Credit repair

Don't pay to fix your credit history - do it yourself

If debt is getting you down or you have a bad credit history there is free help available. If you pay a debt solution company just remember that they may not always be able to do what they claim and can charge high fees for things you can do yourself.

Here we explain what credit repair companies can and can't do for you, how to save money by fixing your own credit and how a free financial counsellor can help you if you are struggling.

How credit repair companies work

'Credit fix', 'credit wash' or 'credit repair' companies act on your behalf to challenge incorrect listings on your credit report. They may tell you they can fix your credit history and solve your debt problems but, in many cases, they may not be able to do what they say they can. You could end up paying a lot of money without being any better off.

Fix your credit history

Credit repair companies may claim they can improve your credit rating by having negative information removed from your credit report, but default listings and other correct historical information cannot be removed. Plus, you can arrange for any wrong information to be removed yourself for free. See how to fix your own credit problems below.

Case study: Toni paid for debt help

Credit repair case study

When Toni moved house, she told the phone company about her change of address, but the following month they sent her bill to her old address. Because she didn't receive the bill, it wasn't paid, and the phone company listed it as a default of $170 on her credit report.

When Toni found out about the listing, she signed up with a credit repair firm that said they could help her remove it. Toni paid $1,000 for this service. In the meantime, Toni also lodged a complaint with the Telecommunications Industry Ombudsman (TIO) and the listing was removed due to her action.

Toni contacted the credit repair firm and asked them for her money back but, as she had signed a contract with them, they refused to refund her $1,000.

If Toni has any issues with her credit report again in future, she plans to use an Ombudsman to sort out her credit issues rather than going to a credit solutions company.

Debt fixes and solutions

Credit repair companies may also offer 'debt fix', 'debt management' or 'debt solution' services to get out of debt and help you take back control of your finances. Many of these solutions can have serious long-term consequences for you and your credit rating.

Do not sign up for any of the following debt management services until you understand what they mean for you in the long term:

  • Debt agreements - an agreement to pay an amount you can afford, over a period of time.
  • Bankruptcy - when you are legally declared unable to meet your debts.
  • Debt consolidation - rolling all your loans into one loan.

Before agreeing to any of these solutions, seek free help to manage your finances from a financial counsellor.

You can also watch the Australian Financial Security Authority's (AFSA) video on how to avoid untrustworthy debt advisers

Things to consider before using a credit repair company

Before you sign up with a credit repair company, make sure you understand what services they are offering, their fees, and the terms of their contract.

If they cannot clearly explain what services they are going to provide, this could be a warning sign, and you might be better off trying to repair your credit report yourself.

ASIC takes action against a credit repair business

ASIC has taken legal action against Clear Credit Solutions for making false or misleading statements about their credit repair business. They told people that they could remove negative listings from their credit file when in fact nothing could be done about the listings. See ASIC's media release for more information.

Fees charged by credit repair companies

Credit repair companies typically charge very high fees, as much as $1,000 to fix one listing in your credit report. Depending on the size of your debts, signing up for a credit repair service could make your financial problems worse rather than fix them.

Even if they are not able to fix any entries on your credit report, the credit wash company could still charge you high fees. Credit repair companies cannot remove or change items on your credit report if the details are correct.

If they make you pay an upfront fee, that could be a red flag that they want to make sure they get paid even if they can't help you.

Charging you for free services

A credit repair company may contact an Ombudsman's external dispute resolution (EDR) service to resolve your case. The company could then charge you a fee, even though Ombudsman services are free and are designed to be easy for people to use.

You could save yourself a lot of time and money by contacting an Ombudsman directly, rather than going through a credit repair company.

How to fix your own credit problems

A poor credit report or credit score could affect any loans or credit you apply for in the future, so it's important to make sure the information is correct.

If there are errors on your credit report, you have the right to get them fixed. There is no charge for this, but your credit report can only be changed if a listing is inaccurate.

Find out how to check and correct a wrong listing on our credit report webpage.

We also have guidance on how to get a good credit rating on our credit scores webpage.

Free debt help from financial counsellors

If you're struggling with debt, a financial counsellor can help you come up with a solution or understand the options available to you. Financial counselling is a free and confidential service.

Use our map to find a financial counsellor in your area, or call the National Debt Helpline on 1800 007 007.

Fixing a wrong credit listing should not increase your money worries. Understand exactly what a credit repair company can do and the costs involved. It may be better to do fix the issue yourself.

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Last updated: 23 Jul 2018