Let’s lighten your load of personal finance matters to worry about. As long as you’re diligent about paying what you owe on time, you don’t need to be concerned about your credit score.
I say this after rebounding from a sizable drop in my own credit score. Last summer, my wife and I added a new credit card and bought a new car with dealer financing (zero per cent, with a three-year term). I’ve made my share of personal finance mistakes over my lifetime, but failing to pay debts on time has never been one of them. That’s why I was surprised that my credit score dropped about 60 points.
For context, the decline took my score from outstanding to very good. It never dipped below the level needed to get a competitive interest rate if I’d needed to borrow. But, still. The drop in score was like being an A+ student who suddenly gets a B+.
Here’s the good news. I checked recently and my credit score was better than ever. The drop of last summer is gone. The negative effects of adding a credit card and a car loan have come to an end.
I tell this story to put your mind at ease if you’re concerned about the impact on your credit score of making a change in credit card or taking on debt. You might take a hit, but it will be short-term as long as you consistently pay what you owe on time.
Roma Luciw and I looked at credit scores in Season 2 of our Stress Test podcast – what qualifies as a “good” score and why these numbers bounce around all the time. Also what can be done to improve a bad score. You can listen to that episode here.
A growing number of banks are offering free access to credit scores on their client websites. Here’s a credit counselling agency’s guideline on what a good credit score is: “Generally speaking, if you’re looking to get a mortgage in Canada, you’ll want a credit score of at least 780.”
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Rob’s personal finance reading list
Cheap home renos that will make a difference
A dozen ways to improve your home’s look for a few thousand dollars or less.
An investing blogger’s Top 10 dividend stocks
Bob from Vancouver is the guy behind the Tawcan blog and an investor who covers 55 per cent of his household’s expenses with dividends. Here’s his top 10 list of dividend stocks.
How to stop buying disposable food storage bags
A selection of reusable food storage bags that offer a cost-effective and environmentally friendly alternative to disposable products. This is a U.S. article, but the products mentioned are available in Canada … at higher prices.
The ‘nastiest, hardest problem’ in finance
That’s how Nobel Prize-winning economist William Sharpe described the task of figuring out how best to sustainably draw down on your retirement savings. Here’s a look at three of the big decisions involved in what financial planners call decumulation.
Ask Rob
Q: Is it better to finance a new or used car with the dealer or use an existing line of credit with the bank?
A: The interest rate on a bank line of credit would be 2.95 per cent these days at best, and more likely 3.45 per cent or more. Dealer financing offers often come in lower than this, and you should be able to get a locked-in rate that won’t fluctuate like the borrowing costs on a line of credit.
Today’s financial tool
Here’s the guide for financial planners on what to use in long-term projections for financial market returns, inflation and more. A reminder of how unusual today’s investment returns are.
Tweet of the week
Pollster Abacus Data finds that 88 per cent of Canadians want to see a wealth tax as part of a post-pandemic recovery plan.
The money-free zone
For your reading pleasure. A list of every Pulitzer Prize fiction winner of the 21st century.
In case you missed these Globe and Mail personal finance-related stories
- Hybrid work risks becoming the next ‘career killer’ for women
- Reducing the financial stress of postsecondary education
- Why I’m banking on dividend hikes
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing … and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
