Credit Repair

I received an email the other day from a young woman named Annie who was inquiring about companies that say they’ll improve a consumer’s credit rating. Was it true? Was it worth the money?

Annie had been in to apply for a car loan at her bank and the lender had declined her loan. She was told only that she should check her credit bureau report. Something there was gumming up the works

If you don’t already know, when you sign a loan application form, you give your consent to the lender, be it a bank, credit card company and retail store, to access your credit bureau information to decide whether or not you’re a good credit risk.

Your credit file contains a listing of debit and credit payments and it includes public record information about how promptly you’ve paid bills, along with all the yucky stuff like collections, judgements and bankruptcies.

You don’t have to be a late payer to be declined. A lender may refuse a loan application simply because the credit bureau’s records indicate that you have other loans outstanding. Yes, everything you owe shows up — including all those credit cards you have even if there are no balances outstanding. When credit is refused, you’re usually advised to have a look at your credit bureau report to see what’s amiss.

In Annie’s case, someone else’s information was being recorded on her credit report. The other woman had a similar name, and it was an honest mistake. All Annie has to do provide the credit bureau with proof of the error and her credit report will be cleaned up.

So back to Annie’s original questions: Can a credit-repair company clean up a mess and is it worth the money? When a company offers to fix your sloppy credit history, it’s often just a ploy to get your money. And wouldn’t you rather spend that fee — anywhere from $250, to $1,000 — paying down your debt, especially when it’s virtually impossible to cover up your past mistakes. While ads for credit repair companies may seem like the cure for a credit life lived less than perfectly, in reality, no credit repairer has the power to change or erase accurate information in a consumer’s file.

If the reason you’re in trouble with a potential lender is because of wrong information on your credit file, you could pay someone to take care of the problem for you, but it’s often just as easy to take care of that problem yourself.

If you’ve damaged your credit rating by missing payments, carrying high balances or over extending yourself financially, you can improve your credit rating. Start by locking away your credit cards. Don’t cancel them because if your credit rating is low, you could have trouble getting new ones. But don’t use them until you are debt free. You must pay at least the MINIMUM to stay on the positive side with your credit history. But paying the MINIMUM isn’t going to get you out of debt. So figure out what it’ll take to get out of debt and then DO IT!

Creditors like to see a solid credit payment history. If you have a credit card, use it every month. Make small purchases and pay them off IN FULL. If you can’t get a credit card — maybe you’ve just come through a bankruptcy —  use a secured card. You deposit money with the lender and they give you a credit card with a limit of between 50% and 100% of the amount you deposited.

Can’t cope with all the bills you’ve got? You have two choices. Declare bankruptcy or find a way to put more money toward you bills: cut expenses or make more money.

You should check your credit files at least once a year to ensure the information is correct. Send a written request to one of the two major credit bureaus in Canada: Equifax Canada Inc. or Trans Union of Canada Inc. More information can be found online at www.equifax.ca and www.tuc.ca. There is no charge for this service. If you’re into instant gratification, you’ll have to pay a fee.

If you question an item on the file, the credit bureau will investigate on your behalf to verify the status of the entry. If an error is found, the credit bureau will fix it and send copies of the updated file to credit grantors upon request.

The longer you exhibit good credit behavior by paying your bills on time and managing your credit wisely, the more your credit rating will improve, until you once again achieve a favorable credit rating. And if you’ve got a good rating that’s been marred by inaccurate reporting, it’s your job to fix it. It’s your credit, after all.

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26 Responses to “Credit Repair”

  1. So if you have cards that you never use and cancel them does it lower your score on your credit report?

    I have 2 that I never use anymore and I hate having them just sitting there. I want to cancel them but was told if I do so it’s a negative impact on my credit.

    Do I just keep them and let them sit never used?

  2. Oh and I do have 2 others that I do use so I wouldn’t be getting rid of all my cards. Just the 2 I don’t use.

  3. Diana,
    My understanding of this is when you cancel a card you have a history on, this history is then wiped out. If it’s a good history than it will no longer show up when credit checks are run. One would assume the same would be true if you had a bad history on the card – but it’s funny how the bad can often prevail! As an example, if you have had one of the cards you are thinking of cancelling for 5 years, and kept that card in good standing, always making payments on time etc., then once you cancel it that “good report” will be gone. When credit checks are run, they are looking for that good history, and the longer teh better!

    Another alternative to cancelling a card if you have a long history on it, is to have the limit lowered as much as possible. In the long run, the amount of available credit you have will have a higher impact than the fact that you have 4 credit cards. i.e. 4 cards with $2,000 limit each is still less than one card with a $10,000 limit.

    Hope this helps!

  4. Loads of great information there! Thank you.

  5. A few months ago, PC Financial turned down my application for its MasterCard. I called and I was told that my credit report was actually very good. However, I did not have a landline phone number and I gave them my cellphone number as my home phone number. The PC Financial staff told me to get a landline phone number and then to apply again in 6 months. When I asked if my cellphone number was the reason for them to turn down my application, the staff said yes.

    Why would I apply for a landline phone number when I am only the only occupant in this apartment, and I won’t be at home half of the time in the day?

    I did order my credit report after my application was turned down. Nothing raised red flag over there.

    So, sometimes, when you’ve been turned down for a loan, it might not be about your credit rating. Check it out for sure. But my experience tells me that, sometimes, banks just don’t like making exceptions.

  6. Dianna/Jessie:

    Actually cancelling old cards has a short-term negative effect on your credit score only if the accounts are older than the average of your credit lines presently reported. In short, a part of your credit score is calculated based on the “age” of your credit lines and if you cancel your two oldest credit lines your average age will drop, bringing your score down slightly with it.

    This will correct itself over time, and quite frankly shouldn’t be a big deal unless you’re looking to apply for credit immediately (in which case apply for your new credit and THEN cancel those cards).

    The only other scenario when canceling credit cards has a negative effect is if it significantly increases your credit utilization (lets say you owe $4000 on 5 credit cards which have a total credit limit of $10,000 altogether. If you cancel two cards that have $2000 limits and keep that $4000 debt your credit utilization just went from 40% to 60% and your score will drop a bit).

    In general, FICO rewards long term stability and responsible use, so govern your actions accordingly. Don’t worry too much about your credit score, if you’re paying your bills on time, not defaulting on your financial obligations and checking that your credit reports have no errors then your FICO score will likely look after itself.

  7. I am currently in the process of repairing my credit history. In my youth i did always make the best choices and I am wondering how long these “choices” will be haunting me. I had a run in with a collection agency, years ago, and i am wondering how many years before this will disappear? I am currently waiting for my report from Equaifax, so I will be able to understand what is affecting it and such. So, typically, how many years do things stay on our reports? negative & positive. Thanks in advance for any info!

  8. Some things like bankruptcy stay a long time… 7 years. If you seek help from credit counseling, it remains on your record for 5 years, I believe, but that’s 5 years after you’ve completed your pay-down, so it can be longer than the bankruptcy’s 7 years overall. If you’re actively rebuilding your credit history, lenders (and Blaine will correct me if I am wrong) will look at your last two-years’ history very closely, so that’s about how long it takes to dust off your history.

  9. avatar Melaniesd Says:
    August 28, 2008 at 6:51 pm

    Angela, the issue with not having a land-line phone is part of how the creditor verifies your identity. When a credit bureau is pulled, sometimes it says the applicant’s address & phone number do not match the credit bureau’s records. This raises red flags because of identity fraud. A home phone number shows stability and proof of address.
    With the FI (financial institution) that I work for, usually we ask the applicant to forward proof of id such as a drivers license and a copy of a utility bill showing the current address and applicant’s name. I’m suprised, PC Financial instantly rejected you rather than asking for more info. In todays day & age, cell phones are the only phone for many people. The FIs need to recognize this.

    Other reasons that applicant’s are declined, is debt ratio. A customer can have amazing credit, but if they have already extended themselves to 40% of their gross income in debt pymts including housing, they may not qualify for more.
    Another reason can be that a client already has the maximum unsecured credit we will offer based on their income. It can be a real challenge to explain this to clients. You can have amazing credit history, but if your income is low, it is limitating.

    Hope that helps!

  10. Good call, Gail. I’ll just put my lender’s hat on here for a moment…

    I worked for RBC in personal lending for over 6 years. I have a ton of experience with credit reports so here we go:

    Melissa, just about everything can sit on your bureau for up to 7 years before it “falls off”. However, lenders tend to be more concerned with what you’ve been up to for the most recent two years. As long as those older bad debts are CLEARED. That means that you need to have paid off or otherwise dealt with your past mistakes. For example, if you defaulted on that first credit card you got when you turned 18 and you never bothered to pay off (or declared bankruptcy) then it will keep showing up every month for 7 years as an R9.

    Gail is 100% correct with regard to bankruptcy vs. consumer proposal. CP’s are a bad idea. You may think that logically, if you work to pay back all your debts eventually that it looks better than a bankruptcy. Wrong. The thing about CP is that they basically consolidate your debt and then you pay it back over several years. Any lender WILL NOT touch you with a 10 foot pole while you are still paying back a CP. Not only that, but it will probably take another two years after the CP is cleared that a lender will take a chance on you. And guess what? Making all your payments on your CP on time doesn’t rebuild your credit at all (I’ve had that argument with a client more than once). A bankruptcy takes several months but once it’s clear, it’s clear. Again, a lender won’t touch you for a MINIMUM of 2 years after your bankruptcy is DISCHARGED (not the date you filed, but the date you’re clear).

    I don’t know how many times I can say this, but the #1 way to prove you’re worthy of credit again is SAVING, SAVINGS, AND SAVINGS. Start an RSP with a regular monthly contribution. Why an RSP? Because it’s long-term, and a lender likes to see that you are thinking long term in your financial plans. Not only that, but it’s not easy to just liquidate in a moment’s notice. Also, it’s a back-up plan in case you run into financial trouble again. Lenders like to see you have something in your back pocket in case of emergency (and no, an overdraft is not an emergency fund).

    Then, go get a secured credit card – you put down a deposit of say, $200, and then they give you a card with a limit of $200. Manage it properly for long enough and they give you back the deposit.

    So, if you’ve done those things then your old creditors should have stopped chasing you, you’ve started savings, and you’re building new credit experience with your secured credit card. Do that for a few years and you’ll have a shot at getting a loan again. It’s going to take time and a lot of baby steps to get your credit back.

    And a note to Diana about canceling those old cards: Don’t worry about your credit score. In my credit decisions, if a person had say, 10 credit cards all at $0 I was leery about granting them anything more. It raises flags to me because the question I have is “why do you have all these cards?” Sometimes having all that available credit can spook a lender regardless of your credit score. Not only that, but credit score is only one part of a credit application. If you have a perfect credit score, but you have no assets or savings, weak employment stability, and a high debt ratio, then you’ll be refused.

    ALSO, having extra credit cards around that you don’t use at all makes you more vulnerable to identify theft and fraud. If you don’t use the cards, chances are you don’t pay attention to them, or who might have gotten ahold of the information from those accounts. If you don’t use them and have no intention of ever using them, then cancel the cards.

  11. avatar Melaniesd Says:
    August 29, 2008 at 5:55 pm

    Well said Blaine. Thanks for the perspective.

  12. Tons of great information! Thanks!

  13. Hello, I just saw a very interesting movie about this subject, “Maxed Out”… it’s very interesting to see the real criteria by which the credit card companies offer credit. Also, the total hopelessness of trying to clean up your record if you have errors in your report.. Highly recommended!

  14. The only real way to improve your credit score boils down to:

    1) Pay your bills on time
    2) Don’t max out your current credit cards
    3) Don’t have several cards( even if you use/ dont use them)
    4) Pull a free credit report every year. Make sure it’s accurate and challenge if it is not.

    Also if you have to call 900 # fort credit repair it most likely a scam. Credit repair can & should be done by yourself ( unless it’s a legal issue)

  15. Comming up with a plan to fix your credit is one of the most important things someone can do. One of the things that really improved my credit report/score was having inaccurate information removed from my credit report.

  16. Over the past fifteen years or so, many “Credit Repair Companies” or
    “Credit Clinics” have opened up across the nation. Their main purpose is to help the individual remove incorrect and negative items from their credit report.Unfortunately, some of these outfits are scams from the word “GO” and have given the whole industry a bad name. They take the consumer’s money and then tell them it will take month s to get results, then disappear without a trace. With the information we have provided you with here, you have no need to take that chance. If, however, you decide to hire one of these companies, check them out!
    First, if the sales person or company uses the word “Guarantee” or
    “Delete”, Run and don’t look back! There is no way to “Guarantee” that
    ANYTHING will be removed from the credit report! Think about it for a minute. Unless he or she is going to “hack” into the credit bureau’s computer, how can he guarantee anything? The Clinic is NOT the one that “deletes” the information! Ask to see their license, get a copy of it, and then contact your State’s Secretary of State to make sure that the company has obtained and maintained the necessary license and/or bond. In the State of Nebraska all companies,organizations, or individuals that provide credit services MUST (with NO exceptions) obtain a “Credit Services Organization License”. If they charge a fee
    BEFORE they provide the services they promise, they MUST also maintain a$100,000 Surety Bond for TWO YEARS after they cease doing business in the state. While you are on the phone with the Secretary of State’s office, ask if there have been any unresolved complaints against the company. Find out how long they have had their license as well.
    There have been a number of credit clinics that guarantee to remove any
    derogatory items from consumer’s credit report. Contact the Attorney General’s office in your state as well, see if there have been any complaints and find out if they are under any kind of investigation. The Better Business Bureau is also another good organization to check

  17. Hi there,
    I have a question about false information being reported to credit bureaus and how to fix it. I got myself into some trouble a few years back and ended up filing bankruptcy. Part of my filing included a cell phone account that was in collections at the time. Apparently they never got the notice because it’s been almost 4 years and they still call me daily harassing me for payment. I have told them several times that it was included in the bankruptcy and they need to call my creditor, which they never have done. I even had my creditor write a letter to them stating that it was included and they need to close the file but no luck. So, how do I go about getting them to believe me? They are ruining all chances of me getting a car loan that I desperately need at the moment since they refuse to accept the fact they are not getting any money out of me. I also recently found out that I have been put back in collections again with the same company for a home phone/cable account that I had almost 2 years ago. When I switched companies they never sent me a bill saying I owed anything (I even lived in that apartment for 10 months afterwards and no bills ever came) and now I’m in collections again. But when I tried to find out what I supposedly owe, no one could tell me. The company would send me a copy of my bill for $4 but only to my old address and refused to tell me over the phone what I “owe” them. How am I supposed to believe I owe them when I never got a bill? And now they can’t, or won’t, prove I owe them at all. Any help you can offer would be greatly appreciated!!

  18. I love this blog. Thanks for the great information. I have it bookmarked and will be back. If anybody needs new credit file don’t hesitate to come on over.

  19. avatar Jrff Brigley Says:
    March 27, 2011 at 12:57 am

    Dear Gail,

    Re: Trans Union Credit Report

    I reside in the province of Nova Scotia. I need someone like you with experience if you have time out of your busy schedule to help me out. I am in the process of buying a home but before I do I want to make sure my credit file is up to date. I have few questions that you might be able to answer. I have a Moore’s account that is closed with an R1 rating. The date of last payment was on July/2005.The high credit showing is $877, credit limit showing $3500 and zero for a monthly term. Is the high credit, credit limit or both affecting my credit score? I also have ten accounts that are showing paid or closed with an R1 rating that are over six years old that are showing a high credit amount, zero credit limit and zero monthly term. Is the high credit on these accounts affecting my credit score? I requested to have these accounts removed and my requests keep getting ignored. Why is Tran’s Union allowed to keep accounts that are positive, closed and over six years on my credit file for twenty years?

    Thanking in advance for your assistance and consideration in this matter.

    Yours truly,

    Jeff Brigley

  20. avatar Jrff Brigley Says:
    March 27, 2011 at 2:38 pm

    How long does a creditor keep your account on their system after you settle or paid in full your account?

  21. Re: Privacy Law

    Once an account is paid or settled with a financial institution or credit card company; how long by law can they keep my personal information on their system?

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  26. avatar mary lawrence Says:
    February 10, 2018 at 7:36 pm

    I was not entirely sure how this works but I heard Spy Stealth is good at helping people with their credit scores in all honesty I could slowly work on my score myself, but the eviction I had on my account was seriously hurting me. I was living with a room mate who’s brother will be moving in by May which means I had to move. I didn’t want to live in hotels anymore I just wanted to be able to get my own place…As I speak, Spy Stealth got rid of all negative listings and eviction on my credit at a reasonable price. Thanks to him, I can’t imagine what my life would have been If I had not met him. And for those interested in his services, his email address is spystealth . org @ g mail . com.

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