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Why You Shouldn't Pay for 'Credit Repair'

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don't let debt wear you down

Having a good credit rating is essential to take out a mortgage and in some cases just to get a mobile phone contract. But that one time when you were between jobs…or were a poor student…and you let the repayments or bills fall behind, you were left with a permanent red mark on your credit history.

"If I Could Turn Back Time..." 

If you’ve ever struggled to pay a bill or put off balancing your accounts you may have found yourself with letters from debt collection agencies and high credit card bills as you try to play catch ups. Fast forward several years and you are back on track now with a steady income and pay all your bills on time. You just want to take out a loan to go on holiday or perhaps its time to buy your first home or upgrade your old set of wheels, but…your credit rating is getting in the way of a loan approval. You wish there was a way to start a fresh slate with a nice shiny credit report with no negative entries.  Enter the credit repair guys who claim they can fix all your financial woes and remove all negative reports on your credit files. Finally you can buy that dream house or go on that Europe trip! It almost sounds too good to be true, but perhaps you’ll just give them a call.

Hold on. It most likely is too good to be true, and the reality is they may not be able to change a thing.  And hey'll charge you for trying. A lot. In some cases up to $1000 per listing you want gone.

Don't Pay For Someting You Can Do For Free

So how does one fix their credit rating? Firstly, it might be good to get a copy of your credit report to check what’s actually been filed under your name. You can get one via credit reporting agencies for free, you just have to provide your full name, date of birth, current address (and previous addresses), contact number, current or previous employer as well as a copy of your driver’s license, passport, birth certificate or a proof of age card (any one will do) and finally a document issued by an official body which confirms you are living at your current address such as a electricity bill or bank statement.  

Once you get your own copy have a look over it and scrutinise the negative listings. Either they are correct or have been filed incorrectly.  Mistakes happen and if so you can dispute incorrect listings on your report. You can ask to have it changed if there are mistakes and you can even request to have your comments added to put a negative listing into context if you think it might help. It’s completely free to update your credit report to remove errors, but changes can only be made if a listing is inaccurate or out of date.  You can hire a credit repair company to do this for you for a fee, but it really is a waste of money as its something you can do yourself.  

Beware The Credit Repair

According to ASIC ‘Credit Repair’ businesses make false and misleading claims suggesting they can remove negative listings from credit files. Despite the convincing marketing they actually have no power at all to change your credit history, (unless there are errors in your credit report). They will still charge you to ‘look into it’ and try, but you can do this yourself for free. There is actually nothing that can be done to change correct entries. What you CAN do is build up records of good credit history so much so that they outweigh past negatives. Building your savings with regular deposits (the same amount weekly, fortnightly or monthly) is a good way to demonstrate reliability and consistency of income.

Of course if there are errors on your credit history you have the right to request to have these deleted, but only if they are proven to be wrong. You can pursue this yourself for free via an Ombudsman's external dispute resolution (EDR) service to resolve your case. Ombudsman services are free and set up to be user friendly. Many of these ‘credit repair’ businesses will simply contact an ombudsman on your behalf and charge up to $1000 to fix one listing.

To find out more about what credit repair companies can and can't do, the fees charged by credit repair companies and how to sort out your own credit problems visit this handy article by MoneySmart

Setting up a Budgeting Account with Endeavour Mutual Bank may be a helpful way to regularly allocate your funds into savings as well as paying off debts so that over time you can demonstrate financial responsibility and contribute more positive credit records into your history.  Endeavour can also direct you to a financial counsellor if you are needing support getting back on track financially.  You can find out more by speaking with one of the friendly Endeavour staff on 1300 13 14 20 or visiting your local branch.  

Alison Gallagher is a freelance writer, resourcefulness expert and entrepreneur. She has been featured in various publications including Stellar Magazine, Australian Health and Fitness Magazine, and Cleo Magazine. Alison is particularly passionate about sharing practical tips on how to live simply, sustainably and seasonally.