of interest and is payable in a reasonable time period, perhaps as a part of an investment that makes interest tax-deductible,” Ms. DiVito says.

For good debt, consider the case of 61-year-old Montreal retiree Ioanna Jakus, who has maintained a mid-six figure investment portfolio while living on an after-tax income of less than $2,000 per month.

A former bank employee, she has a $10,000 line of credit with her stock broker. “I use the line to buy stocks and bonds,” she says. “I can deduct the interest I pay from my taxable income. My investments have been successful and have more than paid the cost of credit. What’s more, rates of interest are so low that borrowing to invest just makes sense for me.”

Not only has Ms. Jakus made intelligent use of credit, she has done so expertly, selecting low-risk GICs, bonds and blue-chip stocks with strong dividends. “I have always been motivated by the knowledge that only I can control my destiny,” she explains. “My husband and I paid off the mortgage — that was when interest rates were near 20% — and we never borrowed again for spending.

“Of course, I can clear my investment debt in a moment by using cash in one of my accounts. My philosophy has always been not to take risks that I cannot afford, especially when it comes to borrowing money.

“Nobody can look after me as well as I can,” she adds.

That’s a lesson a lot of retirees have yet to learn.
Read more: http://www.financialpost.com/news/face+debt/3143925/story.html#ixzz0qpSbthjV

The New Face of Debt

Is Your Mortgage Tax Deductible?

by Contributed - Story: 54952
Jun 5, 2010 / 5:00 am

I have just joined the Tax Deductible Mortgage Program (TDMP). TDMP is a Canadian based company which converts Canadian homeowner’s mortgages, into tax deductible investment loans. TDMP uses a strategy called "tax damming" which is complex, yet very successful. It helps homeowners pay off their mortgage faster while accruing an investment portfolio for the retirement years.

Due to the complex nature of TDMP's program, it is best promoted through interactive seminars rather than advertising. The next one will be held June 17th in Vancouver at the Holiday Inn Hotel. The seminars are informative and provide access to certified mortgage professionals. For those unable to attend, interactive tools are available at The Tax Deductible Mortgage Plan.

While other planners and mortgage brokers do promote similar strategies, they may neglect to assist with the back end work required to keep it compliant with the Canada Revenue Agency. TDMP's online system automatically manages the process so homeowners can rest easy, knowing their accounts are taken care of.

TDMP recently added to its website and now offers an online TDMP test. This allows potential clients to determine whether they qualify for the product. This is in addition to helpful videos, media commentary and frequently asked questions.

If you have any questions about this unique strategy, please visit (http://www.tdmp.com/index.php/MB2300) and/or call (250)862-1806 begin_of_the_skype_highlighting (250)862-1806 end_of_the_skype_highlighting or email mtggal@telus.net.

Is Your Mortgage Tax Deductible?

Credit Score Secrets

by Gail Vaz-Oxlade, for Yahoo! Canada Finance
Thursday, May 27, 2010


Ever wonder how that magical number – The Credit Score – is computed?

Whether you’re obsessing over your FICO score or your Beacon score, you’re likely shopping for credit. The FICO score was developed by Fair Isaac & Co., which began credit scoring in the late 1950s. The point of the score is consolidate your credit profile into a single number. The Beacon score is a brand name used by Equifax, the largest credit-reporting agency in Canada. While Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed, whether you get a loan or not is a numbers game: The more points you score on your credit app, the better you do.

There’s a reason you have to fill out so much information when you’re applying for credit. Everything counts. Your age, your address, and even your telephone number all have a role to play in whether or not you’ll get credit.

More from Gail Vaz-Oxlade:

• Gail's four rules for finding financial bliss

• Gail answers your personal finance questions

• Banks crack down on a safety net for your money
See all of Gail's columns on Yahoo! Canada Finance
Young ‘uns and old folk are at a disadvantage since under 21 and over 65 likely means you aren’t working; no points for you. If you're married, you’ll get a point for being “stable.” And while you might think that being divorced would work against you (all that spousal and child support), most creditors don’t give a whit.

No dependents? Zero points. You’re probably still gallivanting like a teenager since you haven’t yet “settled down.” One to three dependents? Score one point. You’re a solid citizen. More than three dependents? Score zero. Have you no self control! And don’t you know you that with all those mouths to feed you could get in debt over your head?

Your home address counts too. Live in a trailer park or with your parents? Bad risk, score zero points. You could skip town with nary a look over your shoulder. Rent an apartment? Give yourself one point. Own a home with a big fat mortgage and you’ll score major points since someone has already done some checking and you qualified for a mortgage. Own your home free and clear? Even better. You’ve proven you can pay off a sizable debt and now you have a pile of equity that the card company would love to help you spend.

Previous Residence? Zero to five years (some applications only go to three years), score zero points since you move around too much. No land-line: zero points. How the Dickens are they gonna find you when you fall behind in payments. Since they can’t use your cell phone to actually locate you physically, it doesn’t count.
Less then one year at your present employer earns you no points. Again, it’s a stability and earning continuity thing. The longer you’re on the job, the more likely you are to be bored out of your mind but you’ll score more points. And, not to overstate the obvious, the more you make the better.

The more willing you are to make your lender rich, the higher your score will be. Since the FICO score was originally designed to measure customer profitability, if you pay off your balance in full every month, you’re going to score lower than the guy who only makes the minimum payment and pays huge amounts of interest.


Scores range from 300 to 900 and if you manage to hit 750 or above you’ll qualify for the best rates and terms. Score 620 or lower and you’ll pay premium interest if you even qualify; 620 is the absolute minimum credit score for insured mortgages.
More From Gail Vaz-Oxlade

Debt-Free Forever

Debt-Free Forever helps readers take responsibility for, and control of, their money. The book will give you a road map to getting out of the red in 36 months or less.

Find out how to order your copy of Debt-Free Forever

Your credit score can change quickly. Payment history accounts for about 35% of your credit score and just one negative report can drop your pristine score into the doldrums. Since scores are updated monthly, your bad behaviour won’t go unpunished for long.

The type of credit you have counts for about 10% of your score. And your current level of indebtedness accounts for about 30% so going too close to your credit limit is another way to deflate your score. One rule of thumb is to keep your balances below the 65% mark. So if you have a limit of $1,000, you won’t ever carry a balance that’s more than $650.

Having too much credit available can also hurt your ability to borrow since the more credit you have, the more trouble you can get yourself into. If you’ve got a walletful of cards, canceling credit you’re not using can be a good thing – for both you and your credit score – over the long haul. Careful though. If the card you’re eliminating is one with a long, positive history, you’ll eliminate what could be a very good record of your repayment when you cancel the card. You’d be better off cutting up the card so you aren’t tempted to use it, while you establish a track record (six months or more) before you actually cancel the account.


Credit shopping can also cost you points. Since about 10% of your credit score relates to the number and frequency of new credit enquiries, applying willy nilly for new credit will end up costing you. However, it’s only when a lender checks your score that this registers on your score. Checking your own credit report/score is considered a “soft” inquiry and does not go against your score.

Credit Score Secrets

Bank of Canada Increases Overnight Rate Target to 1/2 Per Cent and Re-establishes Normal Functioning of the Overnight Market

OTTAWA – The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 1/2 per cent. The Bank Rate is correspondingly raised to 3/4 per cent and the deposit rate is kept at 1/4 per cent, thus re-establishing the normal operating band of 50 basis points for the overnight rate.

The global economic recovery is proceeding but is increasingly uneven across countries, with strong momentum in emerging market economies, some consolidation of the recovery in the United States, Japan and other industrialized economies, and the possibility of renewed weakness in Europe. The required rebalancing of global growth has not yet materialized.

In most advanced economies, the recovery remains heavily dependent on monetary and fiscal stimulus. In general, broad forces of household, bank, and sovereign deleveraging will add to the variability, and temper the pace, of global growth. Recent tensions in Europe are likely to result in higher borrowing costs and more rapid tightening of fiscal policy in some countries – an important downside risk identified in the April Monetary Policy Report (MPR). Thus far, the spillover into Canada from events in Europe has been limited to a modest fall in commodity prices and some tightening of financial conditions.

Activity in Canada is unfolding largely as expected. The economy grew by a robust 6.1 per cent in the first quarter, led by housing and consumer spending. Employment growth has resumed. Going forward, household spending is expected to decelerate to a pace more consistent with income growth. The anticipated pickup in business investment will be important for a more balanced recovery.

CPI inflation has been in line with the Bank’s April projections. The outlook for inflation reflects the combined influences of strong domestic demand, slowing wage growth, and overall excess supply.

In this context, the Bank has decided to raise the target for the overnight rate to 1/2 per cent and to re-establish the normal functioning of the overnight market.

This decision still leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Information note:
The next scheduled date for announcing the overnight rate target is 20 July 2010. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 22 July 2010.

Bank of Canada Increases Overnight Rate Target to 1/2 Per Cent and Re-establishes Normal Functioning of the Overnight Market