Credit repair may be the light at the end of your bad credit tunnel.
Bad credit is a common source of concern for many people, and getting a negative mark on your credit file is more common than you may think. Late payments, forgotten bills and defaults can happen to anyone, and some of these mistakes end up following people around for as long as seven years.
People with bad credit often feel they have run out of options, or that their only options for credit involve high interest rates and fees. If you have bad credit it's important to focus on improving your finances before you start looking for lenders, and one of the ways to do this is to clean up your credit file with a credit repair agency. Read our guide below on credit repair, what's involved and whether it might be an option for you to consider.
Your credit file
Your credit file is a detailed record of your financial history and is used by lenders to judge your creditworthiness. Your file contains your personal information as well as your past relationships with lenders. Credit reforms which came into effect in March 2014 have meant that lenders are able to see more detailed information regarding your credit history.
Lenders who hold an Australian Financial Services licence are now able to see credit you've applied for, date that credit accounts opened and closed, the limit of your accounts and whether you made your repayments on time over the last two years. This more comprehensive view to credit reporting has made it even more important to be aware of what's on your credit file and how you are seen by lenders.
You can order a free copy of your credit file through Veda or Dunn & Bradstreet and you will receive it within ten business days. If you pay a fee you can receive your credit file in a shorter space of time.
Receive your credit file with information on:
- Details of consumer credit enquiries
- Details of overdue consumer credit accounts
- Commercial credit enquiries
- Details of overdue commercial credit accounts
- Bankruptcy & Court Judgements
- Writs & Summons
- Information on your current relationship with a credit provider
What is credit repair?
Understanding credit repair with Merrilyn Mansfield: Financial Advocate, PRINCEVILLE Credit Advocates.
Many people believe credit repair involves paying to have any negative listings erased from your credit file, but this is not the case. Credit repair is the process of cleaning up incorrect listings on your credit file. The law surrounding credit is complicated, and because of this lenders sometimes list defaults or missed payments without properly adhering to the law.
Credit repair agencies use credit legislation to determine whether negative listings on your file were put there without a credit provider adhering to the relevant laws. Credit repair agencies are experts in the area of credit legislation and can spot these erroneous listings.
How it works
The process of credit repair will differ between credit repair companies so you should familiarise yourself with the process before you apply. Generally, you will contact the credit repair agency for an initial consultation who will assess your file and explain to you how they will go about investigating negative listings. This initial consultation usually is complimentary. After this the agency will investigate your negative listings and if they are able to remove them they will go about the necessary removal process for you. You will normally be charged as you go through the process and be charged a success fee for each successful removal.
- Reading your file. Look at all the information in your file and see if there are any incorrect listings or details and what could be done to improve your score.
- Applying for credit repair. You'll have to fill out a form for a credit repair company detailing any listings or faults you want them to examine.
- Pay a fee. Fees are payable throughout the process to cover the time needed to correct incorrect listings
- Acceptance. If the company decides they can help you, they will accept your application and start looking into your credit history.
- Contacting creditors. The repair company will then start contacting your creditors to determine which defaults can be removed from your file. You generally will pay a success fee for each default you want removed. Some credit repair agencies may also help negotiate a debt repayment plan with creditors if you have an amount owing.
- Listings removed. If the credit repair company is successful in its negotiations, incorrect listings will be removed from your file.
Who offers credit repair?
There are a few different agencies that offer credit repair services. Compare the options carefully before proceeding.
How to compare agencies
There are a few credit repair agencies that offer their services to Australian consumers. However, in order to determine whether or not an agency is reputable, there are a few important factors you need to consider:
- Licenses. Check if the credit repair service has an ABN, you can find these at the bottom of their website.
- Transparency. How upfront is each company about the fees you will have to pay? Look for a company that provides the full terms and conditions before you have to hand over any money.
- Reputation. Is the company a trusted name in the industry or does it have a reputation for being a bit dodgy? Look for a company that is respected and has an impeccable service record.
- Customer reviews. Look at online review sites to get an idea of the experiences other people have had with agencies. This gives you a good idea of how each company treats its customers.
- Overall cost. This is obviously going to be an important factor, but make sure you find the best combination of an affordable price and quality services offered.
Pros and cons
- Even if only some of your negative listings are removed this can improve your chances of accessing credit
- You may save yourself years of having limited access to credit.
- The rates that you pay to borrow money, for example, with a personal or home loan application, may be lower with a better credit score. This could save you significant money over time.
- The process of credit repair can be expensive.
Things to consider
Enlisting the help of a credit repair agency may help you further along to the road to a clean credit file, but there are a few things to keep in mind when making this decision.
Firstly, you should take a look at your credit file to see what your credit history currently looks like. Credit repair agencies often work by charging you a fee per listing they remove, so you need to weigh up this cost against the benefit. For example, if your credit file shows three negative listings and two of them will be removed off your file soon, you need to consider whether you should just wait before they are taken off your file altogether.
You should also consider both your immediate and future credit needs when deciding whether to get credit repair. Negative listings can remain on your credit file for different amounts of time, so when you check your file you should note when the different listings will be removed:
- Repayment history information stays on your file for two years
- Writs and summons remain on your file for four years
- Credit enquiries, overdue accounts as clearouts and defaults and also court judgements remain on your file for five years
- Overdue accounts listed as serious credit infringements remain on your file for seven years
Using this information you should consider whether you may need to access credit before the specific listing is removed.
Should I look into credit repair?
A credit repair agency may be able to help you clean up your credit file, which over time can save you a lot of money. Ultimately, you need to consider your own financial needs and situation before deciding to apply for help with a credit agency. You should keep in mind that no credit agency can guarantee that they will be able to remove listings.
All Australians have the right to view their credit file and examine the information contained within. It’s possible to receive a free copy once a year if you’re willing to wait 10 days. However, if you need access to your file urgently, you’ll have to pay a fee which usually amounts to less than $100.
A good place to start is understanding what is or may not be on your credit file. You can get a copy of your report from the credit reporting agencies listed below, with some requiring you to email, fill out an online form or post a letter asking for a copy of your file. Australian credit reporting agencies include:
- CheckYourCredit.com.au (Dun and Bradstreet)
- Experian Credit Report
- Tasmanian Collection Service
In order to get access to your report, you’ll need to provide your personal information and proof of identity.
Why is it important to check my credit file?
Your credit file is a hugely important document and there are many advantages to checking it regularly, including:
- Looking for incorrect personal information. A credit reporting agency may have made a mistake when reporting your personal information.
- Checking for incorrect defaults, court actions or repayment history indicators (RHI) . A creditor may have reported information wrongly or incorrectly, and this can leave an unfair black mark against your name.
As mentioned, lenders will look at your credit file whenever you apply for credit, using it to determine your ability to repay the money you borrow. With this in mind, it’s essential that the information in your file is accurate and portrays your borrowing history in the best possible light.
Frequently asked questions
Can credit repair companies help if I have been a victim of identity theft? Yes. These companies know how to work with credit card providers to remove any fraudulent entries from your file.
Who can see my credit file? As well as you, credit reporting agencies can disclose information in your file to credit providers, mortgage insurers, trade insurers and agents acting on your behalf.
Can I get rid of every negative listing in my credit file? No. It’s only possible to get rid of listings that are incorrect.