Are credit repair companies legit?

Jul 2, 2024

Credit report errors are fairly common. In fact, nearly one-third of consumers discovered at least one error on their credit reports. You must dispute them with the credit bureaux to correct the mistakes. Otherwise, these inaccuracies can have a negative influence on your credit score for up to seven years.

Credit repair companies can help with this procedure, but use caution. Historically, the credit repair sector has struggled with unethical activities. Are credit repair companies legit? If you are thinking about using a credit repair company, do your research to guarantee it is reliable and follows Australian legislation.

Are credit repair companies legit?

Yes, credit repair companies can be legitimate, but their quality varies. Some are reputable, while others might be scams. You need to do thorough research and watch for warning signs. The key to improving your credit score involves consistently paying your debts and bills on time, reducing your reliance on credit, and spending within your means. By handling this yourself, you gain a sense of accomplishment that positively impacts your overall financial management.

You can get the credit report from these three credit rating companies, along with the score.

EQUIFAX

EXPERIAN

ILLION

Below Average or Low Score

0-459

0-549

1-299

Average, Fair or Room for Improvement

460-660

550-624

300-499

Good

661-734

625-699

500-699

Very Good or Great

735-852

700-799

700-799

Excellent

853-1200

800-1000

800-1000

The same rules apply whether you opt to repair your credit on your own or through a firm. If you choose a company, be sure you understand your responsibilities, their promises, and the terms and conditions. Examine the company’s history, verify its reputation with other consumers, and read recent reviews.

Do credit repair companies really work?

The best credit repair companies can help you find and fix errors in your credit file. However, they can’t remove accurate information reported by your lenders, no matter how many disputes they file.

“If a company claims they can remove accurate information, they’re not being truthful,” says Ricki Lowitz, co-founder and co-CEO of Working Credit. “They might get accurate negative items removed temporarily, but not permanently.”

Reputable credit repair services can’t do anything you can’t do yourself. You can file disputes with Equifax, Experian, and TransUnion for free. When you file a dispute, these agencies must investigate. If your creditor can’t prove the information is correct, the bureau will remove it from your credit file.

How to tell if a credit repair company is a scam

In Australia, by knowing the following steps, you can identify a scam credit repair company:

  • They charge you before doing any work.
  • They guarantee to remove accurate negative data from your credit report.
  • They advise you not to mislead credit bureaux.
  • They tell you not to contact credit bureaux yourself.
  • They suggest altering your identity to improve your credit history.
  • They advise you to provide false information on applications.
  • They don’t give you a written contract detailing their services and payment terms.

It is advisable to look for a more trustworthy business or think about restoring your credit on your own if a credit repair service exhibits any of these red flags. Even if you have signed a contract, you have three days to cancel it without penalty. The Better Business Bureau website offers reviews, and the Consumer Financial Protection Bureau’s database allows you to look for complaints regarding a company’s reputation.

How soon can I see results?

Credit bureaux in Australia have a maximum of 30 days, and often up to 45 days, to examine a dispute after it is submitted. They must tell you of their decision after the investigation is completed. If any errors are detected, the corrected information will appear on your credit report in the following month.

Red Flags to Watch Out for

If a credit repair company offers any of the following commitments, it could be a scam, and more investigation is required:

  • If the guarantee states that negative items will be removed from your credit report, read the terms carefully.
  • Be cautious if a credit repair company asks for payment upfront, unless they have a documented track record or a Legal Trust Account.
  • It is a fallacy that a credit repair company should dispute all bad items on your credit report, regardless of their correctness. Each thing must be investigated independently in Australia.
  • Another misconception is that it suggests generating a new credit identity. In Australia, when you change your name, your credit history is updated to reflect both your new and old names.

What are the other possibilities?

You can take the following measures to bring about a positive change in your credit score:

  • Check your credit report for discrepancies and dispute them.
  • Consult a credit counsellor to develop a debt repayment strategy.
  • Contact a credit repair lawyer for a free legal consultation.

How to repair your credit yourself

You can definitely work to repair your credit on your own. All you need to do is follow these steps.

Obtain your credit report.

Begin by obtaining updated copies of your credit reports from AnnualCreditReport.com, a service provided by Experian, Equifax, and TransUnion. These reports reveal both positive and negative aspects that affect your credit score. You are entitled to one free report each year from each of the three credit bureaux.

Review and Dispute Errors

Check credit reports for mistakes.

  • Incorrect dates or balances.
  • Accounts that do not belong to you or are duplicates.
  • On-time payments are wrongly recorded as late.
  • Collect accounts that aren’t your own.

Dispute the errors immediately with the credit bureaux as soon as you find them. They usually include an online dispute process, which is frequently the quickest way to address disputes. If you discover an error, you will need to file a dispute with each credit bureau to have it erased. This is because credit bureaux do not share information, so you must submit individual claims to raise your credit score with all three agencies.

Arrange Payments

You must have a strategy to pay at least the minimum amount due on all of your accounts. You may need to establish payment plans with your creditors that will not result in consequences.

Steps to Improve Your Credit

Experts believe that refuting bad items has limited impact, especially for older issues. A single late payment might significantly lower your credit score. Strive to update any delinquent accounts as soon as possible and to make timely payments on a consistent basis. Timely payments are critical for improving your credit score.

Minimise credit utilisation

Your credit utilisation ratio, which is the ratio of your credit card balances to credit limits, influences your score. Aim for a lower percentage by maintaining balances far below your credit limits, which can help your credit score.

Consider credit counseling

A professional counsellor can assist you in establishing attainable financial goals and developing a realistic plan to achieve financial security. Visit the Department of Justice website to get a list of approved credit counseling agencies.

Final Thought

In Australia, there are genuine credit repair companies that comply to tight rules. Are credit repair companies legit? These organisations cannot do anything for you that you cannot do for free on your own, such as dispute credit report inaccuracies. The easiest strategy to improve your credit is to maintain good financial practices and address any errors directly with the credit bureaux. If you require additional assistance, consider reaching out to a nonprofit credit counseling agency. They frequently provide more complete service than credit repair companies.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.<

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    Disclaimer: The information in this article is general in nature as it has been prepared without taking account of your specific objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.