Can credit repair companies help fix your credit score?
If your credit score is suffering, you might be asking yourself “can credit repair companies help me improve my score”?
The short answer is, yes. But that’s only if your credit history contains incorrect information, whether that’s one incorrect listing or dozens. But keep in mind that you can attempt to have those errors changed yourself, so a credit repair company wouldn’t can’t anything you can’t do yourself.
The advantages of using a credit repair company become more apparent when there are so many incorrect listings that it would take too much time for you to handle them all yourself.
Credit repair is the process of improving your credit score. Generally speaking, this can be done in two ways:
- You can improve your borrowing habits so that your credit score improves naturally over time.
- You notice incorrect listings in your credit history and successfully challenge to have them removed.
For purposes of this guide, we’ll be focusing on process number 2. But notice there’s no way to remove a negative listing from your file unless it’s been placed there incorrectly and even then it might be tricky and take some time.
Neither you nor a credit repair company can remove a negative listing from your history if it’s on there correctly.
Here are some examples of incorrect listings you can challenge to have removed from your credit history:
- Behaviour you never engaged in. For example, it shows that you were 60 days late on a payment that you actually paid on time. If the credit provider disagrees with your assessment, you will have to show proof that you made the payment on time.
- A negative listing that should have dropped off due to time limits. For example, by law, credit reporting agencies can only report defaults for five years, after which the listing should be removed from your file.
- A negative listing that you shouldn’t have been responsible for. For example, if a judge determines your ex-partner should take sole responsibility for the credit card debt on a joint account, negative listings related to that account shouldn’t appear on your personal file To challenge this, you will need to provide the court documents that prove your case.
How do you know if you need credit repair?
Everyone should have a look at their credit history from time to time to make sure there are no incorrect listings on their file.
If your score falls below 500 you should be especially diligent. Since that’s considered below average, you might find it difficult to be approved for a loan or a credit card. And if you are able to get one, you might find that the interest rates are higher than average.
How do you challenge an incorrect listing?
There are two major ways to challenge incorrect listings:
You can challenge incorrect listings yourself, and this shouldn’t cost you anything. So if you have time to do it yourself, this can save you money compared to hiring a credit repair company.
Here’s what you need to do if you see something that doesn’t look right:
- Contact your credit provider. Dispute the listing with your credit provider and provide evidence of your claim if possible. If they side with you, be sure to have them ask the credit reporting body to remove it from your credit file.
- Contact the credit reporting body that issued your report. If your provider disagrees, you can take your case to the credit reporting body. Illion is the body that issues your report in Credit Simple, and there are others such as Equifax and Experian. Again, make sure you have evidence to back up your claim.
- Contact the Australian Financial Complaints Authority. The AFCA is an independent dispute resolution scheme that may be able to help you.
- Contact the Office of the Information Commissioner (OAIC). If all else fails, you can contact the OAIC within 12 months of becoming aware of the incorrect listing.
As we mentioned, there’s no way to remove a negative lising from your file unless it appears there incorrectly. So at the end of the day, there’s nothing a credit repair company can do that you can’t do yourself.
What they can do is go through the process described above on your behalf, thereby saving you time.
Can you trust credit repair companies?
Credit repair companies are a mixed bag.
On the one hand they can truly help someone with a long and complicated borrowing history, such as an older divorcee who has a long shared borrowing history with a financially irresponsible ex-spouse.
On the other hand, they aren’t always up-front about what they can and can’t actually accomplish.
The Australian Securities and Investments Commission (ASIC) says if you know the information your credit report is correct and the credit repair company tells you it can remove or change it, “walk away”.
Also beware of high pressure sales tactics by these companies.
Finally, if your credit history is relatively short and the incorrect listings are few, you’re probably better off spending the time challenging the listings yourself.
Pros and cons of using a credit repair company.
As you can see, using a credit repair company isn’t always a bad idea. Here’s a table that breaks down the pros and cons of using a credit repair company vs. doing it yourself:
|Using a credit repair company||
|DIY credit repair||
How to fix your credit score the natural way
Don’t fret if your score is low and there are no incorrect listings for you to challenge. You can still rebuild your score the natural way, albeit it will usually take a little longer.
With Comprehensive Credit Reporting being enacted in Australia, your score will improve the more you demonstrate good borrowing behaviours like:
- Paying your bills on time. The simple act of paying your bills on time will help your score naturally improve.
- Clearing up your debts. Paying off your debts means late payments won’t turn into defaults and minor defaults won’t turn into major ones.
While Australian credit repair companies can sometimes be helpful, it’s important to know when to use one and when not to. It’s also important to know what they can and can’t actually accomplish before meeting with one.
If they claim they can remove a correct listing from your file, they are misleading you and you should stay as far away as possible.
If they try to pressure you to pay them a high fee just for removing one or two incorrect listings, you should also steer clear. You can challenge incorrect listings yourself relatively easily.