If you have poor credit, you’ll want to take steps to repair it. Otherwise, having bad credit can stand in the way of accessing various financial products. Or, even hinder your ability to land a job, get an apartment, or obtain an affordable insurance policy.
Fortunately, credit repair services are available to help give your credit score a boost when needed. Let’s discuss how credit repair in Canada works and how much it can cost you.
Key Points
- Credit repair helps restore a bad credit score.
- You can repair your credit on your own for free, or use a credit repair service or company to help you for a fee.
- Even if you pay for credit repair services, you could save money in the long run by accessing better rates and terms on future credit products thanks to a higher credit score.
What Is Credit Repair?
Credit repair can help you achieve your financial goals by improving your credit score. More specifically, credit repair involves carefully reviewing your credit file to spot any inaccuracies that may be unfairly pulling your credit score down. Negative information on your credit file may have either been added in error or were not removed properly following delinquent accounts.
If any mistakes are identified, creditors and credit bureaus may be negotiated with to dispute these errors and have them fixed right away. Cleaning up these errors can help give your credit score a boost.
How Much Does Credit Repair Cost?
The cost of credit repair depends on the route you take. You can repair your credit for free by tackling your own credit repair efforts. Or, you can spend a few dollars a month on credit-building tools from various online financial firms.
Otherwise, credit repair software is available, it can cost from $25 to $500. The most expensive route is to hire a credit repair company to help you boost your credit score, which can cost up to $100 as an initial set-up fee, and monthly payments of anywhere from $30 to $150. Some of the best credit repair companies in Canada are those that offer comprehensive services and take care of everything with creditors and credit bureaus on your behalf.
Credit Repair Tools Available In Canada
The following are examples of some fintech companies in Canada that offer helpful credit repair tools:
| Service | Details | |
| Climb – Accelerator Plan | – Set a savings goal and timeline and make pre-authorized payments that are saved in a secure account – Your positive payment history is reported to Equifax and TransUnion to help you improve your credit score – Get your saved money back at the end of the term – Cost: Set-up fee of $200 – $250; Interest rate of 8.99% | More Info |
| Spring Financial – The Foundation Account | – A portion of each full payment is automatically saved – After 12 months, you’ll have saved $750 – Each payment is reported to the credit bureaus to help you build credit – Cost: ~$37 bi-weekly | More Info |
| Borrowell – Credit Builder | – Make payments for 36 months – Your total savings are deposited into your account – Your payments are reported to Equifax to help you build good credit – Get your savings back at the end of the term – Cost: Program fee (not specified) during the first 24 months; Interest from 18.64% — 26.46% APR | More Info |
| KOHO Credit Builder | – Line of credit separate from your KOHO account balance -KOHO will set aside a certain amount from your credit line every month – Each amount is reported to Equifax to help you build credit – Cost: $5 – $10/month | More Info |
How Does Credit Repair Work?
There are several options available to help you repair your credit, as listed below.
Do It Yourself
You can request a free credit report from TransUnion and Equifax, then review your file for any errors. Then, you can dispute any errors and have the credit bureaus fix them. This alone can help improve your credit score if mistakes on your credit file are the culprit behind your poor credit.
This option can take time and patience, as you may not be familiar with the process of contacting and negotiating with creditors, lenders, and credit bureaus. However, in exchange for your time and hard work, there’s no cost to doing this yourself.
Use Credit Repair Software
Several software solutions can help you repair your credit, ranging from basic to advanced. Basic software will provide directions on how to dispute errors found on your report and a template for a dispute letter to be sent to the credit bureaus.
Advanced software is more expensive, but these tools have a wider range of dispute letters for different errors and can provide alerts notifying you of the progress of your dispute. Additionally, they allow you to track your credit score.
Use Credit-Building Tools
Several online financial firms offer credit-building programs and products to consumers as a relatively affordable way to improve credit. These products often involve taking out a line of credit or account, while regular payments are automated and reported to the credit bureaus. With every timely payment made and reported, your credit score can improve.
Credit-building tools often come with monthly subscription fees.
Hire A Credit Repair Professional
Credit repair companies take care of all the steps required to improve your credit in exchange for a fee. They’ll review your credit report and check for inaccuracies, open disputes with credit bureaus to have these errors fixed, and contact your creditors to negotiate your debts and see what can be removed from your history. Credit repair professionals can also coach you on credit management to avoid future issues.
However, this tends to be the most expensive type of credit repair, as these services typically involve both a setup fee and a recurring payment.
How To Choose A Credit Repair Service?
Before deciding which credit repair service to work with, consider the following:
- Are the fees clear? — Some credit repair companies charge hidden fees, so be sure to choose a firm that is transparent with their fees. You also want to determine whether the fees charged are reasonable for you, as costs can vary.
- Are they licensed? — If you choose to work with a professional credit repair company, ensure they’re licensed and qualified to give you the advice and guidance required to help you build your credit.
- Are they well-rated? — Check to see if the credit repair company or product has good reviews online and is reputable.
How Will Credit Repair Help You?
Credit repair can remove negative marks (if it is a legitimate error) from your credit history and ensure that your credit report is accurate. Items that may be corrected include:
- Bankruptcy or claims against you that are not yours
- Accounts that do not belong to you
- Credit inquiries that you never made or authorized
- Incorrect dates and personal information
- Debt that is not verified and cannot be validated
- Past debt or derogatory items that should no longer be on the credit report
Note: One thing to note is that credit repair only removes items that should not be there. All derogatory marks that are accurate, timely, and verifiable cannot be removed.
How Much Money Can Credit Repair Save You?
Credit repair can indirectly save you money. By helping you build good credit, you’ll be more likely to qualify for lower interest rates on loans and credit products, leading to savings in interest payments and the overall cost of a loan.
For example, if you were to qualify for a 7% interest rate on a car loan instead of a 17% interest rate due to your credit score, here’s how much you could potentially save.
In this example, we used a $15,000 car loan paid monthly with a 3-year term to illustrate how much you’d save. Here you can see that you’d save a little over $2,000 if you can secure the 7% rate for the same loan.
| Car Loan Amount | $15,000 | $15,000 |
| Interest Rate | 7% | 15% |
| Term Length | 3 years | 3 years |
| Total Interest Paid | $1,673.63 | $3,719.28 |
What To Watch Out For With Credit Repair Services
When evaluating different credit repair services, you should be wary of false promises or claims made by companies that they can remove any or all derogatory items from your credit report. It is important to remember that only negative items that are on your credit report in error can be removed.
Credit Repair Laws And Regulations
Knowing your rights and how credit repairers operate are crucial in this process. Let’s take a look at a few regulations surrounding credit repair services:
- Credit repair services and companies must provide the consumer with a written and dated contract.
- Consumers have a cooling-off period from when they receive the contract during which they can cancel the agreement. The length of this period depends on the province. In Ontario, for instance, consumers may be given a 5-day cooling-off period.
- Credit repair services cannot charge advance payments or fees unless they cause a material improvement to the consumer’s credit file.
- Credit repair services cannot make false claims or guarantee a material improvement to the consumer’s credit file before reviewing it.
Final Thoughts
If your credit score needs a boost, you should consider some form of credit repair. Whether you tackle this job or hire someone to help, improving your credit is important for your financial life. Just be sure to consider all forms of credit repair, and the costs associated with each before choosing which route to take.
