Credit is an agreement you make with a lender that allows you to pay for goods or services now. In return, you agree to pay the lender back, usually with interest, in the future. Common types of credit include credit cards, mortgages, personal loans, lines of credit, payday loans and leases. When you borrow money from a lender, they expect that you will live up to the terms of the agreement and that you will pay as agreed. Just as you have rights as a borrower to be treated fairly when dealing with creditors, creditors also have rights regarding the money they have lent you.
Good credit habits matter
Being a responsible borrower can help you to build a good credit history. This makes you more attractive to lenders and may give you the ability to negotiate lower interest rates. Using credit irresponsibly and spending beyond your means can have the opposite effect. Lenders are hesitant to lend to people with a poor credit history and will most likely charge them higher interest rates.
Understand what you’re agreeing to
Once you sign for credit on the dotted line, you have entered into a legally binding agreement. Before you sign, make sure you know exactly what you are agreeing to and that you are familiar with your rights and obligations under the credit contract. You may wish to obtain professional legal or financial advice to assist you.
Understand the true cost
Just because you’re approved for a loan or credit product does not mean you will be able to afford the payments. Before agreeing to any loan or credit product it’s important to be sure you understand how much it will cost you to borrow (fees, interest rate, and other charges) and how long it will take you to pay it back. You also want to make sure your payments fit into your budget. In New Brunswick, lenders are required under the Cost of Credit Disclosure and Payday Loans Act to clearly disclose the true cost of borrowing as well as your rights and responsibilities in their credit contracts.
If you don’t have the cash saved, ask yourself if you truly need it right away, before using your credit card or applying for a loan. Give yourself a cooling off period. Walk away, go home and consider the purchase. If you choose to pay for something on credit, make sure you can afford the payments and have a plan to pay it off.
Have a plan to pay off the credit
Our resources, tips, and worksheets can help you make smart spending decisions, build a budget that works, and avoid living beyond your means. You can also contact a credit counselling service for additional help and information about your options when dealing with and managing debt. Some credit counselling agencies are free, non-profit organizations, while others offer their services for a fee.
Compare different agencies and ask questions to make sure you know what costs are involved and what services you will receive.
Cancelling a credit contract
While you have the right to cancel optional services purchased through a credit contract, you may not be able to cancel the entire contract unless the business or lender gives you permission to do so. When purchasing on credit, ask about the business’s return policies and be sure that any cancellation rights are clearly disclosed in the credit agreement before you sign. Unless the agreement gives you the right to cancel, it may be difficult or impossible to cancel: don't enter into any agreement unless you are positive you want the product or service.
Understand what happens if you cannot make payments
If you owe money to a company, but are not paying or are unable to make the minimum payments, the company may hand the debt over to a collection agency. When this happens, a creditor has the right to collect on a debt that is owed to them, and the consumer has the right to be treated reasonably and with respect. Visit the Collection Agencies page to understand your rights and what a collection agency is allowed and not allowed to do.
Debt settlement companies
A debt settlement company negotiates with your creditors to reduce your debts, should you find yourself unable to meet your obligations. Know your consumer rights before signing a contract with a debt settlement company.
Tips to help you protect your credit
It’s always important to keep documentation regarding your credit products so you can refer to them if a dispute or problem arises. Be wary of companies willing to extend you credit without giving you a copy of the agreement. The agreement can be in writing, or, with your consent, in any other form that allows you to retain the statement for future reference.
Be careful of lenders with no physical address or only a PO box
Unscrupulous companies often have no physical location, and provide just a PO box as an address to give the impression they are an established company.