A step-by-step guide to repairing your credit file and getting your finances under control.
If you’re one of many Australians who suffers from poor credit history, there are simple steps you can take to repair your credit file. Whether you need to apply for a credit card or want to get your finances in order, you can use this guide to understand what is listed in your credit file, the benefits of credit repair and the steps you need to take to get your finances in good shape.
Understanding credit repair
With Merrilyn Mansfield: Financial Advocate, PRINCEVILLE Credit Advocates.
What appears on my credit file?
Your credit file carries just about every important piece of credit related information about you. So, everytime you apply for credit, enter a contract for a service like internet or mobile phone connection or default on a payment, a note will be made on your credit file.
Court writs and summons stay on your credit file for four years; while payment defaults, credit enquiries, court judgements, and bankruptcy stay on the file for five years. Meanwhile, mentions of clearouts and part 9 debt agreements stay in place for seven years. Instances of previous directorships and external administration will remain on your credit file for 10 years. Upon the closure of a credit account, its payment history cannot stay on your file for more than two years.
As per the Privacy Act of 1988, every individual has the right to obtain a copy of his or her credit file, and you can contact a credit reporting agency to get a copy for free. If you need it urgently, you would have to pay a nominal fee.
Why should I check my credit file regularly?
You should be checking your credit file at least once a year and every time you’re planning to apply for a loan such as a credit card, mortgage or personal loan. Checking your credit file from time to time is important because of two main reasons:
Incorrect marks on your credit file
There are instances when banks and other providers of credit process loans and other credit accounts incorrectly, which can lead to incorrect marks on your credit file. For example, you might’ve paid off a loan only to see that your loan provider has accidentally reported a default. If you don’t go through your file, there is no way of knowing if it contains any correct marks. If you’re applying for a credit card or loan, it’s crucial to ensure that your credit file is in ship shape. If there is an error on your file, your application could be rejected, which will leave a negative mark on your file and lower your future chances of approval even further. If you do spot an incorrect mark on your credit file, see our guide on how to remove black marks and defaults from your credit file.
Protect yourself against identity theft
Since your credit file carries details of all credit accounts in your name, going through it can tell you if someone is using your personal information to apply for credit. If you feel you’re a victim of identity theft, you’ll have to take measures like cancelling the accounts in question and filing a police report.
Order a copy of your credit file
Receive email alerts whenever specific changes occur on your credit file for 12 months. You also receive a copy of your credit file despatched within one working day.
Receive your credit file with information on:
- Details of consumer credit enquiries
- Details of overdue consumer credit accounts
- Commercial credit enquiries
- Details of overdue commercial credit accounts
- Bankruptcy & Court Judgements
- Writs & Summons
- Information on your current relationship with a credit provider
- $79.95 p.a. annual fee
What is credit repair?
Credit repair refers to the process of fixing your poor credit file. Whether you have a poor credit score from bad debts, defaults or mistakes on your credit file, there are ways that you can repair your credit to get your finances back on track. Regardless of whether you decide to seek the paid help of a professional or decide to try to repair your credit file on your own, it takes perseverance and patience to get it back into shape. As a bad credit file will drag down your likelihood of acceptance when applying for everything from a credit card or a mortgage to a phone plan or personal loan, the benefits definitely outweigh the costs.
Should you repair your credit on your own or seek professional assistance?
Depending on the severity of the issues on your credit file, you have the choice of seeking assistance from a professional credit repair agency or taking matters into your own hands. While a good credit repair company has the experience and resources to assess and repair your credit file thoroughly and quickly, it comes at a cost.
If you’re not sure whether to fix your credit file yourself or seek the help of a professional, consider the following steps to determine which option is right for you:
- Check your credit score for free via finder.com.au and order a copy of your credit file from Veda, Experian, or Dun & Bradstreet.
- Review your credit file and make a note of any defaults or negative listings along with the dates they occurred and how long they’ll remain on your file.
- Determine how long it’ll take and how much effort you’ll have to spend to address each listing.
- Based on this, consider whether or not it’s worth paying a credit repair company to take care of these for you.
If you’re not sure what to look for or how to go about repairing your credit file, seeking the assistance of a credit repair agency could ensure that your file is fixed properly and that your chances of future loan approval are improved. If you decide to work with a credit repair company, they could help refute and erase innacurate claims on your file or suggest ways to improve your credit history if you have legitimate defaults on your file.
What is involved in the credit repair process?
If you do want to repair your credit file yourself or wonder what a credit repair agency will do to get yours in better shape, see the following steps:
Step1. Get and review a copy of your credit file
You can, as mentioned, get a free copy of your credit file by contacting a credit reporting body like Veda or Experian. Once you have access to your credit file, go through it carefully, and make a note of all incorrect and suspicious entries. Consider speaking to the credit reporting body through whom you got your credit file, as it might have the ability to fix certain errors.
Step 2. Contact the provider in question
If you spot an error on your credit file or if you come by an entry you’ve not made, you should get in touch with the given credit provider immediately. The credit issuer should be able to provide details about the listing, which you can use to initiate a correction or an investigation.
Step 3. If the listing isn’t corrected, contact the ombudsman
If the credit provider is unable to fix the listing in question, the next step is to get in touch with the relevant ombudsman. If this fails to yield the desired results, the next step involves contacting the Privacy Commissioner, which can be done within a year of becoming aware of the error.
A professional credit repair company would conduct one or more of the above measures and, depending on your situation, can also assist you with debt consolidation or a debt agreement.Back to top
What is a debt agreement?
If your credit file is hurting because of legitimate debts that you’re struggling to repay, a debt agreement is another alternative to credit repair to avoid going bankrupt. A debt agreement, or a Part IX agreement, is a legal agreement between a debtor and a creditor, where the creditor agrees to accept an amount of money that the debtor can afford to pay, which is lower than the amount due. The debtor then gets a set period of time to settle the debt. Take into account that a creditor must agree to a proposed debt agreement for it to come into effect, and not all do. Before you go down this path, it’s important to understand that debt agreements come with long-term implications that can impact your ability to apply for credit in the future. Similar to black marks and defaults on your credit file, a debt agreement flags to a lender that you’re a high-risk applicant and they’re unlikely to approve you for a loan.
Is a debt agreement the same as being bankrupt?
Simply put, entering a debt agreement is not the same as being bankrupt. While a debt agreement qualifies as an act of bankruptcy, know that you cannot be bankrupt until you or a court declares yourself bankrupt. However, if you don’t comply with the debt agreement’s terms and conditions or if your creditors don’t accept your proposal, they can file a petition in court to declare you bankrupt.
A typical debt agreement has an administrator looking after unsecured creditors and overseeing that you follow required obligations and remain in control of other aspects of your finances. With bankruptcy, a trustee would play a much larger role, and you would be subject to income thresholds.
What else should I consider to repair my credit file?
If you’re suffering from poor creditworthiness and wish to repair your credit file, you should also consider the following:
- Repay existing debts. Contact your credit providers and try to negotiate paying off your debts by working on revised repayments terms. Otherwise, you could consider conducting a balance transfer to a card with a 0% promotional period. While you’ll still need to pay your debt off, you’ll be able to do so without the burden of interest while the promotion is in place. Otherwise, you could also consider consolidating your debts with a single debt consolidation loan.
- Credit history does not vanish overnight. The law requires that once you repay a debt the lender should update the same on your credit file as soon as possible. This does not mean that defaults disappear from your file once you repay a loan as defaults stay on record for five years. This is important to remember when you’re looking to apply for loans in the future.
- Is turning to a credit repair company the ideal option? A credit repair company can simplify the credit repair process for you, but not all are equally good. Make sure you watch out for companies that charge exorbitant fees, companies that exaggerate their abilities to repair credit and companies that provide contracts with unfair terms like high termination fees. Remember that if you have legitimate debts and defaults on your credit history, a credit repair agency won’t be able to remove these for you.
If you struggle with poor credit worthiness, repairing your credit file might be the key to getting your finances in control. Whether you decide to take the credit repair in your own hands or leave it up to a professional, it’s important to remember that it’ll take time and legitimate marks can not be removed from your credit file completely. Depending on the financial situation, order a copy of your credit file, compare your options and choose the strategy that best suits you.Back to top
Frequently asked questions
What details do I have to provide to get a copy of my credit file?
You’ll have to provide your complete name, date of birth, current address, previous address, and driver’s license number.
Can I get a free copy of my credit file at any time?
You can request for a copy of your credit file if a creditor has rejected your application for credit in the last 90 days, or if your request relates to a credit provider or credit reporting body correcting information in your credit file. You can also ask for a copy once each year, not including the circumstances mentioned above.
Get a copy of your credit file from Veda
How quickly will I receive a copy of my credit file?
You can expect your free credit file copy to get to you within 10 days of placing a request, and you can choose to get it sooner by paying a nominal fee.