Repair Your Credit
How Will Credit Counselling Affect My Credit Score?
Many people worry that their credit will be damaged if they enter a debt management program through a credit counselling service. In fact, their credit score may stay the same or actually improve if they successfully stick to the repayment plan. There are several reasons for this:
- Many creditors will not report anything to the credit bureaus. The goal is to establish an up to date payment history. The fact that you are in a debt management program indicates that an account is being repaid through a counselling agency.
- A status of “R7” may be applied to accounts that are in the program as well. This is different from the account being up to date and in good standing. Keep in mind though, an “R7” rating is better than ignoring your responsibility altogether.
- By entering a credit counselling program you may avoid further late payments, credit problems and even bankruptcy - all of which can significantly hurt your credit.
- If you successfully pay down your debt through a counselling program, your credit score can improve since the amount of debt you carry is one of the major factors in calculating a credit score.
Warning: While you are paying your debts through a counselling agency, you still remain legally liable to the creditor for those payments. If the counselling agency pays creditors late, or doesn't pay them at all, your credit report will suffer. Choose a reputable counselling agency with a track record of paying creditors on time.
What if my dispute doesn’t work?
If after contacting the credit reporting agency and the creditor; you do not have success with your dispute, you have the option of placing a consumer statement onto your credit bureau. Most creditors will read your statement when making a credit decision. Depending on the situation it may or may not have an impact on that decision but it is worth the effort if you truly feel that you are in the right.
Do not put statements on your credit bureau that have personal feelings or opinions included. Keep your statement professional and facts only.
Credit Repair Firms
Think twice before spending your money on a “credit repair program”. Many times these programs cost hundreds of dollars and their techniques may actually be illegal! For example, some companies will tell consumers to get an Employer Identification Number (EIN), which is the same number of digits as a Social Insurance Number. They'll then tell consumers to try to get new credit using that number. The goal is to establish a brand new credit file. Obtaining an EIN for that reason, however, is not legal. The government provides a very helpful website through the Financial Consumer Agency of Canada. Here you will find useful information regarding your rights and responsibilities as a consumer along with alerts for your safety. You can also access information regarding credit and debt as well. Visit the website at www.fcac-acfc.gc.ca for more information.
