Module 4: Credit and debt management

Today, many people need to borrow money to do things like buy a house, get an education, buy a car or pay for home renovations. This is called credit.

Credit is neither good nor bad. It's a tool to help you pay for big-ticket items and meet your financial goals.

However, credit must be used wisely—and unfortunately, many Canadians borrow more than they can handle, as these figures show:

• Household debt in Canada reached a record $1.4 trillion in 2009. This works out to $41,740 per person.^{Footnote 1} 
• Canadian households owed $1.44 for every dollar they earned in 2009, up from $1.16 in 2005. ^{Footnote 2} 
• A total of 145,233 Canadians filed for personal bankruptcy or filed a consumer proposal between June 2009 and June 2010, an increase of 6.2 percent over the previous 12-month period.^{Footnote 3} 

This module teaches you about different types of credit and how to borrow responsibly. In it you will learn:

• the different types of credit available, their purposes and how they work
• the real costs of borrowing
• what a credit report is and how to improve yours
• what to do if you run into problems with debt.

By the time you finish this module, you will be better able to evaluate your own needs for credit and to manage the debt you take on. You will learn what questions to ask when borrowing, and you'll understand your rights and responsibilities as a borrower.

Throughout the module, you will find learning tools that you can use now and in the future:

• quizzes to test your knowledge of different aspects of borrowing
• calculators to add up the costs of borrowing
• videos to help you be a better consumer of credit
• checklists to help you recognize the danger signals of excessive debt
• an action plan of steps to track your progress as you manage credit in the future.