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Credit Repair: What Everybody Ought To Know
September 4, 2014● 4 minute read●
Here at Jacaranda Finance, we are all about being transparent. We offer up-to-date information when it comes to unsecured short-term personal loans. This is why we thought we would give our customers some insight into a new area in the finance business – credit repair.
What is credit repair?
These days many people are trying to establish or pay off a loan. Some need that instant cash loan to head overseas or a quick unsecured loan to make ends meet between paydays. No matter what your loan is for, sometimes factors out of your control influence your ability to make payments. Before you know it there is a default listing against your name.
According to Australian law, once you have paid off the debt, the lender is obliged to update the listing on your credit file as soon as practicable. What many people fail to realise, though, is a default payment will remain on your credit file for five years.
What if further down the track you are looking to take out a more substantial personal loan or home loan? Defaults or negative listings can affect many areas of your life. You might find it harder to rent an apartment, or you could end up paying more for car insurance. It’s consequences like these that have lead to an entirely new business model – credit repair.
You can search for credit repair on Google, and thousands of sites come up promising to wipe your credit history clean. You, as borrowers, just want the default or defaults gone, so you can have a clean slate and get a quick loan for that car you’ve been eyeing. However, before you rush to a credit repair company and hand over your cash, there are a few things you should take into account.
What does a credit repair company do?
These companies call themselves anything from ‘credit repair’, ‘credit fix’ or ‘debt solution specialists’. Most will make claims that they can improve your credit report and remove default listings. What you need to know is that in most cases information in your credit history, including default listings, cannot be removed unless they are proven to be wrong. Also, several credit reporting agencies can look into getting defaults removed for free, whereas ‘credit repair’ companies tend to charge large fees.
For a fee often upward of $900 a credit repair company will primarily contact your lender and offer a generic excuse that relates to your personal situation (loss of income, death in the family, breakdown of relationship etc.) in order to provide justification for the default to be removed. They then in most cases will go on to threaten to contact the Australian Financial Services Authority if the lender does not comply, which will generally lead to the credit provider backing down to avoid extra costs and wasting more time.
This is not always the case, but it is common practice.
If it does come to contacting the Australian Financial Services Authority in Australia it is free to make a complaint about a default or negative listing.
If you break it down in most cases you’re paying for a phone call, some thinly veiled threats and a free complaint service, which you as a customer already have access too.
What should you do in order to get default listings removed?
You can get a free copy of your credit report from Dun & Bradstreet or Veda. If you decide anything on the report is inaccurate you can take action yourself.
Instead of letting the defaults slide and dealing with them later why not contact your lender and let them know the situation. Many lenders will sympathize with borrowers and if it is within their power, they will try and help the consumer, especially if they could get back the loaned money.
If for some reason your lender is unable to assist you, it is within a borrowers rights to contact the Australian Financial Services Authority directly and it is free of charge, you simply fill out a form and go from there.
If you need more convincing premier Australian review site choice.com.au listed Credit Repair Australia in its 2013 ‘shonky’ awards. Choice highlighted the misgivings of an operation that promises to wipe your credit history clean for what is generally a substantial fee.
“Credit Repair Australia has been known to overstate its ability to improve a credit report, providing false hope.” (Choice.com.au)
As the borrower you have to decide which option is best for you but it is important to know the facts before you start spending.
To read more about credit repair service visit afca.org.au.
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Written by Jacaranda Team