The credit repair

When our financial situation is not in its most glorious period, it is normal to feel overwhelmed by the magnitude of the task   of getting back on track. Payments are piling up, we are juggling with creditors, interest rates, maturities and, while we are out of breath, several companies are offering us services to settle everything.  Among these, credit repair: what is it? Is this for you? How does it work?

The credit repair in a nutshell

The purpose of credit repair is to ensure that your credit reports are error-free and representative of the use you make of credit instruments. It is important to know that, even though all your credit information is carefully compiled by the two major Canadian credit bureaus, Equifax and TransUnion, incorrect information can still be found and can negatively affect your credit report.

Credit repair, not for everyone

As you may have understood, credit repair is a good first step in restoring your financial health. Indeed, it allows to analyze and rectify, if necessary, the foundations to build on before implementing more drastic solutions. However, the credit repair will improve your financial health only under specific conditions:

1. If your credit report does contain mistakes

This is probably the most important condition: credit repair is an audit of your file to correct potential errors, so there must be such errors for you to benefit from them. These may be linked to your personal information or to credit information registered by your creditors. Here is an example of such a mistake: proof of one of your payments may have been misplaced by one of your debtors resulting in a non-payment rating in your file.

2. If you can prove that there is a mistake

In order to bring to light incorrect information and possibly have it corrected, you must be able to provide documentation proving that an error has been made. If we take the previous example, in order to have the non-payment rating removed from your file, you could provide your receipt or a confirmation number attesting that the payment was made.

The credit repair process

There are two ways to do thing when talking about credit repair: you can decide to do it yourself or you can work with a credit recovery company. In both cases, the process is quite similar:

1. Audit

First, you will need to order a (free) copy of your credit reports from the two Canadian credit bureaus, Equifax and TransUnion. Why from both? The two centers are independent and do not compile credit information in the same way so it’s a possibility that one report may contain an error while the other won’t.

Then, you’ll need to carefully analyze each entry in your report to identify any errors. If your report is spotless, the process will end here for you.

2. Contestation

If incorrect information is in your file, you can start the contestation part. This is probably where collaboration with a credit recovery company is most profitable. If you have chosen to do everything by yourself, you will need to contact your creditor and the two credit bureaus to deliver a notice of dispute concerning the entry that you deem to be inaccurate.

Depending on the creditor’s level of cooperation and it’s level of investment in the file, you may need to call him back several times to ensure that he has started the process with the credit bureaus and that he is providing the documents needed for the correction. This stage of the process can quickly become frustrating and exhausting, which is why it may be interesting to get it into the experienced hands of experts.

3. Correction

If you successfully go through the contestation step, you should have the correction made within 45 days. Depending on the type of error, the correction could result in a change in your credit rating that will also be recorded within a maximum of 45 days.

Mistakes to avoid

When talking about credit repair, two antipodean behaviors are sometimes observed and should be avoided:

1. Letting it go

Sometimes the pressure is so great from our creditors that we don’t know where to turn. Some people, overwhelmed by events, choose to bury their heads in the sand, hoping for a respite. Therefore, they ignore their situation and think that the negative consequences of their decisions will only follow them for 7 years. While this may be true, it could well be the longest seven years of their lives: difficulty in obtaining a loan, loss of certain career opportunities, denial of service by telecommunications companies, etc. The consequences are numerous and heavy to bear while several solutions are still available in order to correct the situation.

2. Challenge everything on your credit report

Some people, and even some credit recovery companies, try to challenge everything, thinking that the probability theory will prove them right on at least a few things. Unfortunately, such a tactic rather undermines your credibility with credit bureaus. Therefore, be sure to challenge only erroneous elements for which you can provide documents as evidence.