Topic: Credit Score

negative items on credit report

What is the fastest way to remove negative items from my credit report?

A Quora user asks: What is the fastest way to remove negative items from my credit report?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:

If the negative items on your credit report were due to an error and untrue, calling the credit reporting agency will fix it fairly quickly. You may be required to submit to them a form describing the error along with copies of photo ID.

On the other hand, if the negative items on your report are factually correct (e.g., you did actually miss those monthly payments), then there is nothing you can do. Here is how long you would have to wait for items to be removed from your credit report in Canada:

  • Credit transactions – negative information about accounts such as credit cards, lines of credit and loans (also called “trades” or “trade lines” by credit reporting agencies) stays for 6 years. Equifax counts from date of last activity (for example, a payment you made). TransUnion counts from date of first delinquency—the date you first defaulted on the account (for example, by making a late payment) without returning to good standing
  • Secured loans – Loans backed by an asset, such as a mortgage, a car lease or loan stay for 6 years.
  • Banking items – negative information, including: chequing and savings accounts closed “for cause” due to money owing or fraud committed by the account holder bad cheques (also called non-sufficient funds or NSF) stays for 6 years.

Tip: don’t fall for those scam businesses that claim that they can remove negative items on your credit report for a fee. Here is how they work: in return for you paying them a lot of money, they’ll lodge a dispute with the credit reporting agency. The agency will remove the negative item in your report while they conduct an investigation. However, once their investigation concludes that the negative item was factually correct, they will put it back into your credit history.

debt settlement fix credit

Is debt settlement a good way for consumers to fix their credit issues?

Question from a Quora user: Will a debt settlement fix credit? Is debt settlement a good way for consumers to fix their credit issues?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:

The reason for the existence of credit ratings and credit scores is to protect lenders from potentially feckless borrowers who approach them for loans. Therefore, if someone’s credit rating has already been affected by, for example, late or non payment of debts, then a settlement won’t do anything to “fix it”.

The only way to fix a credit report issue is to deal with the outstanding debts by: (1) paying it off; (2) through a settlement; (3) or with the assistance of a Licensed Insolvency Trustee who can assist you with a legal settlement called a consumer proposal. Once you’ve dealt with your debts through one of these options, then you will need to rebuild your credit from scratch.

Rebuilding credit can be initiated by obtaining a secured credit card and using it on a regular basis.

credit report

Will a bankruptcy automatically come off my credit report?

A Quora user asks: Will a bankruptcy automatically come off my credit report after 7 years or do I need to do something proactive to get it off?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:

I’m in Canada, so the answer I’m going to give to you pertains to how it works in my country.

Equifax: A bankruptcy gets removed from your credit file 6 years after you’ve been discharged from bankruptcy. If you are not discharged, Equifax will keep a record of your bankruptcy on file for a maximum period of 7 years (14 years for subsequent bankruptcies) from your bankruptcy filing date.

Trans Union: A bankruptcy gets removed form your credit file 7 years (14 years for subsequent bankruptcies) after you’ve been discharged from bankruptcy. If you are not discharged, Trans Union will keep a record of your bankruptcy on file indefinitely until you obtain your discharge.

The bankruptcy should come off your credit report automatically after the 7 years. However, it’s always good to obtain a copy of your credit report from both Equifax and Trans Union at the 7 year mark to confirm that the bankruptcy record has indeed been removed. If not, you will have to contact them to correct this.

debt consolidation and credit score

Does consolidating debts hurt your credit rating?

Rustyshackleford14 asks on Reddit:

Hi Victor,

I have the following debts

Line of credit… $13,000 @ 8.99%; Credit card… 1,500 @ 9.99%; Car loan… about $16,000 remaining at 1.99% over 4 more years; OSAP… About $3,000 left, I think around 5% and around 3 years of payments remaining.

My buddy was in a similar situation, but I believe he was playing higher interest rates on his debts. He consolidated his debts for 8.99%

I have two questions…

I was once told consolidating your debts hurt your credit rating. Is this true?

Is the interest rate standard for consolidating? Or do they base it on the individual situation? The majority of my debt is below or around 8.99%, so if it was standard, I’d just end up paying more interest on my total debt, no?

Victor Fong, Licensed Insolvency Trustee in Toronto, Canada replies:

Hi Rusty,

To answer your questions:

It depends how you consolidate the debts. If you’re taking out a consolidation loan at a bank (at a lower interest rate than the debts you want to pay off) and you use the proceeds to pay off the higher interest rate debt, your credit rating will be unaffected. If you are consolidating your debts through a debt management plan with non-profit credit counselling agency, your credit will be affected. In Ontario, you will have what is called an R7 on your credit report (it means you’re making a consolidated debt payment); for reference, an R1 is the highest credit rating. If you’re consolidating your debt through a consumer proposal (which is a debt settlement under the Bankruptcy Act), you will have what is called an R9 on your credit report (bad debt, uncollectible) until your proposal has been paid in full.

If you’re consolidating by getting a lower interest rate loan to pay off the other debts, then yes, of course you’re paying interest. If you’re doing a Debt Management Plan with a credit counselling agency, the agency will usually try to get a reduction on the interest you’re paying. If you’re filing a consumer proposal, your creditors are legally prohibited from accruing any more interest on your debts. So in a CP, the amount settled would be based on outstanding balance at the date the proposal is filed.