Are you struggling with less-than-ideal credit and looking for ways to restore it? You could consider getting the services of a credit repair company.
You can try improving bad credit yourself, but legitimate credit repair companies are more experienced in dealing with reporting agencies.
Read on to learn about credit repair companies in Canada, how they can help you, the costs, and their pros and cons.
Key Takeaways
- Credit repair companies work to restore or fix your credit report by disputing inaccurate information on your credit history to improve your credit score.
- Fixing your credit yourself is possible but may take longer than if you work with a credit repair company. However, watch out for the many scammers masquerading as legit credit repair companies.
- An improved credit score is vital for getting the best interest rates and affordable loans.
What is a Credit Repair Company?
A credit repair company is a service that works to fix, restore or improve your credit score by disputing inaccuracies on your credit report — for a fee. The process involves fixing your credit history, which may have failed for one reason or another.
Repairing credit often entails disputing incorrect information that credit reporting agencies share with lenders and creditors and asking them to remove it. Or, it may involve more critical cases like resolving problems caused by identity theft.
How Do Credit Repair Companies Work in Canada?
When you have decided on a credit repair company, the first thing it usually does is pull your credit file from the credit bureaus.
The company will then go through the credit reports with you, explain the contents of the documents, review them for inaccuracies and identify issues that negatively impact your credit score.
If there are inaccurate items that credit agencies must remove, the credit repair company will negotiate it for you.
Together with the credit repair company, you will start a dispute with the reporting agencies and gather documents and statements supporting your claim.
Some of the most common disputes and removals are as follows:
- Bad credit
- Low credit score
- Charge-offs
- False data
- Reporting errors
- Credit fraud
- Excessive inquiries
- Slow payments
- Collections
- Judgements
- Public records
- Identity theft
The credit repair company will then contact your creditors to discuss what items they can remove from your credit report.
The overall credit repair process may vary from one company to another.
Aside from correcting inaccuracies, some credit repair companies will provide follow-up consultations, credit counselling and offer to boost your personal credit score.
How Long Does Credit Repair Take?
Credit repair can take time and may require a lot of work. Preparing for it is necessary so you can plan ahead. The process starts with a thorough review of your credit report.
If you find a mark that you want to dispute, such as one that shows no payment was made when, in fact, there was, you must create a dispute letter and gather the documents proving the mark is wrong.
After you submit it to the credit bureaus, there is a 30-day period when they verify the information and reply to your correspondence.
Disputing false claims like this can take approximately three to six months to resolve. If rebuilding your credit is due to derogatory remarks, it may take up to six months to resolve.
For most people, you can expect to work with your credit repair company for approximately six months. The actual time it takes to repair your credit score depends on your credit report and how many inaccurate items need disputing or removal.
How Much Does Credit Repair Cost in Canada?
The cost of credit repair depends on the plan you choose. Getting the services of a credit repair company can cost between $30 and $150 per month initially, while credit repair software can cost between $25 and $500.
How to Repair Your Credit in Other Ways
Aside from credit repair companies, there are other ways to fix or improve your credit. See below for other alternatives to restoring your credit without a third party.
Check Your Credit Reports
Checking your credit reports helps ensure that the information the credit reporting companies share with lenders is updated and correct. Contrary to common belief, requesting your credit report does not impact your credit score because it is not an inquiry about new credit.
Pay Your Bills on Time
Start this healthy practice of making on-time payments and keeping up with all your bills, especially your credit card bills. This is especially important if your credit is already damaged. Pay your outstanding debt and aim for a credit utilization rate lower than 35%.
Pay At Least the Minimum Monthly Payments
If you cannot make a full payment, at least make the minimum payment. While you should pay your bills in full by the due date every month, making minimum monthly payments is better than not making payments at all.
Get a Secured Credit Card
Apply for a secured credit card if your credit is poor and you cannot qualify for a regular credit card. Proper use of this card helps gradually improve your credit score. Use this card for your daily purchases — taking care not to exceed the limit — and make timely payments.
Neo Secured Credit
Best secured credit card for bad credit
Annual fee: $0
Rewards: Earn up to 15% cashback on first purchases at eligible partners, 5% cash back at partner stores, and 0.5% unlimited cashback on everything else.
Welcome offer: $25 bonus
Interest rates: 19.99%-22.99% for purchases, 22.99%-28.99% for cash advances.
Minimum income requirement: None
Recommended credit score:
None
On Neo Financial’s website
Use a Credit Building Service
Use a credit-building service like KOHO to build or restore your credit. Choose between Credit Building, which uses a KOHO line of credit, and Flexible Credit Building, which uses a secured line of credit.
KOHO reports your on-time payments to Equifax each month, helping to restore your credit and improve your credit score over time.
KOHO Credit Building
For a low monthly fee, build your credit score in one of three easy ways.
Monthly fee: $5 to $10 (depending on which KOHO Mastercard you have)
Free transactions: Unlimited debits and Interac e-Transfers.
Sign-up bonus: Earn $20 in cash back when you make a purchase within 30 days of registering.
Interest earned on deposit: Up to 5.00% interest rate, plus earn up to 5% unlimited cash back.
On KOHO’s website
Use a Credit Repair Company
Find a reputable credit repair company to work with to resolve inaccuracies and negative information on your credit report. It will help you review your credit reports and find marks you can dispute to eventually improve your credit score.
Pros and Cons of Credit Repair Companies
Pros of Credit Repair Companies
- Expertise in the credit repair process
- Improves your financial standing
- It will save you money on future loans due to a better credit score following credit repair
- Can remove fraudulent entries stemming from identity theft
- Resolves inaccuracies on your credit report faster than you can
- Potential to improve or restore your credit score
- Saves time and effort
Cons of Credit Repair Companies
- No guarantee your credit score will increase or that disputes will be solved
- Credit repair services can be costly
- Not all credit repair companies are legitimate
- Upfront fees or hidden charges
What to Look for in a Credit Repair Company
Finding the best credit repair company is crucial to helping ensure your financial standing will improve along with your credit score. It is also a way to avoid scammers, as the credit repair industry is full of them.
Consider these essential factors when assessing if the services of a credit repair company are worth getting:
- Cost. Compare the prices provided by credit repair companies in your area to determine if they offer value for their services.
- Reputation. Choose a trusted name and one with satisfied customers. Check review sites for a credit repair company with numerous positive customer comments detailing their experience with the provider.
- Transparency. A legitimate credit repair company would be upfront about its fees at the outset. Check its website for details on its services and if it provides terms and conditions.
- Customer reviews. Check review sites to find what previous customers say about a credit repair company you plan to hire. Assess how they respond to complaints and how they treat customers.
- Claims. Avoid credit repair companies that make outlandish promises, such as claiming to be able to remove many negative things from your score. Unless these things are inaccurate, no credit repair company can remove them.
Is It Worth It To Use a Credit Repair Company?
Fixing bad credit is a time-consuming process that can take months to resolve. Contacting credit agencies to dispute inaccurate data can take up to 30 days. If they ask for more documentation, it will prolong the process further.
Using a credit repair company to repair your credit can be worth it if there are errors on your credit report that negatively impact your credit score and render you unable to get a loan. Plus, they can go through the credit repair process faster.
A reputable credit repair company can assist you in identifying and removing the inaccuracy on your credit report. It may, however, take from three to six months till you see an improvement in your credit.
Credit repair may also be worth it if you struggle to pay off your debt and would welcome professional help with improving your credit.
Depending on your situation, having incorrect information removed from your credit report may not immediately impact your overall credit score.
But the benefits you may get from an improved credit score, such as better interest rates and lower loan costs, can more than pay for the credit repair services in the long run.
FAQs
In some cases, hiring someone to fix your credit may be worth it if they can help repair your credit faster and let you enjoy the benefits of improved credit. It is vital that you make sure of the company’s experience and expertise in the credit repair process. You may also want to consider doing credit repair yourself to save on the fees, which can exceed $150 a month. Credit repair companies don’t do anything special you can’t do yourself if you are willing to make the effort.
Paying someone to wipe your credit clean is not recommended. No legitimate company will ever claim they can make your negative items legally disappear from your credit report, especially if these negative items are accurate and correct.
Banks can help with credit repair by issuing a secured credit card to help you rebuild your credit. When you use it wisely, you can gradually increase your credit score over time. Banks may also offer consolidation loans to help you manage multiple bad accounts.
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