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Credit is a fact of life

By Reg Rocha

Credit Cards in Canada

Credit is a fact of life

There is an old expression that there are only two things you can be certain of in this life: Death and taxes. To that, I am going to add “credit”.

In today’s world, credit makes the world go ‘round. Of course, most Canadians access credit to make a big purchase like a home or a car, but if you really think about it, our need for credit extends so much further. Without credit, it’s unlikely you can get a cell phone, subscription, or book anything online. In many cases, insurance companies, landlords and employers may also look at your credit to see how financially responsible you are before issuing an insurance policy, renting out an apartment or giving you a job.

For low income Canadians, however, credit has become a tool for survival.

According to Statistics Canada’s recent Economic Insights paper, “Indebtedness and Wealth Among Canadian Households” (March 2019), Canadians current debt-to-income levels, “…are over 20 per cent higher than in late 2007.” But this scenario is not evenly distributed. Families in the lowest income bracket are carrying the greatest debt to income ratios. For example, households in the lowest income quintiles in Toronto have a sharp 420 per cent of debt as a proportion of income. In Vancouver, it stands at 400 per cent.

The weight and precariousness of this existence is crushing families.

As a debt consolidation professional for nearly 20 years, I find this situation challenging to watch. I believe there is more our government and our finance industry professionals can do to begin turning things around, particularly for those most vulnerable.  For example, at 4 Pillars we are committed to our clients’ financial literacy. We believe it is foundational to helping people regain control of their financial health. Overall, Canada needs to apply greater investment into Canadians’ financial education, helping people select financial products that meet their needs and manage necessary credit in healthy ways.

We are convinced that it is also critical to help people with very poor credit ratings get back on track.

When people come to us facing crushing debt and insolvency, we do everything we can to help them limit the debt they are responsible for, find an affordable repayment plan and give them the tools and confidence they need to deal with and recover from past financial challenges.

For a very small number of our clients, we will recommend credit products that make sense for their circumstances. Sometimes a client wants to pay off their proposal sooner, or re-enter the housing market faster, or even return to school to further their education. Our promise to every client is that we don’t offer products they don’t need.

We also believe there is a need to take stronger action against predatory lenders who have built a business model on taking advantage of people desperate to make ends meet.  While credit may be a necessary part of life, and must be managed responsibility, without more protection the rules of the game are stacked against those who are struggling the most.

Credit is an essential element in the lives of Canadian.

Canadians have reached a moment when close to half of us feel we are about $200 away from being unable to meet our monthly bills. For low income Canadians in particular, this is a national crisis point. Based on our experience over the last 20 years, 4 Pillars believes the time for a more proactive and realistic approach to helping Canadians use credit and manage credit is now.

Reg Rocha
4 Pillars Consulting

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