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Credit Repair

Looking to improve your credit score? Find out how to repair it.

30 June 2022Lloyd Smith 8 min read
Credit repair: How long does it take and does it actually work? Improve your credit score

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If you have ever had a credit card, taken out a postpaid internet service, or rented property then you will have a credit score.

Your credit score is a number that reflects your entire financial history that lenders use to gauge your risk profile. Depending on the type of information, listings on a credit report can remain on your file from anywhere between 2 to 7 years.

Since your credit history stays with you for a long period of time, it may impact your ability to get a line of credit and a bad credit score may limit your access to a favourable loan. A bad credit score is often the result of a history of poor financial management such as not paying your bills on time or not paying them at all.

Can a credit repair fix this? It depends.

Starting from a few hundred dollars to over $1,000 per listing, credit repair is not a cheap fix. If you’re thinking about engaging a credit repair company to clean your credit history, read on to learn more about the process and whether it is right for you.

Credit repair is the act of going through a credit report with the goal of finding mistakes and correcting them. In doing so, your credit score should improve as negative information has been removed from your credit report.

For example, you may discover that a previous mobile phone service provider did not notify you of an unpaid debt. As such, they have notified a credit reporting agency of this default and as a result, this unpaid debt has lowered your credit score.

In this instance, the mobile phone service provider is the credit provider and Equifax is the credit reporting agency.

Many credit repair companies offer this as a paid service, however, you can access your credit report and correct any errors yourself for free, too.

Pros

Increase your credit score

When you remove incorrect information from your credit report, all the while adopting positive credit habits, it directly helps improve your credit score.

More chances of getting approved for credit applications

Lenders use your credit score and report to assess your creditworthiness as an individual. By removing incorrect information from your credit report and fixing credit, you also increase your chances of getting approved for a new line of credit, whether you are applying for a new credit card or loan.

Better offers from lenders

When you fix credit and make sure there are no errors, you get a spotless credit report which can help you get better offers from lenders, like zero interest credit cards, low interest loans, and better repayment terms as well.

Cons

Time-consuming

Repairing credit can definitely help you improve your creditworthiness, but at the same time it can be an incredibly time-consuming process. Moreover, if you decide to hire a credit repair company to handle credit fix in Australia, it can also turn out to be expensive.

In cases like these, you want to make sure that the benefit of getting third-party credit repair services outweighs the costs associated with it.

No clear guarantees

Even if you work extensively on repairing credit or partner with the best credit repair companies in Australia, there is no guarantee that removing errors and negative listings will increase your credit score. There is also no saying when your credit score will improve and if it will lead to any significant changes.

Credit repair works by contacting credit reporting bodies and even lenders in some cases in order to dispute errors on the credit report. This can include simple corrections like a wrong entry or a more complex problem like unpaid bills which were already paid months before.

Errors in your credit history are more common than you might think. If you have listings on your credit report that isn’t accurate or fair, credit repair is an important step to take to ensure those errors do not lead to your credit score declining in the long-term.

There are two ways you can initiate free credit report repair – First you need to look out for any discrepancies in your credit report and then, you need to constantly take steps to build credit.

Here are a few ways you can repair credit for free:

1 - Check your credit report regularly

Wondering how do I repair my credit report? The answer to that is constant monitoring.

You should regularly check your credit report and review it for any potential errors or mistakes. It's important to pay special attention to factors that can directly affect your credit scores like hard inquiries, credit utilization ratio, and open credit accounts.

You can check your Experian credit report or Equifax credit report, depending on which credit reporting body most of the lenders around you prefer.

You can also get a free credit report directly with ClearScore. Once you have signed up, check that all loans and debts listed are yours and that your full name, date of birth, and address are correct.

Here is a list of common errors to look for:

  • Incorrect spelling of your name
  • Incorrect or incomplete phone number or postal address
  • Seeing information belonging to another person with the same or similar name to you
  • Unfamiliar accounts in your name
  • Unknown transactions in your name
  • Closed account reported as being open
  • Incorrect balance and credit limits
  • Debt listed as late when they are being disputed
  • Debt listed when a payment plan is in place
  • Incorrect date listed when you first defaulted on payments
  • Same debt being listed more than once
  • Incorrect debt amount
  • The same debt being listed with multiple creditors.

If you do find any incorrect information on your report, you can file a dispute with the credit reporting body. Alternatively, you can also contact the lenders in case the error was from their end.

2 - Review your payment history

The best credit repair advice is to routinely review your repayments.

Payment history is one of the most important factors that is considered when your credit score is calculated. Late or missed repayment can have a significant negative impact on your credit scores for a long time.

Moreover, the size of your debt and the total number of missed payments also affect the score. The bigger the size of your debt and the more recent your missed repayments, the worse your score will get.

3 - Analyse your credit utilisation ratio

Most credit scoring models also consider your overall credit utilisation ratio, which is the total available revolving credit divided by the total credit limit.

Reducing your credit utilisation ratio tells lenders that you can responsibly handle the credit limit available to you and that you never go overboard with your spending.

Here are a few ways that you can reduce your overall credit utilisation ratio:

  • Pay your account balances on time
  • Increase the credit limit available to you either by opening a new line of credit or requesting a credit limit increase on an existing account
  • Take a debt consolidation loan

4 - Get a credit card to build credit

Paying off credit card bills on time is an important part of repairing credit as it keeps your repayment history in check and shows lenders that you can handle your credit accounts responsibly. You also need to make sure that you don’t overspend. Ideally, you should only use 30-40 percent of your credit limit to keep the credit utilisation ratio low.

You can consider the following option to leverage credit cards for repairing credit:

  • In case you have multiple credit cards, focus on paying your existing balance instead of getting a new card
  • If you have been struggling to pay up debt for multiple cards, you can consider consolidation or transferring your debt to a balance transfer credit card to decrease the interest rate and pay the debt in a more simplified manner
  • If your credit score is considerably low, you can get a credit card for bad credit just with the main focus to rebuild your score. You can also get personal loans for bad credit just to improve your score and credit history.

5 - Think before getting new credit

Opening numerous new credit accounts in a short span of time can make you seem risky as a borrower and even impact your credit score. That is why, before you take on a new credit account, make sure it is absolutely essential for you.

At the same time, when you are shopping around for the best interest rates for a new line of credit, remember that every time you apply for a new credit line, it creates a hard inquiry in your credit report. Too many credit inquiries in a short period of time can lower your score.

There is no set time frame for how long does it take to repair credit score or rating. The goal is to get your credit score in the range of ‘good’ instead of ‘fair’ or ‘poor.’

The time can depend on several factors, including:

  • Your current credit rating
  • The age of credit accounts
  • The type and age of negative information present on your credit report

If you have any foreclosures, bankruptcies, or court judgments in your credit report, it can be all the more difficult to repair credit.

Here’s how long information stays on your credit report:

Late payments: over 7 years

Hard inquiries: over 2 years

Closed accounts: over 10 years

Foreclosure: over 7 years

Bankruptcy filings: over 7 years

Hard inquiries: over 2 years

The cost of credit repair can depend a lot on your current credit rating and the way you decide to repair credit. If you are planning to use a credit repair company in Australia, it can cost you upwards of $1,000 for the entire repair process.

Most credit repair companies charge varying fees that include administration fees, upfront fees, and success fees for every negative entry that is removed from your credit report. They may also charge a fee depending on the type of negative entry that you want to remove. For instance, taking out a default from your credit report would be more expensive than taking out a late payment record.

You can also do a DIY credit repair to save on costs. Although this would be more time-consuming, free credit repair is a great option if your budget is already strained and you want to focus on paying up impending debts. The only costs required to do a credit report repair yourself would be the extra charges for paying up interests on your debts or consolidating your debts.

If you can find instances where a credit provider or credit reporting agency has made a mistake and they agree with you, removing the listing(s) can move your credit score in the right direction.

If, however, you want to remove negative information that reflects your financial history, credit repair will not work. This is because you cannot change or remove any information on your credit report that is correct - even if you pay a credit report company a hefty fee to try.

In most circumstances, paying a credit repair agency will not improve your credit score when your bad credit is the result of poor financial management or the listing falls under one of the things that cannot be changed or removed from your credit report.

The best thing you can do is to improve your credit score by doing the following:

1. Pay your existing loans and debts on time. If this means consolidating your debts and moving them into a balance transfer, speak to an AFS licensed professional for financial advice.

2. Pay your utility bills on time. You do not want another negative listing added to your credit report.

3. Pay your credit card on time each month. Pay the balance in full or at the very least pay more than the minimum repayment.

4. Reduce your reliance on credit cards.

If you find yourself getting into more debt, talk to a free financial counsellor.

The first step to clear your credit history of any errors or discrepancies is to check your credit report routinely. ClearScore allows you to access your credit report for free and check credit score in just a few clicks. Take a look.


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Written by Lloyd Smith

General Manager AU

Lloyd spreads the word about how awesome ClearScore is.