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Credit “Repair”

“Buy now, pay later!” This phrase has become a mantra for many who embrace the credit concept. But when the bill comes and you have no way of paying it, debt begins to spiral out of control.

That’s when the “Fix bad credit…fast!” line starts to look appealing. And it’s everywhere
these days – on television, in newspapers, and displayed prominently on public transit buses and trains.

Desperate people are often disillusioned when a credit repairer promises to fix their credit.  In reality, they often only add to the debt by requiring payment for accomplishing nothing.

If a client is thinking about using a credit repairer or want good advice regarding credit,
Here are the things a client needs to know.

Quick Tips

• A consumer should be wary of advertisements promising to “fix” bad credit. Credit repair companies may claim to improve consumers’ poor credit ratings, but, in reality, no credit repairer has the power to change or erase accurate information in a consumer’s file.

• A consumer should watch out for companies that say they’ll “fix” bad credit for a fee – often substantial, usually payable in advance. So called credit repair clinics say they will arrange to have negative credit information removed from your record – including information about bankruptcies and default judgments. The Consumer Reporting Act provides rules regarding how long this information may appear in a consumer report. No credit repair clinic has the authority to have negative information removed from a consumer report unless it is inaccurate, or the rule in the act requires that the information be removed.

A Clients Consumer Rights

• It’s illegal for credit repairers to accept advance payment, security for payment or to charge a fee unless their services cause a material improvement to the consumer’s credit file. For example, if an account owed by on consumer appeared on the wrong person’s credit file, a correction of that information achieved through the efforts of the credit repair company would be a material improvement.

• It’s illegal for a credit repairer to represent that they can cause a material improvement to a consumer’s credit file, prior to examining the consumer’s consumer report.

• Consumers have a 10-day cooling-off period, which begins from the time they receive a copy of the agreement that meets the requirements of the act. If the company fails to repay the money, the consumer can take the company to court.

• Credit repairers must provide the consumer with a written, dated contract.

• It’s illegal for credit repairers to make false or misleading claims. In reality, no credit repairer has the power to change or erase accurate information in a consumer’s file.

Quick Tips on Managing Credit

• A consumer should check his/her credit files at least every one to two years to ensure the information is correct.

• Send a written request to one or both of the two major credit bureaus in Canada: Equifax Canada Inc, or TransUnion Canada Inc.

• If you question an item on the file, the credit bureau will investigate on your behalf.

• If an error is found, the credit bureau must correct it. The consumer should present official receipts to the bureau when updating balances.

• The credit bureau will send copies of the updated file to credit grantors upon request.

• The credit bureau itself does not refuse the loan applications. Financial institutions (i.e. banks and other credit grantors) follow their own systems for deciding whether or not to grant credit.

• If credit is refused, the consumer is directed to a credit bureau to review the information that contributed to the decision.

How to Improve A Clients Credit

If  a consumer needs to improve their credit profile, they should start by asking the credit reporting agency that holds his/her file to show them what is in it. This is something they are required to do under the Consumer Reporting Act. If they find anything that is wrong or incomplete – and can prove it – the agency has to correct it, make the information complete or delete it. If their file is corrected, the agency has to inform anyone they can identify who has been given the old information in the past six months to a year.

The only sure way to improve a poor credit rating is to work with creditors and allow time to pass to show that your payment habits have improved. Consumer reports should not contain a bankruptcy discharged more than seven years ago unless you have declared bankruptcy more than once.

From a Clients Consumer Files

The case of the bankrupt consumer

Not every consumer who wants help with his/her credit situation can avoid declaring bankruptcy, even with the help of the credit experts at member organizations of the Ontario Association of Credit Counseling Services. But some consumers report that they have paid credit repair companies up to $1,000 to “clean up” their credit ratings only to discover later that it couldn’t be done.

In one case, a bankrupt man paid more than $900 to a credit repair company to fix his credit rating, with no results. He had found the company through a newspaper ad, and when he visited them, he was told they could fix his credit rating by purging the bankruptcy from his credit file. He signed up and paid in advance. (Note: Prepayment for credit repair services is against the law under Ontario’s new Consumer Protection  Act.)

He was told that the company would make all appropriate contacts and that if he contacted the Ministry of Government Services (the former Ministry of Consumer and Business Services) directly, his contract would be cancelled. (The ministry regulates credit reporting agencies in the province.) However, if the consumer had called, he would have learned that the credit repair company could not have his bankruptcy removed from his record. Only time can mend the past; a consumer bankruptcy cannot be included in the credit file more than seven years after the consumer is discharged from bankruptcy.

He also would have learned that he should not prepay for credit repair services and that, if he does, he is entitled to his money back on demand. However, the consumer called the ministry only after he could no longer reach the credit repair company. It had gone out of business, closed its doors and could not be found. The consumer was not only bankrupt, but out-of-pocket a further $900.

Credit Repair Statistics

Complaint Type                                            Number
Written                                                            20
Phone                                                              39
Total                                                               59

Inquiries / Complaints:

• Quality of services;
• Misrepresentations;
• Demands for up-front fees/advance payments;
• Failure to complete contract deliverables;
• Refunds not forthcoming.