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No quick fix for poor credit rating

National Post
Wednesday, February 9, 2000
Page: D4
Section: Financial Post Investing: Money
Byline: Tracy Lemay
Column: Personal Finance
Source: Financial Post

Sheila McCracken's job would be a lot smoother if she could neutralize the magic wand some credit repair companies claim they can use to heal ailing credit reports. 

"We've had 200 consumers this month alone from the Toronto area who have paid just under $1,000" each to companies that offer to resuscitate credit records with failing grades, says McCracken, vice-president, credit reporting at Equifax Canada Inc. 

The problem is, in most cases, these firms can't do a thing. And in the event corrections to your credit record are necessary, you can do the job yourself -- for free. 

Equifax is one of Canada's two large creditor bureaus. The other is Trans Union of Canada.

 These companies act as clearing houses for information on how consumers handle loans. They assemble reports based mainly on data lenders file with them. 

Each credit account is given a ranking by the lender according to a nine-point scale, reflecting how payments have been, or are, made. The scale ranges from a 0, which would be applied to an approved, but unused, account, to 9, which reflects a bad debt or one placed for collection. For common credit activity, records are kept six years.

A lender who is considering extending credit uses the information to try to determine a consumer's future ability to repay the loan. If one of his or her accounts carries a 9 rating, for instance, there's a good chance the loan won't be forthcoming. 

If credit is not granted based on a poor credit report, some consumers turn to these repair clinics, often paying a hefty fee up front. Sometimes, refunds are promised if the firm fails to resuscitate the record. 

However, you have the right to check your file at any time. Consumers can also correct any mistakes on their files. 

Note that negative rankings -- assuming they're based on accurate data -- cannot be prematurely removed. In a recent consumer advisory, the Ontario government warned consumers to be very cautious "if anyone promises to change or erase information on their credit files that they know is accurate." 

But some people who "go to credit clinics really believe that they [can] have accurate factual data removed," says McCracken. "The reason they believe it is they got into trouble in the first place by not paying a bill, it could have been only $300-$400, and that affected their credit rating.

"So they think that if they got into trouble in the first place by not paying they can get out of trouble by paying a sort of penalty fee. But that's not the way it works," she says. 

If you spot errors in your file, you can correct them by filing supporting documents to the credit bureau. The bureau is obligated to make the correction.

If for some reason the bureau fails to set things right, there's a very good chance you can appeal to your provincial government. 

The best advice? Check your file regularly -- once a year is good -- and deal with mistakes yourself. 

(Editor’s Note: This critical credit information is now easily and inexpensively obtained online through CanadianCreditCenter.com. To obtain your credit report and/or credit score directly from Equifax Canada, visit their website now.)

Idnumber: 200002090005
Edition: National
Story Type: Business; Column
Note: Tracy LeMay can be reached by e-mail at tlemay@nationalpost.com
Length: 505 words

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