Bad credit can make life harder. With weak credit, it can be more difficult to get approved for credit products, secure affordable interest rates, or even get an apartment. Building good credit isn’t easy, either.
In this scenario, you may want to hire a credit repair company to help. The only problem is that many credit repair companies aren’t legitimate and may mislead you into believing they can do more than they actually can to fix your credit.
Let’s dig deeper into credit repair companies, how to spot illegitimate services, and what to consider before hiring one.
Key Points
- Credit repair companies can help you improve your credit score by addressing errors and negative items on your credit report.
- You can perform the same duties as credit repair companies for free, if you have the time and patience.
- Be wary of credit repair companies that promise or guarantee to repair your credit or remove negative remarks.
What Do Credit Repair Companies Do?
Credit repair companies perform a variety of tasks, including the following:
Dispute Errors
Credit repair companies often dispute credit report mistakes on their behalf. They will typically reach out to the credit bureaus and provide documentation to support the dispute. They may also follow up with the credit bureaus to ensure disputes are resolved and corrections are fixed.
Review Credit Reports
Many credit repair companies may carefully review your credit report to spot mistakes. If there are any, they can contact the credit bureau as required.
Provide Educational Information
The more reputable credit repair companies may offer educational resources to help you improve your credit profile. This may include managing debt, setting a good budget, and adopting good credit habits.
Monitor Credit Reports
Some credit repair companies may offer credit monitoring services, which involve alerting you to changes in your credit report. This can help you deal with any mistakes or potential fraud more quickly.
What To Watch Out For With Credit Repair Companies
As mentioned, some credit repair companies may not act in your best interest. They charge a fee for their services, so they may try to lure you without providing services as promised, just for a profit. Here are some common red flags with sketchy credit repair companies:
False Promises
These companies often mislead Canadians by promising to increase their credit score or erase a black mark from their credit report for a price. However, no one can magically fix bad credit or remove negative information from a credit report if it’s accurate. The company can only dispute an error for you and ask a credit bureau to remove it from your report.
Quick And Easy Solutions
No matter what “guarantee” they offer, credit repair companies can’t solve your financial problems or get rid of your debts. They can only help you as much as you can help yourself. Most things a credit repair company claims they can do, including the ability to dispute errors on your credit report, you can do alone for free.
High-Interest Loans
Some credit repair companies offer loans with high interest rates as “solutions” that allow you to cover debts and raise your credit score with good payments. While these loans can be useful during a financial crisis, they also encourage you to accept more debt, which may not be affordable due to the high rates and fees involved.
What Borrowing Rights Do You Have?
Before you apply for any financial service, understand your rights as a consumer. You aren’t obligated to purchase anything until you’ve signed an agreement. Here are your rights when it comes to credit repair companies:
- Guarantees – In Canada, legitimate credit repair companies aren’t allowed to misrepresent their services or promise to fix your credit. Any company that offers a 100% guarantee is probably trying to take advantage of you.
- Cooling-Off Period – Credit repair companies are also legally obligated to give you a grace period of 10 days from your contract’s start date, during which you can cancel a purchase and get fully refunded without penalty.
- Contracts – No company can sell you a product without giving you a written and dated contract beforehand. The contract should list any legal rules and costs involved.
- Upfront Payments – No legal credit repair business will ask you to pay anything in advance. Until the agreed-upon service is purchased and there’s a notable effect on your credit, they can’t charge any fee or security deposit.
Pros And Cons Of Using A Credit Repair Company
Using a credit repair company comes with its perks and drawbacks to consider:
| Pros | Cons |
| Experience handling disputes Saves time and effort Negotiation with creditors Credit monitoring services | High costs No guarantees Potential scams |
Pros Of Using A Credit Repair Company
Here are a few benefits of using a credit repair company:
- Experience Handling Disputes — Credit repair companies have experience with the credit bureau dispute process and can help you challenge credit report inaccuracies.
- Saves Time And Effort — If you don’t want to deal with the disputes or simply don’t have the time, a credit repair company can save you time and effort by tackling the job for you, including dealing with creditors and credit bureaus.
- Negotiation With Creditors — Some credit repair companies may negotiate with your creditors on your behalf to reduce the amount you owe or to have negative items removed in exchange for a fee.
- Credit Monitoring Services — Some credit repair companies offer credit monitoring services that will notify you when there are changes in your credit report.
Cons Of Using A Credit Repair Company
Consider the following drawbacks to using a credit repair company:
- High Costs — Credit repair services cost money, which can add up to over $100 per month, depending on the company. This is a lot of money considering they’re performing tasks you can do yourself.
- No Guarantees — Credit repair companies can’t guarantee that you’ll see improvements to your credit score or that they can get rid of accurate negative items from your report. Legally, accurate information must stay on your report until it expires.
- Potential Scams — Unfortunately, there are fraudulent credit repair companies out there that prey on unsuspecting consumers. Some companies may charge an upfront fee, make unrealistic promises, or don’t deliver what they promise.
How Can I Repair My Credit Myself?
You can easily perform your own credit repair. It just takes a little time, patience, and effort. Here are things you can do to repair your credit.
Get Your Credit Report
Start by pulling a copy of your credit report from Equifax or TransUnion. You can get your Equifax and TransUnion credit reports for free either online, by mail, by telephone, or in person.
Scan For Errors
Once you get your credit reports, review them carefully for errors. This can include wrong addresses, incorrect name spelling, accounts that aren’t yours, or payments listed as late or missed when they were actually made on time.
Dispute Errors
Contact the appropriate credit bureau and have the mistake investigated and fixed right away. Each credit bureau has a dispute process, which you’ll need to go through to get errors fixed.
Pay Down Your Debt
Aside from fixing mistakes on your credit report, you can also repair your credit issues by addressing your debts. Focus on paying down high-interest debts first, then work your way down. If you’ve missed bill payments, get up-to-date on them and stay current.
Set Up Payment Reminders
It can be easy to miss bill payments, especially if you have several due on different days of the month. By setting up payment reminders or automatic payments, you’ll be much less likely to miss deadlines.
Keep Your Credit Utilization Low
Try to keep your credit utilization ratio to less than 30%. That means spending less on your credit cards or even increasing your credit limit. You may also want to avoid closing old credit card accounts, even if they’re old and not being used. Closing these accounts could increase your credit utilization, which you don’t want to do.
Should You Use A Credit Repair Company?
Remember, there’s almost nothing a credit repair company can do that you can’t do yourself with patience and timely payments. If you’re not willing to put forth the effort, hiring a credit repair company can take the stress off your shoulders, but you’ll have to pay for it, which may add to your financial problems.
Before you look into credit repair companies, speak with a financial advisor, credit counsellor or Licensed Insolvency Trustee (LIT) to get the best advice possible. These real professionals can help you determine if a credit repair company seems trustworthy or refer you to more effective and affordable options.
What To Do Before Working With A Credit Repair Company
While credit repair companies can be useful, they aren’t always a great solution for building or improving credit. Plus, fake companies could take advantage of your desperation to manipulate you into buying products that don’t actually help.
So, before you work with a credit repair company, take these precautions:
- Research the company and confirm its reputability
- Check customer reviews and consult a financial professional
- Compare the products, rates, and fees from several companies
- Read the fine print of any contract or service agreement they offer
- Look their organization up in the Better Business Bureau (BBB) database
Final Thoughts
While it might be helpful to have a professional work on your behalf to deal with your credit issues, these services come with a fee. You’ll want to consider whether it’s worth spending money to have someone else do the work that you can easily do yourself. Plus, some credit repair companies aren’t helpful and many just want to get every penny they can out of you without offering a lasting positive effect on your credit. Before you buy any of their products or services, don’t forget to do research, so you won’t get caught off guard by a misleading credit repair company.
