Debt Consolidation Loans and Avoiding Credit Repair Scams

Posted by: Krista McDonald on 11/07/2011

The Internet has made it easy for people in some financial difficulty to get information about different solutions.  For those concerned about preserving their credit rating, a debt consolidation loan seems like the ideal way to help with their difficulties.

However, when you investigate what it takes to qualify for a debt consolidation loan, you quickly learn that not only do you need stable income and a source of collateral, you also need good credit.  Canadians with substantial equity in their homes may be disappointed when applying for a debt consolidation loan if their financial difficulties have resulted in a lowering of their credit rating.

Some reputable loan originators provide advice on how to repair a credit rating in order to get a debt consolidation loan.  Depending on your situation, the credit repair process may take too long to help you get out of your current troubles.

A few Canadians will then go forth and look for a credit repair company to speed up the process.  First, you need to know there is nothing one of these companies can do for you that you cannot do for yourself.  The FCAC (Financial Consumer Agency of Canada) website provides information on how you can do this.

Second, you need to know some of these companies are financial scams you should definitely avoid.  What some of them tell you is they can remove negative information from your credit report.  That is only true if the negative information is inaccurate.

Canada’s two major credit reporting bureaus – TransUnion Canada and Equifax Canada – do nothing more than record, organize, and rate the credit history information they get from your creditors.  Creditors make mistakes but the credit bureaus have no way to verify the accuracy of the information unless they return to the creditor and ask for documentation.

That is what valid credit repair is all about – ensuring the information in your credit file is accurate.  If negative information can be verified as accurate, no one can remove it and any credit repair company that tells you they can is a financial scam to avoid.

Finally, if you have heard of companies that fix your credit rating by getting you a new tax identification number so you can open a second credit file, be aware that doing that is against the law.  If you want reputable advice about credit repair, look for an RQIC credit counselor.  They are approved by the federal government as Registered Qualified Insolvency Counselors.