Like many journeys, the road to bad credit starts with a single step – or misstep in this case. Whatever your situation, once you've started having trouble with your credit score, it can be difficult to find your own way back to a strong financial situation. But you have some money saved in your RRSP, so why shouldn't you use that to get out of debt? While it seems like an easy solution now, you might regret your decision in the future.
Individual debt is increasing
Canadians are becoming increasingly concerned with affordability – both large purchases, such as a home, and day-to-day expenses like groceries and gasoline. While the cost of living has gone up in recent years, the cost of borrowing has stayed relatively low; as a society, we have had easy access to credit cards and other loans that help us take care of these expenses in the short-term. The problem with this situation is that we begin to live on credit and rack up debt.
A recent survey by BMO shows that paying off living expenses and paying off debt are the second and third most likely reasons for people to withdraw funds from their RRSP, accounting for almost 40% of respondents. (The top reason for an RRSP withdrawal remains supporting a home purchase.) The use of retirement savings to solve immediate emergencies and affordability problems raises a red flag when it comes to managing your finances. In general, a withdrawal from your RRSP for short-term use should be a last resort.
Take control of your finances
While managing your money can seem intimidating, mastering that skill will let you live with less stress and worry. There isn't any one "best way" or "special formula" that works perfectly for everyone to improve their credit, but we've compiled 10 fast and effective ways to get out of debt on our site. Remember: if you've tried to improve your bad credit in the past and failed, you don't need to beat yourself up about it. If you can turn those tips into habits, you'll not only improve your credit but see greater gains as your money works for you rather than against you.
A savings strategy is an important part of personal finance. You'll see more gains from your investments the earlier in your career you contribute to them, which is why using retirement savings may not be in your best interest.
Bad or bruised credit can stop your mortgage journey in its tracks. However, if you've got a low credit score your dream of buying a home isn't necessarily over. Once our team has had a chance to assess your situation, we'll work alongside you to get your credit score back on track and find a mortgage solution that is right for you.
If you're concerned about your credit and want to buy a home, contact Auxilium Mortgage today for a free consultation with one of our brokers: call Toll-Free 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours, Monday through Friday 8:30 a.m. – 5:00 p.m. We can also arrange an appointment evenings or weekends to work with you.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals.