Are credit repair companies effective? Here’s what you need to know about credible credit repair
So your credit score is shot. And you need to borrow money, open a utilities account, or rent a home. If only you could repair your credit.
Chances are you’re at your wits’ end and don’t know what to do. It feels unfair that your old defaults are holding you back.
Credit repair is possible (sometimes). But beware of the credit repair industry. They can promise a lot but deliver – well, not very much.
Their services to offer to wipe defaults from your record look impressive, but not everyone who uses them is happy. “Thieves liars fraudsters,” one unhappy client wrote in an online review. The company took $1100 from the client but didn’t inform him that bankruptcy and bankruptcy related loans couldn’t be cleared, he claims. “Once they get the money they don’t contact you anymore.” “Paid $2200 with no luck from these people,” another wrote. (To be fair, there were also positive comments within the review.)
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.
Of course there are also happy customers, who don’t mind spending a few thousand if they can clear black marks from their credit records.
DIY Credit Repair
The repair agencies can’t do anything more than an individual can, says Credit Simple CEO David Scognamiglio. “They make promises that they really can’t keep.” That’s because there really has to be something wrong for a default to be removed. It’s not magic.
If the entries on your file can be proven to be wrong the credit bureaus must remove them. “Everyone can request a copy of their credit report and dispute information directly with the credit bureaus,” says David.
The three amigos of credit repair
Your three amigos (friends) when it comes to credit repair are:
Pay all your bills on time. Thanks to positive credit reporting in Australia it’s actually relatively fast to improve your credit. Your credit score will start to rise after three months of diligent payment.
Clear your debts. Sometimes paying off the debts means the default can be removed. It may remain on your credit file, but your positive action of paying it back will be reflected in your score.
Fight if it’s unfair. Black marks on your credit record can knock hundreds of points from your credit score. If you’re sure there is an error involved it’s worth fighting.
The cleaning process
Credit reporting agencies are required to take reasonable steps to ensure the accuracy of the credit information they hold about Australians. If you suspect errors in your credit record apply for your credit file from all four agencies: illion, Equifax, Experian Credit Report and Tasmanian Collection Service. (Remember, you’re entitled to one free full credit report from each company each year, but you can check your credit score with Credit Simple as often as you want and it’s always free. Also illion, our parent company, doesn’t charge for credit reports, and doesn’t limit how many you can get each year.)
Once you have it and have identified errors, make your case to the original credit provider or debt collection agency that loaded the default.
If you aren’t happy with their response, move onto the credit reporting agency and make a complaint in writing. Make sure you include all relevant emails, letters, statements and any other evidence you have.
If the information on your file isn’t yours and you believe it’s a case of identity theft you need to report it to the police and to each of the credit providers. Be persistent with this.
If all else fails
If you’re not happy with the dispute processes then you can complain to the Credit & Investments Ombudsman, as well as the Financial Ombudsman Service, and individuals can also complain to the Office of the Australian Information Commissioner.