|Who is the real bogey-man?|
You see, in order to get a home, for example, a person must have established credit. According to most lenders' policies, a mortgage borrower must have at least two credit cards, which must have a spending limit of at least $2000 and which must have been in place for at least 2 years.
See the problem?
Here's the rest of it. If a borrower has great credit management skills and, for instance pays a decent sum on their cards - or pays them off monthly (AS THEY SHOULD), the credit card companies UP the borrower's spending limit, often without letting the borrower know until after the fact.
I know what I'm talking about, in case any one's asking: I've worked in finance - specifically lending - for almost 10 years. I personally have been a 'victim' of this practice. I had a credit card with a $2500 limit. After not many years - three I think, I happened to check the spending limit and what did I find? $25,000. Yes. Did they ask me? No. When I discovered my limit had been so vastly increased, I called them to cancel the card. They didn't want to lose my business, despite that I always pay my balances monthly so they agreed to terminate the annual fee and to reduce my limit back to $2500 (I had, at that point, never spent more than $250 on that card...).
Those looking for mortgages MUST have a credit history. There are lenders out there who will deal with people who only use cash but those lenders are few and their rates are higher - usually about 2% higher - so excellent money managers are penalized for using cash - which all good credit counsellors will tell you is the best way to manage personal finances.
The truth is that people who have three credit cards, which they do NOT pay off monthly, will have a far easier time of acquiring a mortgage than someone who has no credit and no debt. That is the fact.
If the Canadian government means to do anything more than talk about consumer indebtedness, it will have to deal with the card companies first, but also with lenders' policies for adjudicating mortgage files - and car loan/lease files and all other big-ticket item files.
Possession of credit is an absolute necessity in this country if one is going to buy a house or a car. It's a double-edge sword to be sure.