Credit Remediation for Home Buyers

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An adverse notation on your credit score can rob you of the dream of home ownership or relegate you to borrowing from high-interest “B” lenders where you can never get ahead financially.

It is important to understand how exactly the credit system works in Canada and, perhaps more importantly, where it doesn’t work so well.

There are two main credit reporting agencies in Canada, Equifax and Transunion.  Both are private, for-profit corporations who make their living by collecting and selling your data.  

Certainly, maintaining a credit reporting system is essential to the economy and for a great many reasons one can see the rationale for keeping such a system in private hands.  

Where I would argue the system fails a great many Canadians is in the lack of oversight and regulation of the industry.  In particular, the reliance of the system on unverified information from firms who enroll with the credit agencies to provide data on you and other borrowers.

The system firmly relies on those firms to vigilantly maintain the accuracy of the information they report.  Incorrect information can ruin lives.

Unfortunately, it is relatively easy for a firm to become entitled to supply data and there is scant apparent effort by the credit agencies to ensure that the information they submit is accurate.  The reporting companies have every incentive to make an adverse notation on a customer’s credit rating, but little practical consequence should they make an error. What’s more, disreputable reporting issuers may intentionally misreport negative information for financial gain.  Two alarmingly common examples I see of this are credit agencies transferring a debt and claiming that as “activity” to avoid the debt expiring and credit agencies taking on debt claims without supporting evidence.

Another deeply troubling aspect of our credit reporting system is that the agencies themselves will add Court judgements (including CRA Judgments obtained without notice) to a person’s credit report with devastating effect on a person’s credit score, but do not seem to have any mechanism to remove those judgments once satisfied.  The satisfaction of judgments is a matter of public record just as readily available as the judgment itself, but the credit agencies, like their reporting companies, have little practical incentive to avoid false negatives. This, notwithstanding the fact that these false negatives each represent a person who’s financial life has been ruined and who often has little practical recourse.

But, there are actions that you, as an ordinary Canadian can take.

Firstly, regularly review your credit report and report any errors that you find to both credit agencies.

Secondly, send a letter to your MP advising of your own experience and asking that something be done to hold credit agencies accountable for errors.

And, finally, though seldom used it seems, small claims court is an accessible and effective alternative to seek redress if a credit agency or reporting issuers provides false and harmful information about you.  Remember, the credit agencies are private for-profit corporations and ought to be liable to you for harm they cause you.

As a real estate lawyer, I particularly see incorrect credit reporting robbing young and working-class Canadians of their dream of home ownership.  It is painful to see.

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