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LOWEST CREDIT SCORES RATING: THESE CANAD1ANS LED GIGANTIC CREDIT CARD DEBT REPAYMENT

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Canadians with the lowest credit scores rating led a wave of pandemic credit card debt repayment

Statistics Canada reported on August 23, 2021, that Canadians with the lowest credit scores rating repaid the most credit card debt in the first year of the pandemic. Over the period of the pandemic to January 2021, the mortgage debt of Canadian households increased by a record amount of $99.6 billion, driven by rising home prices, especially for single-family houses. Over the same period, non-mortgage debt fell by a record $20.6 billion, mainly due to a $16.6 billion decline in credit card debt.

In this Brandon Blog, I look at the area of people with credit scores rating and discuss how and why these lowest credit scores rating Canadians were able to pay down their high-interest debt.

Credit scores rating: Credit report and score basics

Credit scores are three-digit numbers derived from your credit report. An individual’s credit report summarizes their Canadian credit history. The Canadian credit reporting bureaus are Equifax Canada and TransUnion Canada. These private companies are credit reporting agencies that collect, store, and share information about how you use credit. As your credit report changes over time, your credit score will change as well. The more responsibly you manage your credit, the more points you get. According to a review of Borrowell Canada members, even a single missed payment can lower credit scores by 150 points.

Your credit score calculation is based on information in your credit report. A credit score between 660 and 900 is generally considered good, very good, or excellent credit scores.

The credit score model has credit score ranges from 300 to 900 that is used to determine creditworthiness. People always ask if there is a “magic number” to obtain better loan rates. This is an age-old question. Different lenders may focus on different aspects of your credit history. So, I cannot give you one number that unlocks the door to the best loan rates.

credit scores rating
credit scores rating

Credit scores rating: How to check your credit report

Getting a credit card, getting a car loan, or applying for any loan will result in a credit file being opened up on you. The report keeps getting updated over time. Your borrowing history and borrowing experience are all taken into account.

The report contains information about every loan you have taken out in the last six years and whether you pay on time or not, how much you owe, what your credit limit is on each, as well as a list of creditors who are authorized to access your record.

You can get a free credit report on yourself yearly from each credit bureau. You need to submit your ID and background details to prove you are the person entitled to make the request. You can make sure that your credit history report is error-free. Any errors will be corrected by each credit bureau based on the evidence you provide.

A credit rating of R1 is the best. That means you pay within 30 days of receiving your bill, or “as agreed.”

Anyone who wants to grant you credit or provide you with a service that involves you receiving something before you pay for it (such as a rental apartment or phone service) can get a copy of your credit report so they can make a credit decision about you.

R9 is the lowest credit rating.

Average Canadian credit scores rating improved during the pandemic, Borrowell study finds

With Borrowell, a fintech company, you can get your credit score every week for free. From Q1 2020 to Q1 2021, they analyzed credit scores and credit reports of 1,015,369 Canadians, including those in 20 of Canada’s largest cities, to investigate changes in credit scores and missed payment trends across the country.

The Borrowell study came up with several very interesting findings:

  • Government relief measures, lifestyle changes, and financial shifts have impacted credit scores and bill payments over the past year – sometimes revealing the divergence in how COVID-19 affected different segments of society’s financial future.
  • In spite of the coronavirus pandemic, credit scores for Canadians actually improved.
  • The average number of people with missed payments decreased from 3 out of every 10 consumers to 2 out of every 10 people between the first quarter of 2020 and the first quarter of 2021.
  • From Q1 2020 to Q1 2021, Borrowell members’ average credit scores increased by 18 points, rising from 649 (under the average) in Q1 2020 to 667 (fair).
  • The risk of missing paying bills on time is 432 times higher for consumers with low credit scores rating.

    credit scores rating
    credit scores rating

The Statistics Canada study: Canadians with the lowest credit scores rating led the wave of pandemic credit card debt repayment

The new StatsCan study, “Trends in household non-mortgage loans: The evolution of Canadian household debt before and during COVID-19“, examines how Canadians reduced non-mortgage debt and debt levels during the pandemic.

During the pandemic, households began to see their disposable income rise, partly due to the limited spending opportunities during lockdowns, as well as the government’s monetary assistance, such as CERB or enhanced Employment Insurance. This was an opportunity for many households to pay down their expensive non-mortgage debt, with unsecured credit lines and credit card balances being paid down at record levels.

Prior to the pandemic, the outstanding balance on credit cards was $90.6 billion in February 2020, compared with $74 billion just a year later. During the two decades prior to the pandemic, the outstanding balance carried on credit cards had increased on average by 20.7% per year.

Debt reductions were greatest among Canadians with the lowest credit ratings, suggesting that those most vulnerable to financial hardship used savings prudently during the pandemic. Home prices increased, especially for single-family houses, as I indicated at the outset, driving a record increase in mortgage debt for Canadian households of $99.6 billion.

For me, this is a mixed blessing. You may be pleased to hear that many Canadians with low credit scores have been able to save money and reduce their household debt. In my opinion, mortgage debt is highly unlikely to have been accumulated by the same people.

People with low credit scores were not the ones filling out mortgage applications. It was rather people with good and excellent credit who either moved up and/or refinanced in order to do renovations, improvements and/or to pay off debt with a high-interest rate. Furthermore, it shows that people with low credit scores can earn more money staying home and receiving government COVID-19 assistance than they could make at their normal job. That is a very sad comment.

Minimum credit scores rating for mortgages in Canada

You can either be approved or declined for a mortgage based on your credit score. It can affect your mortgage interest rate, the type of mortgage available, as well as the mortgage lenders that you can choose from.

A mortgage requires a minimum credit score of:

  • in the case of major banks, 600;
  • for B lenders, 550;
  • private lenders have no minimum requirements; and
  • for CMHC mortgage default insurance mortgages, 600 points are required.

For a mortgage with bad credit, your only options are B lenders and private lenders, and they may require a large down payment or equity in your home. A lower credit score is generally associated with a higher mortgage interest rate. Low mortgage rates require a credit score of at least 680.

Having a credit score above 600 is good for getting a mortgage in Canada, as it opens up more options. In most cases, CMHC mortgage default insurance is not available to people with credit scores below 600. When you have a low credit score, your mortgage loan application may be denied, your mortgage rate may be higher, or you may be limited in the amount of money you can borrow.

A credit scores rating must be 680+ to qualify for the low-interest rates advertised in the media. CMHC mortgage default insurance is another issue some borrowers need to be concerned about. As long as you have sufficient income and property value to service the mortgage, a low score may suffice, however, the private lender will charge you higher fees and interest rates.

credit scores rating
credit scores rating

Credit scores rating summary

I hope that you found this credit scores rating Brandon Blog. Credit scores do not always properly reflect people who have problems because they are cash-starved and in debt. There are several insolvency processes available to a person or company with too much debt. You may not need to file for bankruptcy.

If you are concerned because you or your business are dealing with substantial debt challenges, you need debt help and you assume bankruptcy is your only option, call me.

It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties with debt relief options as an alternative to bankruptcy. We can get you the relief you need and so deserve. Our professional advice will create for you a personalized debt-free plan for you or your company during our no-cost initial consultation.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people with credit cards maxed out and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do as we know the alternatives to bankruptcy. We help many people and companies stay clear of filing an assignment in bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need to become debt-free, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We hope that you and your family are safe, healthy and secure during this COVID-19 pandemic.

Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

credit scores rating
credit scores rating
Categories
Brandon Blog Post

HOW TO USE QUADRIGA CX SCANDAL TO IMPROVE FINANCIAL LITERACY

quadriga cx
quadriga cx

If you would prefer to listen to the audio version of this Brandon’s Blog, please scroll to the bottom and click on the podcast.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Introduction

Quadriga CX (Quadriga, QuadrigaCX or Quadriga CX) was a subsidiary of Quadriga Fintech Solutions Corp. (Fintech). Fintech operated an online cryptocurrency exchange system where parties interested in acquiring, offering or trading numerous cryptocurrencies were able to complete such purchases on the QCX System.

In this Brandon’s Blog, I explain how the QuadrigaCX financial scandal can be used as an important lesson to aid in our financial literacy.

The Quadriga CX demise

Quadriga was experiencing a liquidity crisis as well as having been incapable to honour withdrawal requests from individuals. Furthermore, Quadriga had not been able to find a substantial amount of cryptocurrency upon the death of QuadrigaCX founder and CEO, Gerald William Cotten.

As a result of the liquidity situation combined with missing cash and cryptocurrency, Fintech and related companies made a decision to call a time out by filing for bankruptcy protection and hope for business restructuring on February 5, 2019, under the Companies’ Creditors Arrangement Act( Canada) (CCAA).

By April 11, 2019, it was obvious that there was no possibility of restructuring. On that date, the Court made a Termination and Bankruptcy Assignment Order was made by the court confirming the process through which the Quadriga CX CCAA procedure would terminate and shift to a corporate bankruptcy under the Bankruptcy and Insolvency Act (Canada) (BIA).

QuadrigaCX 2020 update

The demise of the cryptocurrency trading system QuadrigaCX arises from a fraudulent scam by Gerald Cotten. Clients delegated their assets to Quadriga, which supplied fraudulent guarantees that those properties would be protected. In truth, Mr. Cotten invested, traded and made use of those properties as he pleased. Running with no proper system of oversight or interior controls, he had the ability to misuse those assets, uncontrolled and undiscovered, eventually bringing down the entire trading exchange.

On January 14, 2019, Quadriga CX announced that Mr. Cotten had passed away in India the previous month. With the Quadriga CX CEO death, he could not continue to manipulate the Quadriga CX platform and hide his fraud. The entire business operation imploded as described above.

It turns out that over 76,000 Quadriga CX customers were owed a combined $215 million. About 40 percent of the clients were from the province of Ontario. The bankruptcy trustee recovered $46 million in assets for distribution to unsecured creditors. The people that relied on QuadrigaCX collectively lost at least $169 million.

The Ontario Securities Commission investigation into the Quadriga CX demise

The staff of the Ontario Securities Commission (OSC) carried out an evaluation of the QuadrigaCX business operations to establish how the system was run, what created its collapse, and where the money went. Over a period of approximately ten months, a multi-disciplinary team of OSC Enforcement Branch staff analyzed trading and blockchain information, interviewed key witnesses and worked together with many regulatory bodies.

Most of the $169 million shortfall arose from Mr. Cotten’s fraudulent conduct. It has been widely guessed that the bulk of the losses arose from crypto properties ending up being lost or hard to reach as a result of Mr. Cotten’s death. The OSC found that most of the $169 million shortage arises from Mr. Cotten’s deceitful conduct.

The OSC report states that the bulk of the loss– about $115 million– occurred from Mr. Cotten’s illegal trading on the QuadrigaCX platform. He opened up Quadriga CX accounts under pen names and attributed himself with phony Quadriga cryptocurrency balances which he traded without knowledge by unwary Quadriga CX customers. He incurred losses when the price of the cryptocurrency would change, thus producing a deficiency in the assets needed to satisfy customer withdrawals. Mr. Cotten covered this deficiency with other customers’ deposits. This indicated that Quadriga CX, a state of the art new technology operated an old-time Ponzi scheme.

It is reported that Mr. Cotten lost an additional $28 million while trading customer deposits on three external cryptocurrency trading systems without permission from, or disclosure to, clients. He also misappropriated millions to fund his and his wife’s, Jennifer Robertson, way of living. In its final months, Quadriga CX had virtually no balances left and was running like a revolving door– brand-new customer deposits were quickly re-routed to money needed for Quadrigacx withdrawals.

In summary form, the OSC described the losses as:

  1. $115 million trading losses sustained by Mr. Cotten on the Quadriga CX platform.
  2. $46 million assets recovered or identified by the licensed insolvency trustee (formerly called a bankruptcy trustee).
  3. $28 million trading losses sustained on external platforms.
  4. $23 million which could not be accounted for because of the poor state of the Quadriga CX books and records.
  5. $2 million of client funds misappropriated for living and travel expenses.
  6. $1 million estimated operating loss.

What the Quadriga CX scandal can teach us for improving our financial literacy

  1. In Canada, lots of crypto property trading systems are not registered. They have taken the view that they do not need to sign up with regulatory authorities. This is an essential message to users and possible users of these platforms. So we need to keep in mind that there may be no regulatory oversight at all on these cryptocurrency trading platforms.
  2. Cryptocurrency trading and the trading platforms are risky. Trading in crypto assets carries threats. Many platforms preserve safekeeping and control of their clients’ crypto assets. Clients just have ordinary unsecured claims against the platform for their assets. Clients are relying upon the solvency and stability of the system operators. Crypto asset trading systems might not operate transparently. Clients might have restricted or no details regarding how the platform is protecting and managing their assets.
  3. Cryptocurrency system clients ought to perform due diligence and look out for signs of fraud. Anyone considering delegating their assets to a crypto asset trading platform should take action to learn more about the platform’s operations and approach to control the risk of monitoring. I recognize that this may not be feasible with the present degree of disclosure supplied by some systems. Cryptocurrency trading platforms are a bit of a black box that ordinary people do not really understand.
  4. If cryptocurrency trading platforms were required to sign up with the provincial regulatory authority, perhaps there would be some oversight and protection for consumers.
  5. Platforms need to make sure that they have systems as well as controls in a position to take care of risks. Having an internal control system to take care of risks, including those pertaining to business protection, vital employees and compliance with regulations is an important step for consumer confidence. The trading platforms should be able to describe the systems used to protect client assets. That way the public at least has a chance of being able to properly evaluate between different systems.
  6. Systems should reveal key details to customers. Supplying clients with exact details regarding crucial aspects of their operations – such as asset wardship and storage techniques, charges, reported volumes, system protection actions and internal controls will help with educated decisions by investors and also advertise capitalist confidence in the platform.

Summary

The Ira Smith Team family hopes that you and your family members are remaining secure, healthy and well-balanced. Our hearts go out to every person that has been affected either via misfortune or inconvenience.

I hope you have found this Quadriga CX scandal Brandon’s Blog helpful. Cryptocurrency trading is still in the realm of the Wild West. Further work must be done before crypt currency can be widely used as a cash replacement. There are many financial literacy lessons we can garner from the Quadriga CX story. Even if Mr. Cotten had lived, the Ponzi scheme could only have been kept afloat for a finite time period before it would implode.

We all must help each other to stop the spread of the coronavirus. Social distancing and self-quarantining are sacrifices that are not optional. Families are literally separated from each other. We look forward to the time when life can return to something near to typical and we can all be together once again.

Ira Smith Trustee & Receiver Inc. has constantly used clean, safe and secure ways in our professional firm and we continue to do so.

Income, revenue and cash flow shortages are critical issues facing entrepreneurs, their companies and individual Canadians. This is especially true these days.

If anyone needs our assistance for debt relief Canada COVID, or you just need some answers for questions that are bothering you, feel confident that Ira or Brandon can still assist you. Telephone consultations and/or virtual conferences are readily available for anyone feeling the need to discuss their personal or company situation.

The Ira Smith Team is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

Categories
Brandon Blog Post

ALTERNATIVE MORTGAGE LENDERS CANADA REVIEW

Alternative mortgage lenders CanadaAlternative mortgage lenders Canada: Introduction

Alternative mortgage lenders Canada have now made sure that mortgages and loans are no longer the exclusive domain of banks and other brick and mortar financial institutions. Fintechs (financial technology companies) have changed the game in the same way that Uber disrupted the taxi industry. In fact banks who don’t want to be left are changing the way they do business and investing in or partnering with fintechs.

We recently blogged our review of two recent alternative lenders in Canada:

  1. # VIDEO – CREDIT KARMA CANADA REVIEW: IS IT REALLY FREE AND LEGITIMATE? #
  2. #VIDEO- GOOD AND BAD CREDIT LOANS REVIEW CANADA #

Alternative mortgage lenders Canada: Fintechs are a legitimate alternative

We’ve traditionally thought of alternative lenders as shady operators or payday lenders who prey on the most vulnerable. However a new crop of alternative lenders has emerged in the mortgage game – the fintechs. Some are publicly traded companies and perfectly legitimate. They market to the millennials who want everything online and in an instant; and that’s what some of the new fintechs deliver.

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Alternative mortgage lenders Canada: How do the fintechs offering mortgages work?

  • They can register as a broker and have licensed brokers on staff
  • In addition to mortgages they can offer personal loans
  • They work on a fee-based model which gives them upfront revenue without capital requirements or credit risk
  • They receive a commission on mortgages completed through their service

Alternative mortgage lenders Canada: Fintechs technology advantage

Fintechs take advantage of technology to change the mortgage process. They try to create a more personal experience for users (more akin to online banking) and believe that their process of acquiring a mortgage is more transparent than that of traditional financial institutions. Some even give perks such a bottle of champagne to celebrate your new mortgage and/or dinner for meeting payment milestones. Some fintechs offer:

  • A mobile interface where users can compare rates, apply for a mortgage and track their payment progress
  • An interactive dashboard that walks users through the mortgage process
  • The ability to set up things like payment reminders and progress trackers

Alternative mortgage lenders Canada: What does it mean for you?

For one thing, the banks and other financial institutions have competition, and competition always benefits the consumer. Chances are if you’re already indoctrinated in digital and reach for Apple Pay or Android Pay instead of your wallet, you may welcome fintechs into the mortgage scene. But, not all fintechs are created equal. It’s up to you to check them out thoroughly and check out the rates to make sure they are giving you a good deal. You have options when it comes to taking out a mortgage but make sure you do your homework.

Alternative mortgage lenders Canada: What if you have too much debt?

Not all homeowners’ stories have happy endings. If you’ve bitten off more than you can chew or life has thrown you a curve ball and you can’t make the mortgage payments, contact Ira Smith Trustee & Receiver Inc. We’re here to help you solve your debt problems and set you on a path to debt free living Starting Over, Starting Now. All it takes is one phone call to schedule a free, no obligation appointment.

Call a Trustee Now!