We all know it’s important to have a good credit score so we can get a loan, buy a home or a car, and get decent interest rates when doing so. But many people run into further financial problems as they attempt to repair their credit because they fall victim to credit repair scams. In this blog, we’ll show you how to spot, report, and beat credit repair scams.
Information on Credit Repair Scams Canadians Should Know
Being in a desperate financial situation can cause anyone to make bad decisions, making a believer out of even the biggest skeptic. That’s just what credit repair scammers are banking on. The average Canadian owes nearly $23,500 in consumer debt, and when you have a lot of debt and other monthly bills to take care of, it can become difficult to manage and make all of your payments on time. If you don’t, your credit score will take a hit.
High debt and low credit scores can make the perfect hunting ground for unscrupulous credit scammers. These companies (and we use that term loosely) have built businesses by defrauding people out of millions of dollars with various credit scams.
In 2020 alone, over 100,000 fraud reports were filed in Canada — involving close to $160 million in losses. We think that number is actually a low estimate, as many people who have been duped by scammers, including credit card scams and credit repair scams, are too embarrassed to report it. So, let’s figure out how to spot those scammers!
What Is Credit Repair?
Credit repair is a dubious term because you cannot repair credit, you can only rebuild it. Accurate negative information on your credit report cannot magically go away; it’s there until it falls off your credit report, which can take about six years. So be careful with any company claiming they can repair your credit.
If your credit report isn’t that great, the only way you can go about “fixing” it is by rebuilding it with a positive credit history. This includes making your debt payments on time every single month and as agreed. You can rebuild your credit on your own or you can work with a non-profit credit counselling agency that can offer free advice, such as Credit Canada.
Rebuilding credit takes patience, as building your credit is often a slow process. We’ll cover ways to build it back up in just a bit.
What Are Credit Repair Companies?
A credit repair company is an organization that offers to improve your credit in exchange for a fee — which can sometimes be very high. These companies say they’ll take care of the hard work for you, negotiating with credit reporting agencies to improve your credit score.
How Are Credit Repair Companies Different from Credit Counselling Agencies?
Credit repair services are different from not-for-profit credit counselling agencies, which are typically a free service offering non-profit financial education and advice. The goal of credit counselling is to teach Canadians how to improve and manage their financial situation. This, in turn, can help improve their credit rating and credit score. They may also offer a Debt Consolidation Program (DCP) or debt management plan for a minimal fee.
Thankfully, there are ways to tell the good guys from the bad guys and we’ll show you some of the most common signs to look out for.
Credit Repair Scams vs. Loan Schemes
Two corrupt peas in a pod—both prey upon vulnerable Canadians by offering quick debt relief and credit score fixes. Canadians who search for “credit repair Canada” or “Canada credit repair services” online may find themselves targeted by credit repair scams or loan schemes. While they can go hand-in-hand, their tactics are a bit different.
Credit repair companies say they'll repair your credit by simply removing negative information from your credit report, thus boosting your credit score—for a fee, of course. They take advantage of the fact that many Canadians don’t know you can’t remove accurate information from your credit report, good or bad. If a company says they can remove accurate negative info from your history, it’s very likely that they’re part of a credit repair scam.
Loan schemes are another type of credit scam. However, they work by “giving you a loan” on paper without ever actually giving you any funds! You make monthly or bi-weekly payments on the loan, which you never receive money from. Instead, these companies claim that any payments you make towards the loan will reflect positively on your credit report, thus helping boost your score. This is not the case.
Victims can start to become wary of this credit repair scam when they make payments for months but their score doesn’t change. In some cases, they threaten to stop the payments, but these companies warn that if they do, they’ll report negatively on their credit report, so their credit score could get even worse.
For some real-world examples, check out these articles from CTV News and The Toronto Star. Even a simple search of “Canada credit repair scams” or “credit card scams Canada” can yield a wealth of other examples.
Thankfully, the similarities between repair scams and loan schemes make them equally easy to spot—if you know what to look for!
Credit Card Scams
In addition to credit repair scams, some fraudsters may try to trick people into falling for credit card scams.
What is a credit card scam? How do credit card scams work? What are some credit card scams Canadians should watch out for? Let’s find out!
What Is a Credit Card Scam?
A credit card scam can be any tactic that a fraudster uses to try to steal a person’s credit card information. The goal here is similar to credit scams — the scammer is looking to make an easy profit. However, the methods are different.
How Do Credit Card Scams Work?
If you search “credit card scams Canada” online, you’ll find a lot of examples of how these scams work. For instance, some common types of credit card scams that target Canadians include calls from fraudsters posing as credit card anti-fraud departments, card skimmers that steal credit card information, and now skimming apps that scan credit card data just by holding a phone close to it.
10 Credit Repair Scam Red Flags
“Bad credit? No problem!"
"Best Credit Repair Services!”
We’ve all heard these statements before — they’re a rallying cry for credit scams. But here’s a more accurate saying that you’ve probably heard too: “If it sounds too good to be true, it probably is.” It’s that little voice of reason in the back of your mind—listen to it!
Any credit repair company offering a quick fix or instant solution should immediately cause you to raise an eyebrow. There’s no quick fix when it comes to your credit score, and building good credit takes time, effort, and prioritization.
Here are 10 warning signs that you should simply stay away from a “credit repair” company:
1. Requesting “Upfront” Payment
It’s illegal for credit repair companies to request payment upfront; this is where many break the law. But many count on the lack of coordinated consumer protection rules across the country to allow them to slide by. They’ve also gotten cleverer over time, using loopholes to take your money. For example, they’ll provide a guide or a tablet that never works, and then claim the fee and/or loan payments went towards it.
2. Offering Instant Approvals
Legitimate companies typically don't offer instant approval for loans or other credit products without first understanding your current financial situation and your credit history. But scammers don’t care — they’re only interested in getting you to sign over your money right away, and they'll say whatever it takes to make you do so.
For example, they might offer you a pre-approved card or loan without doing a credit check first. Credit card scams Canadians often fall for can start this way.
3. Requesting Payment by Gift Cards
What a weird way to pay for a service, right? Unfortunately, many people are being duped, just like the wiring money scams of yesteryear. The credit repair scammers will ask you to purchase gift cards and provide them with the serial number and PIN on the back. Now, they can purchase whatever they want online, and what they’ve promised you never materializes. Remember this: Gift cards are a gift, not a form of payment. Any company asking for a gift card as payment is a scammer.
4. Use of High-Pressure Sales Tactics
Think about it: Someone who truly has your best interests at heart is going to listen to your situation and offer help, not aggressively push you into a plan that you’re not entirely comfortable with.
So why do so many scammers take this approach? Again, they’re preying on your desperation, and they know that high-pressure “act now!” scenarios make it difficult to think clearly or act rationally. A reputable company will let you take as much time as you need to make sure you’re making the right decision for you.
5. Guaranteeing They Can Erase Bad Credit
Scammers may claim they have a little-known secret or know some hidden loopholes to boost your score. This is a lie. No one can legally remove accurate negative information with a wave of their hand. It simply can’t be done!
6. Warn You Against Contacting a Credit Bureau
Of course they don’t want you to — reputable credit bureaus will clue you in to the fact that you’re being scammed! The scammer will come up with any number of reasons why you shouldn’t contact these bureaus, but ultimately there’s no valid reason to avoid contacting them. In fact, getting in touch with Canada’s credit bureaus (Equifax and TransUnion) is one of the first steps in building your credit. Canada’s credit reporting agencies can give you a copy of your credit report for free once a year.
7. Advice to Dispute All Information on Your Credit Report
Only inaccurate or false information should be disputed; accurate negative information is there for a reason, and cannot be removed. Knowingly disputing accurate information is a fraudulent act and could cause problems.
8. Not Providing a Transparent Contract
If you’re provided a contract, there are five things you want to be sure it includes:
- The amount you’re being charged and the details of the (bi-weekly/monthly) payment plan
- Details about the services being rendered
- The date when the service will be performed (or a time period in which it will occur) with an end date
- The name, business address, and phone number of the company
- A statement giving you three days to void the contract (a three-day cooling period on contracts is standard for individuals to reassess their purchase decision)
9. Not Providing a Contract at All
This should go without saying; never agree to anything, make a payment, or provide your banking information until you’ve seen a contract in writing.
10. They Call Themselves a Credit “Repair” Company
The ultimate red flag—the company offers to repair your credit, which is something no company in the country can do. The only way to improve your credit and credit score is to rebuild your credit, and you do this by creating positive line items on your credit report.
How to Avoid Credit Repair Scams
You’ve spoken with a credit company, they seemed genuine, and none of the red flags were ever raised. Now what? There are a few more steps you can take to ensure that you’re dealing with a reputable company.
1. Check Online Scam Sites or Reviews
If you’re dealing with a scammer, chances are you’re not the first one they’ve scammed! A quick online search can turn up complaints from consumers across a number of sites that specialize in exposing scams, including customer reviews.
2. Consider the Source
Where did you hear about this company? Was it a random cold call? An online ad that linked to a cheap website? Or a late-night commercial promising to work credit miracles? Or did you hear about them through a reputable news source or referral, like a bank, credit union, or community agency?
3. Look for Features in Publications
4. When Were They Established?
Most reputable companies have some history, and again the internet can be your friend (or foe) here. Scammers tend to come and go, setting up shop under different company names with relative frequency to avoid detection. Some scammers operate under ten different company names! Don’t be fooled. Do a Google search of the address affiliated with the "business" to check if they have multiple business names.
5. Make Sure They’re a Non-Profit
This means they’re trying to help consumers, not increase their profits. If they offer free educational materials, this is also a good indication of a reliable organization.
6. Check for Accreditations
Accreditation means that a business has met some kind of high standard of quality or a specific set of criteria from an accreditation body. This third-party assessment serves as an indicator of quality and reliability.
In the field of credit counselling, two major accreditation bodies are Credit Counselling Canada (CCC) and the Association for Financial Counselling & Planning Education (AFCPE).
Companies with CCC or AFCPE accreditation have met strict financial counselling industry standards, and Counsellors must go through rigorous training. So, such accreditations serve as a strong indication of quality of service. However, don’t just take the company’s word for it — check with the CCC or AFCPE to verify the accreditation!
How to Report Credit Repair Scams
As we mentioned earlier, many Canadians don’t report being the victim of fraud because they may feel embarrassed about having been taken advantage of. Don’t let the scammer get away with it! That simply empowers them and guarantees they’ll do it again to someone else.
If you’ve been scammed, or even suspect you have been, here are some steps you can take to try to get your money back, warn other people, and get the law to go after the scammer.
Dig Up All Relevant Documents
As with any financial transaction, you never want to throw anything away. Contracts, emails, receipts—even your bank statement showing the payment(s)—all of this could help if you decide to pursue the matter.
Ask for a Refund
In some cases, it may help to simply ask for a refund. Some fraudsters may decide to pay you back simply to avoid legal trouble.
Of course, this doesn’t always work with all scams, including credit repair scams. Some scammers may simply take your money and run.
Report Them to the Canadian Anti-Fraud Centre (CAFC)
If you’ve already sent the funds, or think you may be getting conned, report the fraud or suspected fraud to the Canadian Anti-Fraud Centre. This can be done on the CAFC website or by calling1.888.495.8501. There’s also a wealth of information on their site about your credit rights.
Remember, if it happened to you, it can happen to anyone—our best defense is to look out for one another!
File a Claim with the Better Business Bureau (BBB)
The more claims there are against a company, the lower their BBB rating falls. This is another avenue you can take to help prevent others from falling into the credit repair scammer’s snare.
File a complaint with your provincial consumer protection agency. If you want something to change, involving them will only help. For a full list of provincial and territorial consumer protection agencies across Canada, click here.
How Do I Build My Credit? 8 Steps to Rebuilding Credit!
Despite what those scammers say, rebuilding your credit takes time, dedication, and patience. It won’t happen overnight. But if you follow these steps, you’ll see your score increase, and you’ll feel good!
1. Get a Copy of Your Credit Report
It’s important you know what you are dealing with. You can get a free copy of your credit report from both Equifax Canada and TransUnion. Review the report to see what is documented and if the information is correct.
For no charge, you can get incorrect information removed from your credit file or credit report by filing a dispute with the credit reporting company. Depending on the invalid information, you may need to show proof that the account has been paid off or that it isn’t your account.
Of course, if the information is correct, then you need to work on rebuilding your credit. No one can simply change or erase information that is part of your credit history. Offers to do so are usually a sign of a credit repair fraudster.
2. Work at Getting Your Accounts Current or Paid Off
Why pay money to a credit repair company promising to fix your credit (before they even know what your credit history looks like) when you can use those funds to actually pay down your debt?
On your own, you can also speak with your creditors to arrange payments or even ask if they will accept a lower amount to “settle the account in full.” If they agree, make sure to get everything in writing! This is better than falling for a fraudster offering credit repair services that don’t do anything to fix your credit.
3. Contact a Credit Counselling Agency
If you aren’t able to contact your creditors on your own or get current on your payments, you can contact a not-for-profit accredited credit counselling agency, like Credit Canada, to help you resolve your debt problems. All of our counselling is free, and if you do sign up for our Debt Consolidation Program, the administration fee is minimal.
4. Make at Least the Minimum Payment Each Month by the Due Date
Late payments have a negative impact on your credit score. So don't fall for one of those loan-based credit repair schemes we mentioned earlier — those companies that offer you a loan saying it will increase your credit score — because those so-called credit repair loans usually have a very high interest rate.
You’ll make large monthly or bi-weekly payments, and you won’t see any of the loan funds. Worse yet, they don’t pay off any of your current debts, so you still have those payments to maintain, as well as this new phony loan payment.
Instead, focus on making at least your monthly minimum payments for each debt you currently have if they haven’t been sent to collections. A history of consistently paying down debts can be a good starting point for rebuilding your credit — and a lot better than paying a credit repair scammer!
5. Create and Follow a Budget or Spending Plan
You need to stay on track with your finances in order to avoid missed payments, as those can lead to a decreased credit score. Again, Credit Canada can help you establish a realistic and workable spending plan. You can’t rebuild your credit if you continue to miss payments. Check out our free Budget Template to help you stay on track.
6. Get a Secured Credit Card
A secured credit card can help you build your credit score without paying interest or fees to a credit repair company. You put down an initial deposit that usually determines the amount of credit you’ll have. So, if you give the bank $500, you’ll likely get a card with a $500 limit.
Want to increase your limit? Give the lender more money. They keep this money in case you fail to make your payment. Responsible usage of this card will begin to build your credit.
Eventually (usually after one year of proving yourself), the bank will ask if you’d like to switch over to a traditional, unsecured credit card. The money you deposited on the secured card will be refunded or applied to your new credit card’s balance.
7. Use Credit Responsibly
Credit shouldn’t be used to replace money that you don’t have. When using credit, always be aware of the interest rate you are paying and any fees there might be. Again, getting a high-interest loan to rebuild your credit can backfire if you aren’t able to afford the payments of your other debts.
8. Be Patient
It will take time to rebuild your credit, but it can be done without taking on new high-interest debt. And no, there aren’t any magical solutions for getting rid of past bad debt regardless of what the advertisements might say. You simply need to clean up what you can, paying down debt and demonstrating improved credit habits, such as making payments on time. And in time, your credit score will rise.
A word of advice: Put the most money towards paying off or paying down unsecured debts first (i.e., payday loans, credit cards, personal loans, etc.), as these tend to have the highest interest rates. You’ll still need to make payments on your secured debts, such as a mortgage and/or a student loan, but these tend to be considered “good debts'' because they yield future value.
For example, houses typically increase in value and higher education tends to help you earn more money in the future. An auto loan is a toss-up; some say it’s bad debt because cars depreciate in value, while others say it’s good debt because it can help you get to work and/or earn extra income (i.e., becoming an Uber or Lyft driver).
So, just maintain the minimums. Focus on the really high-interest debts!
Where You Can Find Additional Help
Everyone loves a quick fix, but the truth is that such things are rare, especially when it comes to credit. Many people facing credit issues actually have serious debt problems that will need to be resolved if they want to boost their credit rating and score. So, before searching for “credit repair Canada” in Google, it’s important to know how to sort good sources of information from bad ones.
Legitimate, unbiased credit building advice from a non-profit credit counselling agency, like Credit Canada, may be the best solution. A debt consolidation program can be a vital part of the credit rebuilding process. It starts with a credit building assessment where a certified Credit Counsellor will pull your credit report and score for free and review it with you. They’ll also discuss how to fix your credit and help you develop a personal debt repayment plan.
Depending on the information contained in your report, as well as your monthly income and expenses, they will provide you with all of your available options to get your credit where you need it to be.
As much as we like to see the good in people, there can always be someone looking to take advantage of someone else’s bad situation (check out our other story on the Top 15 Internet Scams to learn more). To ensure no one becomes a victim, we must be vigilant! Report credit repair scams and loan schemes to protect yourself and others.
If you would like non-profit credit building help, give us a call at 1.800.267.2272 or book an appointment online! All of our counselling is 100% free, confidential, non-judgmental and there's no obligation. You’ve got nothing to lose but sleepless nights, and we’ll also put a stop to collection calls!