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Your credit score determines your creditworthiness. And having a low credit score, especially when you want to borrow money for a home, could be quite unnerving. Several companies in Australia claim to repair your credit by removing listings from your credit file, charging up to $1,000 or more, upfront. But, is it really worth engaging a credit repair agency?

Let’s find out.


Why credit repair?

Your credit file is like your financial report card – detailing how good and responsible you have been financially. However, if you ever missed a payment or defaulted on a bill, the concerned organisation could put a negative listing on your file, impairing your credit. Such negative listings stay on your credit file for up to seven years, severely impacting your creditworthiness and borrowing capacity. (Learn more about your credit score here)

In fact, with good credit, you are not only more likely to be approved for a home loan but also in a stronger position to negotiate a better interest rate, leading to significant savings over time. Thus, it makes sense to pull out your credit file periodically and review it to ensure there are no incorrect entries, bringing your credit down.


What does a credit repair agency do?

If your mortgage application has been refused, thanks to your less than perfect credit file, you might feel tempted to engage a credit repair agency – one that claims to improve your credit by removing negative listings from it. However, before you do that, let us inform you that in most cases of negative listings, unless proven to be wrong, such listings cannot be removed from your file.

Beware. If a credit repair agency claims to remove listings from your file that are correct, you must understand that it is not possible. Details can only be removed when proven incorrect.

Be warned of unscrupulous companies that claim to eliminate negative listings from your file when, in truth, nothing can be done about those entries. Read about Australian Securities and Investments Commission’s (ASIC) legal proceedings against the Gold Coast-based credit repair business, Malouf Group Enterprises Pty Ltd (Malouf Group), here.


Repair your credit for free

If you know that the information listed in your credit report is inaccurate, you can contact the credit reporting body, which will investigate and correct the information on your credit file for free. If you are not satisfied with the outcome of the investigation, you could contact the relevant Ombudsman service for resolution.

Alternately, you could hire one of the credit fixing agencies to dispute the incorrect entries on your behalf. Note that these companies charge as much as $1,000 for fixing one listing, which you could do for free yourself. Thus, it makes sense to engage a credit repair agency only if you don’t have the time to repair your credit yourself. In any case, it is important to understand what services the agency is exactly going to provide.


How to fix your own credit

If you are gearing to buy a home or a car, or even apply for a new credit card, bad credit score could adversely affect your plans. Thus, it is important to ensure that the information listed on your credit file is correct so that your credit rating is not reduced.

For this, pull out your free credit report from websites such as Equifax, for free, and read each entry in detail. If you find any incorrect entry, you have the right to get it removed for free, by contacting your credit provider or credit reporting agency.

For small errors such as incorrect name or date of birth or address, or a debt entry repeated twice, you could simply contact the credit reporting agency that will, in most cases, promptly update the information.

However, if a default is incorrectly listed against you, or the listed debt is under dispute, or you were never notified of the outstanding debt by the creditor, and other such cases, contact the lender immediately and ask them to have the listing removed. In case you are not satisfied with the response of the creditor, you must communicate with the relevant Ombudsman service for help. If your issue is still not addressed, file a complaint to with the Office of the Australian Information Commissioner (OAIC) promptly.

Read this detailed article on the ASIC website to check and correct wrong listings yourself.

Having bad credit on your file severely limits your financing options. However, at HashChing, we feel that everyone deserves a second chance. If you are planning to buy a home and think you can afford one, we have bad credit home loans to help you get a fresh start. Contact an expert to know more.

 
By Vidhu Bajaj
HashChing Content Writer
 

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