If you’re reading this, chances are you are one of the many individuals currently working on improving their credit score or have a credit score that needs to be revised. While your credit score may not always be a top priority, it becomes the foremost thing that comes to mind when you apply for loans or lines of credit. Your credit score reflects your credit history, borrowing history, and ability to make timely payments. It indicates your creditworthiness and how good or bad you are as a borrower.
Why Your Credit Score Matters
Your credit score is a number consisting of three digits. It is calculated based on your credit history, which records all your past credit-related activities. This record includes your payment history, credit utilization ratio, and credit usage. Lenders use your credit score for creditworthiness and determine whether to give you credit.
Maintaining a good credit score is important to your financial opportunities. A high credit score can result in significant savings over the life of a loan.
Understanding Negative Items on Your Credit Report
If you have ever paid your credit card late, filed for bankruptcy, had debts sold to collections, or closed an account with a balance, all of this will appear in the derogatory section of your credit report. This is in addition to other negative accounts you may have accumulated over the years that you may not know about.
Accounts with negative information can stay on your credit report for several years, with duration varying based on the nature of the account. The impact of a late payment made a year ago will be less severe than a late payment recently added to your credit report.
As Equifax Canada states, “Most types of negative information generally remain on your Equifax credit report for 6 years.”
Equifax. (n.d.). How Long Does Information Stay on My Equifax Credit Report? Equifax Canada. https://www.consumer.equifax.ca/personal/education/credit-report/how-long-does-information-stay-on-my-credit-report/
Negative items on your credit report can lower your score, and a low score coupled with a negative item on your credit report can make it difficult, if not impossible, to be approved for credit.
How to Get a Copy of Your Credit Report
It is important to review your credit report at all times to ensure that everything reported on it is as accurate as possible. Did you know that you can actually request a free copy of your credit report from each of the two major credit bureaus in Canada once a year?
Online:
- Equifax: Go to the Equifax Canada website and click on the “Get Your Credit Report” button.
- TransUnion: Go to the TransUnion Canada website and click on the “Get Your Consumer Disclosure” button.
By mail:
- Equifax: Download and complete the Equifax Credit Report Request Form. Mail the form to the address provided on the form.
- TransUnion: Download and complete the TransUnion Consumer Disclosure Request Form. Mail the form to the address provided on the form.
How to Spot Inaccuracies and Errors
Once you get a copy of your credit report, it can be overwhelming. Take a moment and carefully review each section. Follow these steps to stay organized:
- Start with your personal information. Ensure your name, address, and date of birth are reported correctly, which is sometimes mixed up with other people’s personal information.
- Review the accounts that make up your credit report. Carefully read the name of each creditor, account type, and balance to ensure all the information is accurate and that you recognize each account.
- Check your payment history. Pay attention to the date and amount you paid to see if you are being penalized by the creditors for any late payments you might not even know about.
- Look for inaccurate negative items. Look for items such as late payments, collection accounts, charge-off accounts, and bankruptcies. Plan to dispute these accounts with the credit bureaus.
If you wait too long to identify these errors, you may miss out on saving money on interest and having awesome deals. Plus, waiting too long may make it difficult to dispute these accounts.
Gather Supporting Documentation
If you find inaccurate or incomplete negative items on your credit report, you will need to gather supporting documentation to support your dispute. Common types of supporting documentation include:
- Receipts or payment records
- Correspondence from creditors or collection agencies
- Proof that the account was discharged in bankruptcy
- Proof that the account was never opened in your name
Start Disputing Negative Accounts
If you want to improve your credit score, you can start by disputing negative items on your credit report. You can do this easily by visiting the credit bureau’s website with accurate or complete information. Alternatively, you can mail a dispute letter to the credit bureau.
Your dispute letter should be clear, concise, and polite. It’s important to send it by certified mail so that you have a record of when it was received. The credit bureau will have 30-45 days to investigate your dispute and respond. If the information needs to be more accurate or complete, they will remove it from your credit report. However, if the information is accurate, it will remain on your credit report.
You can keep track of the progress of your dispute by checking your credit file using the credit bureau’s website or by contacting the credit bureau by phone.
How to build back your score?
Secured credit cards are an excellent way for people with bad or no credit to build good credit and increase their credit score by making on-time payments.
Before you get a credit card:
- Make a plan.
- Identify your needs and financial situation.
- If you have a stable income and a clear strategy, research your best credit cards (e.g., rewards, cash back, low interest).
Commit to smart spending, paying bills on time, and managing debts wisely. Your credit will thank you later! Avoid unnecessary spending, make on-time payments, and never carry a balance from month to month.
Moving Forward
Once the investigation is complete, the credit bureau will send you a written response. The response will explain the outcome of your dispute and provide you with an updated copy of your credit report.
Great news! If the credit bureau removes a negative item off of your credit report, your credit score should improve within a few months. However, if the credit bureau doesn’t remove the negative item, you can dispute it again. Furthermore, if you believe your information was mishandled by the credit bureau, you can take action by filing a complaint with the Office of the Privacy Commissioner.
Patience and Persistence
Disputing negative items on your credit report can take time. Be patient and persistent. Don’t give up if you’re not successful at first. Keep disputing the item until it’s removed from your credit report.
Don’t let negative items on your credit report hold you back from getting the loan or credit card you need. Contact us today for a consultation on how we can help you dispute these items and improve your credit score.
