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Line of Credit. Should I accept the offer?
May 25, 2019
9:40 pm
Save2Retire@55
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Hello. I got an email from Tangerine saying I am pre-approved for $10K line of credit. First 90 days 3.99% and then 7.99%. I never had a line of credit nor I have any intention of getting or using one. I am just wondering how it impacts my score (not that I care but curious). Or let's say what's the disadvantage of accepting the offer? Or advantage?

I have always paid my credit balance in full. Never ever paid any interest in my life. Well I don't own a house and no intention to buy one unless I can pay it all cash LOL

May 26, 2019
12:48 am
Doug
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I would personally accept it, yes. Interestingly, I don't know why Tangerine waited so long to launch a personal line of credit after launching their overdraft and HELOC products. In typical Tangerine fashion, they launch it in targeted waves, which is elitist.

Only thing to keep in mind is while the interest rate is indeed lower (surprised 7.99% is their best rate, though, as Prime+2% is usually common as the best rate for unsecured personal line of credits with Prime to Prime+1% for secured), there's no interest free grace period like you might have on a credit card. Also, Tangerine's overdraft lets you cover the overdraft before the end of the day and avoid the one-time monthly overdraft fee and any interest. There's no monthly fees with the line of credit, but might not be any 1-day interest free grace period.

Also, if you have a Tangerine Overdraft, which doesn't report on your credit report whereas a Tangerine Line of Credit does, and accept this offer, it will replace your Overdraft. You can't have both.

Overall, though, I would accept it if I was offered it. At the end of the day, the more available credit you have, generally speaking, the higher your credit score due to your credit utilization being lower.

Cheers,
Doug

May 26, 2019
8:28 am
Brimleychen
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If you don’t need it, why you accept it.

LOC is always advertised as the interest rate is better than credit cards, but it is still opening a wide door for debtor. There are no better evils.

Don’t go for something you don’t need.

May 26, 2019
9:32 am
GICinvestor
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I have had one for many many years from BMO for $15,000 and the % rate is not that high nor is it phased. I thought I might need it to help buy my a major purchase for my daughters or if I could not pay off a major purchase on a credit card I would pay it off with the LOC. I still have it, is it active....I don’t know, have I ever used it.....NO. It came with cheques and later I was offered a MasterCard, that I did not take, that would link to it. I have never paid interest on a credit card as we always pay in full every month.

Bottom line, I agree with Brimleychen. If you don’t have a use for it DON’T get it.

Don’t get all hyped up about your credit score either. Have good practices with your financial obligations and all will work out for you. I don’t know what mine is, don’t care what it is and have never been turned down or restricted for a loan, mortgage, bank account or credit card.

But to better protect yourself in today’s environment I would suggest that you turn on any alert possible for bank accounts and credit cards.

May 26, 2019
10:04 am
Norman1
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Save2Retire@55 said
Hello. I got an email from Tangerine saying I am pre-approved for $10K line of credit. First 90 days 3.99% and then 7.99%. I never had a line of credit nor I have any intention of getting or using one. I am just wondering how it impacts my score (not that I care but curious). Or let's say what's the disadvantage of accepting the offer? Or advantage?

It would have the same impact as obtaining another credit card with a $10,000 limit.

I've received line of credit offers like that from banks that I have accounts with. I can't justify accepting any of them. None of my HISA's pay anything close to 3.99% or 7.99%. So, it would be better for me to take money out of a HISA than draw on a 3.99% or 7.99% line of credit.

May 26, 2019
10:15 am
GICinvestor
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So, it would be better for me to take money out of a HISA than draw on a 3.99% or 7.99% line of credit

Great idea, I do that every now and then, borrow from my HISA. I usually have 50-60 thousand in an HISA that is all ear marked for the future and can easily withstand a loan. I have a spreadsheet that ear marks funds by category. Then I use another category for the loan, a negative figure, with a separate note field that refers to the line number. If any one wants a copy of it, let me know.

But for those in the midst of their careers....what options do they have? No HISA.....then you run a tight ship finance wise.

May 26, 2019
10:58 am
Doug
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All of the above points by Brimleychen, Norman1, and GICinvestor are valid and I'd agree with them completely in terms of preferring withdrawal of funds from a HISA over personal line of credit (at 6.99-7.99%).

However, in my initial reply, which is what I think Save2Retire was getting at, I said my reasons for why I'd accept the offer, which are all valid and with which I'd stand by. There is a significant difference between accepting and using an offer. Any time you lower your credit utilization ratio, either by increasing your total available credit or by paying down what you owe, it will generally have a positive (with varying degrees of success) to one's credit scores as provided by Equifax and TransUnion.

I could be wrong, but I believe Save2Retire's intent is on just accepting the offer (not using it). For ultra short term cash flow management purposes (i.e., unexpected pre-authorized debit) whereby you're overdrawn for a day or two or even up to but not more than 30 days, the debit interest payable is not especially significant. From Save2Retire's other posts, he pays off his debts monthly and a is both a prudent saver and an investor despite financial obligations to his spouse and children. So, on that basis, I am comfortable with recommending accepting this offer to Save2Retire as he will not likely use it much (if ever).

Cheers,
Doug

May 26, 2019
11:14 am
AltaRed
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Unless one had some credit issues in the past, I would not take on a LOC to boost credit score. It matters not whether it is 760, 800, or 850. The less 'things' I have dangling out there, the better. KISS

May 26, 2019
11:46 am
Norman1
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AltaRed said
Unless one had some credit issues in the past, I would not take on a LOC to boost credit score. It matters not whether it is 760, 800, or 850. …

I agree. Lenders don't read as much into the exact score as people think. That's because they know the limitations of how some of the scores, like the FICO scores, are calculated.

Earlier, a VP of client solutions at Equifax Canada said that lenders don't see any meaningful difference between someone who scores 783 and someone who scores of 846. Any score over 700 is considered to be "excellent".

Some mortgage brokers shared how the lenders they deal with see the scores. Score differences of ±10 are not meaningful unless it moves the score over the 680 or 700 marks. Over 760, the exact score doesn't matter to the lenders.

I suspect seeing one's score fluctuate between 800 to 820 each month is to entertain. Otherwise, people may feel they are not getting anything in paying a monthly fee to see their score each month if it was repeatedly reported as just "excellent" every month.

May 26, 2019
2:13 pm
Doug
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Norman1 said

AltaRed said
Unless one had some credit issues in the past, I would not take on a LOC to boost credit score. It matters not whether it is 760, 800, or 850. …

I agree. Lenders don't read as much into the exact score as people think. That's because they know the limitations of how some of the scores, like the FICO scores, are calculated.

Earlier, a VP of client solutions at Equifax Canada said that lenders don't see any meaningful difference between someone who scores 783 and someone who scores of 846. Any score over 700 is considered to be "excellent".

Some mortgage brokers shared how the lenders they deal with see the scores. Score differences of ±10 are not meaningful unless it moves the score over the 680 or 700 marks. Over 760, the exact score doesn't matter to the lenders.

I suspect seeing one's score fluctuate between 800 to 820 each month is to entertain. Otherwise, people may feel they are not getting anything in paying a monthly fee to see their score each month if it was repeatedly reported as just "excellent" every month.  

Very true, and many lenders and banks consider even a score of sub-700 to still be "very good" if not excellent. For instance, HSBC Bank Canada required an Equifax credit score of 680 in order to receive a debit card with no deposit hold limits of any kind (they've since upgraded their systems that allow them to apply holds on the portion of a deposit over a certain dollar amount, but I suspect the qualification criteria for that is still the same). Similarly, 680 was also, usually, the minimum requirement for HSBC MasterCard to approve you (and they are one of the stricter credit grantors when it comes to credit card adjudication). Motus Bank, and Meridian Credit Union even, reportedly had a 620 minimum requirement to open a Motus chequing account, though due to an outcry from the public, they've reportedly since relaxed this requirement.

It's true that it's mostly for entertainment purposes in that 780 is not that much different from 850 or even the elusive 900 (of which I've never seen), particularly since TransUnion - and even Equifax - have updated their scoring methodologies that saw peoples' 850+ credit scores dramatically reduced by 25-100 points in the past year. Such a change did not discriminate.

Nevertheless, if personal fascinations are important to someone, I see nothing wrong with accepting this offer. Better to have it than not and risk an inadvertent NSF charge or something.

Another advantage to a personal line of credit: if you make a deposit via pulled EFT transfer to cheque to your bank account that exceeds your "access to funds" limit, you can effectively have immediate access to those funds even though they're on hold because one's ledger balance is what is used for determining if debit interest is payable by the customer.

An example will illustrate this:

Let's say I make a $20,000 deposit via cheque to my Tangerine Chequing for which I have accepted a hypothetical $15,000 personal line of credit offer at, say, 7.99%. My access to funds deposit limit is $5,000, which means I can access $5,000 of that $20,000 straight away. The remaining $15,000 is on hold; however, since the credit limit increases one's available balance, I effectively have full access to the full $20,000 without dipping into my line of credit because, once the hold comes off, if I had subsequently withdrawn that full amount, my ledger balance would now be at $0.

So, in that sense, a LOC acts like an extra way to artificially increase one's access to deposited funds limit. sf-cool

Cheers,
Doug

May 26, 2019
6:04 pm
Save2Retire@55
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Thanks everyone. Great responses. Declining the offer.
True. My CC hovers between 800 and 830. It is fun to check it once a month.

May 27, 2019
4:42 am
Top It Up
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Signed onto my BIG 5 account this morning and here was what I was greeted with, once again-

Hello _____!

You’re pre-approved for a Personal Line of Credit. This offer expires on June 05, 2019

These offers are our way of saying thanks. Check out the offers selected just for you but hurry, they’re available for a limited time only.

May 27, 2019
7:30 am
Doug
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Top It Up said
Signed onto my BIG 5 account this morning and here was what I was greeted with, once again-

Hello _____!

You’re pre-approved for a Personal Line of Credit. This offer expires on June 05, 2019

These offers are our way of saying thanks. Check out the offers selected just for you but hurry, they’re available for a limited time only.  

Interesting, I doubt that was Scotiabank as I didn't get one. Who was that with? Just curious.

Thanks,
Doug

May 27, 2019
3:06 pm
Save2Retire@55
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Top It Up said
Signed onto my BIG 5 account this morning and here was what I was greeted with, once again-

Hello _____!

You’re pre-approved for a Personal Line of Credit. This offer expires on June 05, 2019

These offers are our way of saying thanks. Check out the offers selected just for you but hurry, they’re available for a limited time only.  

We are thanking you by offering you our great offer of taking your money. How awesome.

May 27, 2019
4:57 pm
Norman1
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Save2Retire@55 said

We are thanking you by offering you our great offer of taking your money. How awesome.

Like those Beneficial Finance ads from long ago used to say: "At Beneficial (toot!) (toot!), you're good for more!"

June 18, 2019
2:54 pm
Loonie
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I realize the decision has been made, but I just got to this thread.
I think it really depends on how much cash you have on hand. If you have enough to cover a few months' expenses, then the LOC is probably a waste of credit room. But most people don't.

We've had one in place for probably 30 years or so and it hasn't hurt us at all. We only got it in the first place on a lark because there was a good AirMiles offer that went with it.

We were a single-income family at the time. Within literally a couple of months of getting it, the breadwinner was involved in a car accident leaving us without income for several months due to self-employment and without a car. The accident was not our fault. I think we had some disability insurance, but can't remember. We had to use that line of credit, although we never expected to, and were really glad we had it. If we'd tried to get a loan after the accident and with no current income, we might not have gotten it. It was sheer luck.

Have never used it since, but it's still there even though we now have the cash to cover whatever might come up. They don't get cancelled unless you become a poor risk or cancel it yourself. We could cancel it but it's not hurting us at all so we haven't. It seems to have a certain nostalgia/superstition value at this point, which is surely irrational.

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