Archive for Category 'Credit repair'

Question: I have recently been trying to re-establish my credit since I have returned to a secured field of employment that would allow me to do so. I have previously started establishing credit by having a visa, a revolving store account and a cell phone contract that was obtained in 2004. All have been sent to collections, but have recently been paid in full as I am in a position to borrow again. I have met with several lenders who could not give me the proper advice needed in order to obtain credit from their institution. They would rather treat it as a gamble and advise me to “just apply and see what happens.” Once I have applied and have been denied, even with a down payment the lender would give me advice on what I needed to do in order to obtain credit. I have conducted research into the issues i have encountered and have been monitoring my credit report and score in an effort to bring my file to an acceptable lending position. Even with doing so and having my fico score start at 630ish with nothing owing and plummet to 550 from the numerous inquires then return to 600 and plummet once again due to the inquiries and false advice received from the lending institutions every time they would tell me I would be approved for the loan. Now that all three bills have been paid in full for over six months the lending institutions are now telling me that I am a credit hunter and are refusing my application as a result of the previous inquiries. I currently have a secured credit card and a loan from well fargos that are relatively new. I was wondering if there was anything i could do to have the inquiries removed from the bureau as the majority of them are only there as the banks stated I would be approved if I complied with their request’s but only to be denied by them again? I am starting to think that it might have been more efficient to claim bankruptcy instead of trying to repair the credit on my own.
Thanks

Answer: Your question raises some interesting issues.

If you have a debt that goes into default, and then at some later point you eventually repay it, the notice of the default still appears on your credit report.  According to Equifax, information about debts you pay late remains on your credit report for six years, which is the same period that information regarding bankruptcy appears.  Credit inquiries remain on your credit report for three years.  So yes, you may be correct that in hindsight a bankruptcy may have been a viable option for you.

It should also be pointed out that since the market crash back in late 2008, all banks have tightened up their lending practices.  It has become much more difficult to borrow now, even if your credit isn’t bad.  That could also be a factor in your inability to borrow.

Your best option is probably to only borrow when you are highly likely that you will get the loan.  For example, perhaps you start a small RRSP at your bank, and then apply for an RRSP loan for a small amount.  Since the loan will be re-invested in your RRSP at the bank, it is more likely that the bank will approve the loan.  That will then give you a loan approval on your credit report, which should improve your credit score in the future.

Some other tips:

First, avoid credit repair scams.  There are lots of people who will promise to fix your credit, but there are no magic solutions, so if it seems to good to be true, it probably is.

Second, the best way to repair your credit is to have money in the bank, so work on saving money.  That money can then become a down payment or a security deposit on a future loan.

Third, don’t apply for lots of loans.  As you have discovered, every time you are rejected your credit score on your credit report drops.

Finally, keep all of your current bills up to date.  Don’t be late with your hydro bill, or any other bill, as that will negatively impact your credit.

Credit repair doesn’t happen overnight, so take your time and allow the gradual improvements to improve your credit score.

Question: About 6 months ago I was discharged from a bankruptcy and haven’t done anything yet to re-establish it. I’ve also moved (renting as usual) and changed jobs (different industry) in the last month, so I have no job or residence stability. My bank won’t offer me any sort of credit for another 5 and a half years when the bankruptcy falls off my credit report.

I realize this is the penalty I pay for being relieved of my debts and wasn’t expecting it to be a walk in the park. I’ve learned from my mistakes and have be pretty good about paying my current bills on time to avoid any negative reports on my credit report. But, I don’t make much money and have very little left over after everything is paid. I’m looking for a higher paying job, a extra part-time job, or starting a part time business on the side to make more money.

Short of high-risk (and high-interest) car loans and mortgages, which I may be able to qualify for in the near future is there anything else I can do to re-establish credit? I’m even afraid to obtain a credit report as I’ve heard that will lower my score a few points – and I need all the points I can get right now!

I’ve heard about secured credit cards to repair credit and have seen some mentioned on your website. Money is a bit tight right now, but I hope to be able to save $300 or $500 to start one soon. I’ve heard conflicting opinions on whether or not to get a higher limit – theory being I “could” max out the card at any time and give me a bad debt-to-income ratio. Any ideas on what I can do to re-establish credit soon would be greatly appreciated.

Answer:  The most important method for re-establishing credit after bankruptcy is to save money.  That money can then be used as a down payment for a car, house, or other purchase.

A secured credit card is also generally a good idea.  We suggest you use it, but pay it in full every month.  It shows that you are handling credit wisely, but still have no debt.

As for your credit report,  it is true that if you apply for credit at a lot of places in a short period of time, you will lower your credit score.  However, requesting a copy of your own credit report does not impact on your credit score.

Question: Two months ago I paid off my consumer proposal 9 months early. I have established a secured credit card in good standing, have maintained zero debt and have been employed long term. I need to purchase a vehicle, what is the best approach to take to have the best shot at financing (I have saved a small down payment)?

Answer: Now that your consumer proposal is completed, the car loan lenders will look at your income, your employment history, and the amount of your down payment.  The bigger the down payment, the greater the chances of getting a car loan at a favourable interest rate.

Our suggestion would be to visit two or three car dealerships.  Start by visiting a new car dealer; in many cases, because they have manufacturer’s financing, you may be able to get the best deal from them.  Also try a used car dealer.  Compare the deals they are offering you.  Also ask them if you would get a better deal by having a bigger down payment, or by waiting another six months or year after the completion of your proposal.  If an additional $1,000 down payment would make a significant difference in your payment, it may be worthwhile to wait a few more months before purchasing.

Question: Can you still get a mortgage eventhough your credit is in r9 or r7? right now i am renting a condo for $1100 a month & pay all utilities. worked fulltime & earn 19 per hour. spouse is earning wsib benefit but eventually will be looking for a job.

Answer: Yes, it is possible to get a mortgage with poor credit.  However, if you are an R7 or an R9 the mortgage will be very expensive, and so may not be a good idea.

In most cases it is best to work on repairing your credit and saving money before you apply for a mortgage.  That may mean talking to a credit counsellor about a debt management plan to pay off your debts, or perhaps even filing a consumer proposal or personal bankruptcy in Canada to discharge your debts and give you a fresh start.

Question: After a collection agent has reported you to the credit bureau and you pay them off in full how long should it take them to notify equifax and have your credit file updated?

Answer: Most creditors report to the credit bureau on a monthly basis, so in general it will probably take about two months for your credit file to be updated.  We recommend that you check your credit report in about three months, and if it has not been updated contact both the collection agency and the credit bureau and request that they make the change.

Question: My husband has been trying to apply for a credit card for a while. We have been out of Canada for the past 5 years and recently returned 2 years ago. When we came back, we paid off his student loan. My husband and his father has the same name. Equifax has a lot of information and credit details that dont belong to my husband but to his father. With this even though all our current payment are always up to date and he is making close to $100,00 a year, no banks will give him a credit card.

How do we fix this problem? Should we go to the bank that gives the false information? I know the last resort maybe getting a lawyer but I want to know of any repairs that we can do without forking out a huge chunk of money since the whole thing is not our fault at all. Thanks

Answer: First, you should contact Equifax.  They have a procedure in place to review information for accuracy.  If after providing proof to Equifax that your credit report is in error, if they don’t correct it, then yes, consulting a lawyer may be your only option.  If Equifax has made an error, it is possible that your lawyer will be able to recover their fees from Equifax for providing knowingly false information.

Question: We were contacted by phone regarding an overdue cellular bill. The person they were looking for was in fact not my husband, but another person in the same city as ours with the same name. They had the incorrect address(es), but somehow got our phone number, and his current drivers licence number…and therefore are convinced it is him. We paid the bill to get it off his credit report, now what can we do? We’ve been to the cellular place, first they said they had no record of my husband, so there must be a mistake, now, they are saying no, it is him…..

Answer: It depends how far you want to pursue it.  You could go back to the cellular company and demand that the account be removed from your credit report.  If they don’t, you could consult a lawyer and pursue legal action against them.  That may be very expensive for the amount of money involved.

The other option would be to contact the credit bureau and ask them to put a note on your credit report indicating that the debt is a result of mistaken identity.  With proper proof the credit bureau may even remove it from your credit report.

Question: I’m about $30,000 in debt with an R9 credit rating. I was OK until last year, but things have gone downhill recently. Some debt is an Ontario and Canada student loan from 10 years ago. Some debt is from Ontario, some from Quebec. I want to take control of this and get back on track as soon as possible. I’ve heard that if I get debt counseling and go on a DMP (Debt Management Program), my credit can be reestablished two years after it’s all paid off – meaning a clean credit record – as if nothing had ever happened.

That sounds very appealing to me as I’d like to get a mortgage and a credit card as soon as possible after the debt is taken care of. Although I could pay less using a consumer proposal, or potentially nothing if I file personal bankruptcy, rumour has it that those NEVER leave you. They’ll certainly remain on my credit rating for 6 or 7 years and possibly always be lurking in the background forever. Is this true? What would be the best solution?

Currently I am about to be laid off, but hope to get another job very soon. I rent my living quarters, have no assets (other than furniture – some nice and new, some not) and an older vehicle that’s not worth more than $1000. I am, however, 1 year into a 4 year lease on a new car that I can’t get out of easily. Despite the financial burden (I was much better off financially a year ago when I got it), I’d like to keep the car since it’s reliable transportation and I can also keep making the monthly payments to help my credit rating improve. Is that also a wise idea?

Answer: First, let’s start by dispelling some myths.  You said that you have heard that with a debt management plan “my credit can be reestablished two years after it’s all paid off – meaning a clean credit record – as if nothing had ever happened.”  This is not true.  To quote Equifax, the largest credit reporting agency in Canada, this is how long information remains on your credit file:

VOLUNTARY DEPOSIT – ORDERLY PAYMENT OF DEBTS, CREDIT COUNSELING: When voluntary deposit – OPD – credit counseling is paid, it will automatically purge from the system three (3) years from the date paid.

REGISTERED CONSUMER PROPOSAL: When a registered consumer proposal is paid, it will automatically purge three (3) years from the date paid.

In other words, a debt management plan through a credit counsellor remains on your credit report for exactly the same amount of time after it is paid in full as a consumer proposal.  There may be advantages to choosing credit counselling over a consumer proposal, but time to repair your credit, or the impact on your credit report, is not one of them.

As you correctly point out, in most consumer proposals you pay less than the full amount owing, and in a debt management plan you generally pay the full amount owing, so in fact in most cases a consumer proposal can be paid off faster, and therefore is a quicker way to repair your credit.

As for the car, if the lender will allow you to keep making the payments, and you can afford it, then yes, keeping the car will keep something positive on your credit report, which may help you in the future.

Question: We have just paid off our consumer proposal three months early. How do we go about getting a unsecured credit card. It seems nowadays you need to have a credit card for deposits etc.

Answer: Congratulations on paying off your consumer proposal early.  You can apply for an unsecured credit card through any bank.  However, because your proposal just ended, they may want you to wait a while before they will allow you to apply.

A quicker option is to get a secured credit card as a way to repair your credit.  One of the largest and easiest companies to deal with is Home Trust Visa; they specialize in helping people with less than perfect credit obtain credit.

The Home Trust Secured VISA is a credit card that requires a security deposit for eligibility. Your credit limit is then set at the amount of the deposit. You can put down as little as $1,000, or as much as $10,000. Your security deposit earns interest, while your Home Trust VISA card is open and in good-standing.

For more information or to apply, read our article on credit repair with a secured credit card.

Answer: can true information on my credit be removed?

Question: As a general rule, no, true information cannot be removed.  However, you can ask the credit bureau to include an explanation of any negative items on your credit report.  Most information remains on your credit report for six years, so eventually the information will drop off your credit report.