Practical tips to help you improve your credit score and repair your financial history.
A poor credit history can have a significant impact on your finances and your chance of being approved for future lines of credit. If you have bad credit, you can follow a few simple steps to increase your credit score and get your finances back on track. You can either tackle the issues yourself or enlist the help of a credit repair agency.
You can use this guide to compare professional and DIY credit repair tactics, understand the steps you'll have to take and learn how to compare credit repair agencies.
How do I know if I need credit repair?
Your credit file is a detailed record of your financial history and is used by lenders to judge your ability to manage loans and repayments. Your file contains your personal information as well as any details of loans and credit cards you have held. This includes utility accounts and store cards.
If your credit score is between 0 and 550, you likely have a weak or below average credit history. This means that your credit report may include evidence of late payments or defaults, several credit enquiries in a short period, overdue accounts, bankruptcy and other negative listings. If you have poor credit, you'll struggle to get approved for a credit card and may be given higher interest rates when you apply for a loan.
Don't know your credit score? You can order a free copy of your credit report and you will receive it within 10 business days. You can also pay a fee to receive it online within 24 hours.
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What is credit repair?
Credit repair is the process of cleaning up incorrect listings on your credit file and adopting positive financial behaviours to increase your credit score. The specific steps you'll take will vary depending on whether you use a professional agency or try to do it yourself.
Using a credit repair service
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. As they're experts, these agencies know what to look for and who to contact to have any incorrect listings removed from your report.
If you use a credit repair service, you may need to pay a consultation fee and will be charged a fee for each listing that is removed. Make sure to get a quote from your credit repair agency before you sign up for the service.
To get started, here are the steps you can follow to improve your credit with an agency:
- Read your credit report. Review your report and see if there are any incorrect listings that can be removed. You can order a copy of your credit report and score for free through Finder.
- Apply for credit repair. Once you've compared some credit repair companies and chosen the right one for you, you can contact them to apply for credit repair. You'll need to fill out a form detailing any listings or faults that you want them to examine and potentially resolve.
- Pay a fee. Depending on the company, you may have to pay a fee to receive your consultation. Once they've reviewed your report, they may be able to give you a quote detailing the fees you'll have to pay. Depend on the service required, this could be hundreds or thousands of dollars.
- Acceptance. If the company decides it can help you, it 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 to be 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.
You can watch the video below with Merrilyn Mansfield, financial advocate from Princeville Credit Advocates, to find out more about the credit repair process.
DIY credit repair
If you find incorrect listings on your credit report, you can try to fix them yourself for free. You can contact the credit reporting bureau that issued your report (such as Equifax or Experian) and ask them to remove the listing directly. If they refuse, you can contact Ombudsman external dispute resolution service to help resolve your case.
If you have valid negative listings such as bankruptcy or defaults, these can last on your report for two to seven years depending on the exact listing. However, you can still improve your score by adopting some positive money habits:
- Make timely repayments. Late payments and defaults can hurt your credit score, so it's important to make the minimum payments on time each statement period. If you're using a credit card, it's ideal to pay your balance as much as you can or in full each month to reduce your interest payments.
- Consolidate your debts. If your credit score is low because you're struggling to pay off multiple card or loan debts because of interest costs, you can consolidate your debts into one account with a 0% balance transfer offer. These cards don't charge any interest on the transferred amount for a promotional period (which can sometimes be as long as 26 months). You can start comparing balance transfer cards and understand how they work on Finder.
- Lower your credit limit. Your credit score is also based on how much credit you have. If you have a large credit limit that you aren't using, you could consider lowering it. Not only will this curb any temptation to overspend, but it could have a positive impact on your credit score.
These are just some of the tips you can use yourself to improve your credit history, but you can check out our complete guide to DIY credit repair for more.
How to compare credit repair 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:
- Licences. Check if the credit repair service has an ABN, which you should be able to find at the bottom of the company's 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. Look for the best combination of an affordable price and quality service.
You can see our complete guide to Australian credit repair companies for more information.
The pros and cons of credit repair
- Improve your credit score. Removing negative listings from your report and adopting positive repayment habits will increase your credit score.
- Increase chances of credit approval. Lenders use your credit report and score to assess your risk as a borrower. If you remove any incorrect black marks from your credit report and increase your credit score, your chances of approval should also improve when you're applying for a credit card or loan in the future.
- Fees and charges. If you use a credit repair agency, the credit repair process can be expensive. However, the benefits may outweigh the costs if you get your finances back in order.
- No guarantees. There are no guarantees the credit repair company will be able to remove your negative listings. If the black marks are legitimate, you'll have to wait until the set period (such as five years) until they're removed from your report.
Credit repair can be a great way to improve your credit score and get your finances back on track. If you decide to get help from a credit repair agency, make sure to compare your options and weigh up the costs with the benefits before you commit.