Are Credit Repair Companies Trustworthy? Our Team Investigates

Bad credit can make life harder. Building good credit isn’t easy either. Plus, weak credit can make it difficult to get approved for affordable credit products. You may not even be able to get an apartment if a landlord pulls your credit and thinks you won’t make rent.

When those things occur, it can be tempting to hire a credit repair company. The only problem is that many credit repair companies aren’t legitimate and will mislead you into believing they can do more than they actually can to fix your credit.

Tips On What To Look Out For With Credit Repair Companies

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 & 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 cheaper.

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.

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LOOKING OUT FOR YOUR BEST INTEREST

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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 they will 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 either. 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.

Wondering if someone is using your identity? Find out how to tell if you’ve been a victim of identity theft.

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 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.

Additional Reading

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 use 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 database

Learn more about the cost of credit repair.

Be Careful Around Credit Repair Companies

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, now or ever.

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Bryan Daly

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.