Tag Archives: consumer
Debt Reductions Companies in Canada – Do Your Due Diligence
When making a big ticket purchase like a vehicle, you do your research right? You check the history of the vehicle, ensure it has not been in accidents, learn about the ownership, check the maintenance record for the vehicle and more. Your personal finances are no different and if you are in financial trouble, before choosing a company to help you, you really should do the same kind of research.
“The banks are offering a program that’s about to run out” or “time is running out on Federal Government Programs”; sound familiar? Debt reduction companies are spending hundreds of thousands of dollars on advertising per/year to sell you on this message. The question is; is it true? And do they “really” help? Is there really a program that all of the banks collaborated on and is time running out? Is it true that the Federal Government programs that help Canadians get out of debt could end in the near future? And what do they do anyway? Let’s get to the bottom of it.
First of all; all of the banks have not gotten together to offer a debt reduction program, hence time is not running out; because it simply isn’t true. The only Federal Government programs that help Canadians deal with debt are administered under the Bankruptcy and Insolvency Act (BIA). The Federal Government has made no announcement that there is a plan to eliminate the BIA legislation and there is no other Federal Government program that we are aware of that helps Canadians get immediate, legislated, debt relief. Seeking debt relief under the BIA does not mean that you have to go bankrupt and Federal Government programs are a viable means to get out of debt when a financial crisis emerges. The BIA offers different remedies to deal with debt, but the principal program offered by debt reduction companies doesn’t even involve relief under the BIA.
Debt reduction companies collect money from you on a monthly basis over a period of years with a promise that in the future they will settle your debt. By way of contrast, debt consulting companies represent you and provide you with a range of options to deal with debt that could include a consolidation or even enrolment in a credit counselling or Federal Government program. Debt reduction companies have one primary goal and that is to collect your money on a monthly basis. This is where the money that they use to advertise to you comes from. The Financial Consumer Agency of Canada (FCAC) recently issued a consumer alert about debt reduction companies; you can view the alert here http://news.gc.ca/web/article-eng.do?nid=649969.
Before you deal with a debt reduction company, do your due diligence. While writing this article we took some simple steps that any consumer who has access to a computer can take to research a company; the results really scared us.
We visited the first debt reduction company’s website and there were many red flags. First, there wasn’t any information about the company’s ownership. Are they Canadian? American? Who is their president and what does he or she stand for. The company publishes no information about their ownership whatsoever. Red flag 1!
We Googled “who owns [company name]” and nothing came up. Red flag 2!
We went to Linkedin and ran a search by company name to see how many professionals on Linkedin are employees of the debt reduction company. The only profile that came up was an individual page branded for the company – not one employee and not a single name of anyone associated with this company emerged as a result. You would expect that a company that bills itself as a national provider of debt reduction services would have at least one employee with a profile on Linkedin; the world’s largest professional networking site. We would liken this to you not knowing a single person who has a Facebook account. Red flag 3!
Finally, we searched “[company name] reviews” and on the first 3 pages of Google we found no less than 6 pages by companies who represent people and individuals themselves who reported very serious claims about this debt reduction company. Red Flag 4!
Don’t believe everything you hear! Ads are paid for by the advertisers, companies pay the BBB to be members and any company who doesn’t wilfully and publicly provide information about their corporate structure and ownership, may not be a company you should commit to paying hundreds of dollars per/month for years to come. When it comes to debt reduction companies do your due diligence.
Increase Credit Scores Rating
Credit scores ratings always starts with Credit repair. It is something that takes time and patience to accomplish, especially if the damage was made recently. There are many ways to increase your credit score and boost your ability to apply for future financial aid, but these can be tedious and time consuming.
To start the repair, you will need a copy of the reports from all three consumer reporting agencies:TransUnion, Equifax, and Experian. Compare all the reports and make sure that all the information they contain are accurate. Some creditors only report to one agency, which can cause discrepancies. Also, there have been instances where closed accounts are still being reported open and paid off debts are still showing as unpaid. Make sure to correct these errors right away by calling the consumer reporting agencies and explaining the situation. You may also need to contact the creditors who made the report to send an update to clear up the inaccuracies.
The next step is to get rid of too much debt. Make sure to get rid of all most of your unsecured debt either by paying it off or consolidating it. Too much debt can be seen as a negative and is a factor when it comes to your credit file . Close out all the extra charge cards and store cards and only keep two – ideally a Visa and a Mastercard, to make sure that you will have access to funds when you need it. Keep the accounts that have been open the longest because this will have a positive impact on your credit score. Donít close out all the other accounts at the same time. Try to close only one or two accounts every six months to give your score time to adjust.
The way to confirm the repair is to ensure that you do not have late payments or incur an overdraft on any of your debts. Financial institutions report these to the consumer reporting agencies , who in turn put it in your credit report. There is a 30 day, 60 day, and 90 day category on missed payments, and having one of this can cause your score to take a very large drop .
Finally, make sure that your credit report information is being accurately reported. Your FICO score is partly based on the amount of debt you have versus the amount of credit you have available. Some charge cards report your highest balance instead of your limit, so if the highest balance youíve incurred is $400 out of a $500 charge card and you charge $450 the next month, it may look like you went over the limit. Make sure never to charge more than 30 percent of your limit to show that you are not spending more than you need to .
Credit report repair is a long term process, especially since some of the negative feedback will take 7 to 10 years to fall off. One thing that you need to remember is not to borrow more than you can afford to pay back and to make sure that your accounts are all up to date. After all, even though the repair can take years, it will still benefit you in the long run.