You got yourself into some debt and have now discovered that your credit score isn’t great. Naturally, you want to repair it, but you don’t know how to do it or where to start. In our latest blog, we warn you about the dangers of ‘credit repair’ companies and paying to try to fix your bad credit history.
Don’t fall for ‘credit repair’ companies
What is a ‘credit repair’ company?
‘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 can’t.
In actual fact, you could end up paying a lot of money for nothing and end up no better off!
Consumer groups are warning about these so-called ‘credit repair’ companies too. The Consumer Action Law Centre (CALC) says it has received numerous complaints about such services, with allegations of excessive or hidden fees, and even unauthorised direct debits from customers’ accounts.
There had been 700 complaints or referrals to the centre about credit repair in 2013.
Every ‘credit repair’ company charges are different. However, they have been known to charge anywhere between $1,000 and $2,000 for an initial fee, before hitting their clients with an excessive termination penalty in the hundreds of dollars.
These companies use heavy tactics against companies to force them to remove negative marks on customers. There have been reports of some companies threatened with being taken to the Financial Ombudsman Service (FOS) or Credit Ombudsman Service (COSL) should they refuse to remove a negative report.
What’s a little frightening, is that the credit provider may often decide it’s not worth the expense of having their case heard, thus opting to simply remove the bad credit listening altogether.
Why is this a little frightening? Because the consumer’s credit report may actually be an accurate reflection of their situation and removing this listing from their record, may allow them to borrow even more money, thus getting them into even more debt.
This is not helping the person in debt at all. In fact, it is likely to make their financial situation dramatically worse! Ironic, given ‘credit repair’ companies claim to help clients repair their situations not make them worse!
Don’t pay to fix your credit history – do it yourself
Our advice? Don’t pay to fix your credit history, try to fix it yourself. There is free help available to help you fix it too.
Whether you want to check and correct a credit listing you feel may be incorrect, receive guidance on how to get a good credit rating, or get some reliable financial counselling, ASIC has a range of services available to help.
Visit Money Smart website or call the National Debt Helpline on 1800 007 007. Financial Counselling is a free service also provided by local government and non-profit organisations. To find your nearest location, click here.
At Life After Debt® we have offices in Perth and Sydney and we can help you reduce unmanageable debt by offering you affordable, practical debt solutions without taking out another loan. If you are struggling with debt and want to avoid legal action and bankruptcy then contact us today, to receive honest and sympathetic advice, without judgement.