We often have people call us about rebuilding a credit score that has been damaged by poor credit behaviour. What is surprising is the number of problematic myths that exist in relation to credit scores and rebuilding credit, one of which is the assumption that, after a few years, bad items will just disappear.
One of the biggest mistakes you can make when rebuilding your credit score, thanks in large part to this myth, is leaving bad credit items on the report, unpaid, assuming the item will magically disappear after enough time has passed.
Unfortunately, the reality is far more complicated than that.
In Ontario, credit reporting agencies must follow the Consumer Reporting Act which sets out the various rules and guidelines governing such agencies and their activities, including how long items can be reported to your credit report. While there are some protections under the Consumer Reporting Act, things may not be so clear cut as far as your actual credit report is concerned.
According to the Consumer Reporting Act, there are timelines to which reporting agencies have to adhere, and yes, items will eventually be removed from the credit report after a certain period of time has passed, but the circumstances must satisfy various conditions. Additionally, the reality is that information gets improperly reported to the credit report all the time, especially the longer things go unchanged. Sometimes a creditor assigns a debt to a collection agency and it results in a secondary collection item, etc., an item that remains on the report even after it should be removed.
In most cases that timeline is 7 years. So, if an item is 7 years old, it will be removed from your report – 7 years from when you made your last payment. Sound good? Sure, if you’re not concerned about what happens with those defaulted items that have balances as you wait for the 7 years to pass. Keep in mind that, if you think 7 years have passed, you must be able to prove the date of the last payment. Is just leaving them there to accrue interest and further damage your credit the answer? All this does is further damage your credit, often to the point that it becomes almost irreparable.
When it comes to rebuilding your credit score, the best thing to do is request a copy of your credit report from both Equifax and TransUnion. Here are the links to both sites:
If you notice things on the report that should have been removed, gather your proof and file a dispute with the credit reporting agency. Once you file your dispute, make sure to follow up to see that an investigation is followed through.
Look at your balances and any defaulted items. How can you clean those up? In order to start rebuilding your credit score you need to fix any problems. Look at your income and debt objectively. What is your true ability to pay? Think some extra help and guidance is needed? Speak with a Licensed Insolvency Trustee to see what your quickest road to recovery is. Sometimes their solutions are the answer, sometimes they will point you in another direction – they are objective and will give you a firm and clear assessment of your finances.
Want to get started on rebuilding your credit score and clearing up those bad debts?
Call Spergel today at 310-4321 for a free consultation.