Credit Repair Guide - How to repair your bad credit rating in Australia

Has your credit card application been rejected? Credit repair is very important if you have a poor credit rating and wish to avail of financial services.

Table of Contents: Guide to Credit Repair

• How can credit repair help?
• Do I really have a credit report?
• How did I get a credit report?
• How does my credit report affect me?
• Can I improve my credit rating by repaying my debt?
• How does credit repair work?
• How long does credit repair take?

What is a credit report?

There are over 14 million credit reports in Australia, with the majority being maintained by Veda Advantage. Chances are that if you have ever applied or even inquired about a loan, credit card, financial service, insurance, utilities or even a mobile phone - you have a credit report.

A credit report contains the following information:

• Your full name, date of birth, current and previous addresses and other personal information
• Your employment history, including current and former employers
• Any name changes you made
• Any bankruptcies you filed for
• Any late payments, defaults and "cross outs". (A "cross out" is a term used to describe an event where you changed your address without notifying your creditor, due to which they could not contact you for payments)

As you can see, you credit report is really made up of all your personal and financial information. Every time an institution enquires about your credit, your file will get updated. You can obtain a copy of your credit report from Veda Advantage.

Your credit report contains all this information which is used to calculate your "credit score" - this is a number that succinctly describes your credit-worthiness.

Every time you apply for a financial service such as a loan, mortgage or credit card, your credit score is considered. If you have a good credit score, you will not have any trouble obtaining financial services and will get the best interest rates and low fees. However, if you have a poor credit score, you are considered to be a financial risk, and so you may find it difficult to obtain any loans or financial services; even if you do obtain a loan or service you will be charged exorbitantly high interest rates and charges. Since a poor credit score can adversely affect your lifestyle, it is important to maintain a good score.

How can credit repair help?

Repairing your credit report (if you have a low credit score) is not as easy as simply making regular payments and not defaulting any more. This will not actually improve your credit score, since the negative reports will stay on your file and bring down the score.

In order to repair your credit score you need to conduct a credit repair - that is, you need to obtain a copy of your report and dispute any inaccuracies on file. This will ensure that such inaccurate negative reports are removed, which in turn will improve your credit score. If you have a poor credit score, credit repair is something that you need to do in order to avoid the liabilities and costs that come along with a poor credit score.

Credit reports are very important files that indicate your credit-worthiness. It is important to report any inaccuracies and improve your credit rating. Poor credit ratings can adversely affect your lifestyle.

Have you ever suffered from bad credit? If so, you may be interested in credit repair services. Here are some frequently asked questions about credit and credit repair.

Do I really have a credit report?

Chances are that you do have a credit report. There are over 14 million credit reports in Australia, and if you have ever applied for or even enquired about a financial product, credit card or mobile phone, then you most likely do have a credit report.

How did I get a credit report?

Every time you make an enquiry or apply for a financial service, you actually give your consent to the provider to add this information to your credit report. So any time you use a credit card, apply for a post-paid phone, etc, that information goes onto your credit report.

Who keeps my credit report information?

There are private companies in Australia, who are in the business of keeping credit reports. They collect information about individuals and their credit ratings. Every time someone borrows money or uses a service which entails post-paid payments, or simply enquires about such services, the information goes on to the credit reports maintained by that private company. The largest company in Australia which keeps credit reports in Veda Advantage Ltd.

Is it legal to keep such reports about me?

Any individual or organization can become a credit reporting agency. There is nothing illegal about keeping such credit reports as long as such an agency does not breach any laws, such as privacy laws, consumer protection laws, trade practices laws, etc.

How does my credit report affect me?

Every time you apply for a loan, financial product, utility or even a mobile phone, the service providers will query your credit report. (Each time you apply, you actually authorize the providers to query your report.)

If you have a lot of cross-outs, defaults, late payments or bankruptcies on your credit file, you will be classed as having poor credit. Having poor credit means that you may be denied various loans and services, which can affect your lifestyle negatively.

In addition, the fees and interest rates that you are charged by various providers are heavily dependent on your credit rating. You credit rating is one component that affects the interest rates and fees that you are charged. So a poor credit rating will mean that even if you are successful in obtaining a loan or other product, you will probably have to pay higher fees and interest charges. This is unfortunate since it means that you will be wasting a lot of money on such fees - again, such high payments may affect your lifestyle negatively.

Is my credit rating legal?

A credit report does not have any legal status. However, financial institutions and other organizations look at this report before they provide you with any loans or services. For instance, if you apply for a loan, the bank will check your credit report to see if they should give you a loan and if so at what interest rate. So although a credit rating has no legal status, it does carry a lot of weight with organizations.

Does a credit report breach my privacy?

The government, the law and the finance industry believe that an individual's details can be kept and maintained by private companies, and that this information should be available to other third party institutions such as banks and mobile phone companies, upon their request. In order for your information to be accessed and maintained, you need to provide your consent - usually, this is mentioned in the long forms you have to fill up or the fine print of a contract. Credit report agencies must, of course, comply with certain laws in regards to the collection and maintenance of such information.

Can I find out my own credit rating?

Certainly, you are entitled to know your own credit rating. Veda Advantage Information Services & Solutions Ltd is the largest credit rating agency in Australia, and they maintain over 13 million credit reports. You can simply order a copy of your credit report from them. In addition, if you apply for credit repair services, your credit repair agency may be able to obtain a free copy of your credit report for you.

How many negative reports can affect me?

As you may have experienced, it does not take much bad credit or too many negative reports to be denied a loan or other service. Even one late payment can result in being denied loans and other services.

Can I improve my credit rating by repaying my debt?

It sounds logical that if missed payments mean a bad rating, paying your debt should improve your rating. Unfortunately, it does not work that way.

In Australia, we have a negative credit rating system, that is, only negative events are recorded, not positives. So when you miss a payment, that is recorded, but there is no way to record a payment that you did make.

What about a rating based on incorrect data?

A credit rating that is based on incorrect information may be considered defamatory. It will also breach a number of Australian laws. In this case, your credit report is considered "contestable".

If you can identify which part of your credit report contains inaccurate information, you can raise the issue and get it corrected, in order to improve your credit report.

How does credit repair work?

You may think that since your credit rating goes down due to missed payments or late payments, simply paying your bills on time would help to improve your credit. Unfortunately, that is not the case - while you are penalized for not paying or not paying on time, you are not credited for paying on time. Credit repair is slightly more complex.

In order to conduct a credit repair, you should first order a copy of your credit report. Many credit repair agencies will even be able to obtain a copy for you, for free.

The next step is to go through the report in detail, and find any mistakes or inaccuracies, such as reports of late payments when you actually paid on time.

The final step is to dispute those mistakes or inaccuracies - this is actually one of the most difficult and critical steps. Most consumers are not familiar with the bureaucratic procedures that need to be followed, and so they cannot dispute the claims correctly. The goal of disputing the claims is to have them corrected so that your credit report improves.

This is where a credit repair agency can help. Since they are well-versed in such procedures, they are able to easily dispute inaccuracies and help you to repair your credit.

As you can see, credit reports are a very important part of any financial applications you make. That's why it's important to check your credit report frequently and report any inaccuracies so that you do not suffer needlessly from a poor credit rating.

Is credit repair illegal?

There is absolutely nothing illegal about credit repair. It is your legal right to dispute items on your credit report. Pointing out a mistake on your report is similar to pleading "not guilty" when accused of a crime in court, and is just as legal.

How do my bad credit listings get removed?

Bad credit listings are removed by disputing them in accordance with various legal procedures documented in the law. It can be quite difficult for an individual to remove their own bad credit listings through this process, which is why a credit repair organization can be very helpful.

Should I trust a credit repair agency?

There are many credit repair scams out there and it's important to be aware of unethical organizations. The reality is that very few individuals have enough expertise and knowledge to get the job done successfully.

However, there are a number of reputed credit repair agencies who achieve success for their clients and have a lot of experience in this field. Credit Repair Australia is one such organization. They have spent a number of years reviewing legislation and documenting procedures, which helps them to successfully improve the credit rating of their clients.

How long does credit repair take?

There is no fixed period of time in which individuals can have their credit repaired. If you try to do it yourself, it is likely to take half a year or longer, since you will first have to review the legislation and procedures for disputing information on your report. Then you will have to contact the institution which provided the inaccurate information and communicate with them, and possibly go to court if they do not co-operate.

On the other hand, a credit repair agency can often complete a credit repair within a month and a half, if the client is honest with them about their credit history. Of course, the length of time varies from one case to another.

What is a Debt Agreement?

A Debt Agreement is a legally binding agreement between you and your creditors. You can apply for a Debt Agreement if you are insolvent, or have unsecured debt, net assets and a net income which is below the Australian indexed threshold income. You can also apply for a Debt Agreement if you are insolvent. A person is insolvent if they are unable to repay their debts when they become due.

Is a Debt Agreement the same as being bankrupt?

Entering into a Debt Agreement is not the same as declaring bankruptcy. A Debt Agreement is "an act of bankruptcy" but does not have the same repercussions as declaring bankruptcy.

What does a Debt Agreement do?

A Debt Agreement freezes unsecured debt, if your creditors agree to your proposal. This allows you to pay back your loans over a longer period of time. Of course, your creditors must agree to the Debt Agreement, and not all creditors agree, although the majority do.

What is unsecured debt?

Unsecured debt is debt that is not tied to any collateral. Examples of unsecured debt include credit cards, some personal loans (but not car loans), store cards and medical bills.

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