Amanda Smith
Georgia Rose
Athena Cocoves
A below-average credit score can hinder your ability to borrow money, which may derail some of your life goals like buying a house. The good news is there are ways to repair your credit, either through a credit repair company or by fixing it yourself.
No matter what method you choose, it’s important to understand what credit repair is and the type of information that can be repaired before you get started.
What is credit repair?
Credit repair, as the same suggests, is the process of reducing negative marks on your credit report while implementing healthy money management habits to nurture a good credit score in the future.
A credit score that falls into the ‘good’ range or above is typically not a huge concern. Scores below this range, however, may need some attention. Credit score ranges vary among credit bureaus, so a ‘good’ score at illion may be an ‘average’ score at Experian.
These are the ranges for a ‘good’ credit score at each bureau, as of this writing.
- Equifax: 661-734
- Experian: 625-699
- Illion: 500-699
» MORE: How to check your credit score
What information can be repaired?
In general, there are two types of information that are repaired on your credit report: errors, and negative information.
- Errors happen when lenders or credit bureaus log incorrect data on your report, such as marking a credit card payment as late when it was paid on time. Fixing errors is typically swift and free to do.
- Negative information refers to marks on your report that harms your score, such as late mortgage payments, bankruptcy filings or defaults. While these details cannot be removed immediately, they don’t stay on your report forever. Therefore, as long as you maintain healthy financial habits moving forward, you should see a better score once the negative information eventually drops off.
How long does information stay on your credit report?
| Factor | Length of time |
|---|---|
| Serious credit infringements. | Seven years. |
| Bankruptcies and debt agreements. | Two or five years, depending on the circumstances. |
| Court judgements, credit enquiries and defaults. | Five years. |
| Current debt obligations and repayment history. | Two years. |
| Financial hardship information. | One year. |
Repairing your credit on your own
Many of the steps you need to take to repair low or bad credit can be done yourself.
Start by getting a free copy of your credit report from each of the three major bureaus — Equifax, Experian and illion. Then, check for errors, inaccuracies and opportunities to dispute the listing yourself.
Your next steps will depend on what you find in your report.
How to fix errors
For the most part, fixing errors on your report is free and can be done yourself.
Simply notify the lender or credit bureau of the error and explain why you believe the information was recorded incorrectly. If you are having trouble resolving the issue, you can always contact Australian Financial Complaints Authority (AFCA) for free dispute resolution assistance.
Ways to address negative information
Only time and better habits can help correct legitimate negative marks, and you don’t need an external company to do this. Try focusing on these three financial habits to keep your credit report healthy.
- Pay your credit bill on time and in full at the end of each billing cycle. If you cannot pay the bill in full, always make the minimum payment on time.
- Don’t apply for new credit products unless it’s an emergency. You want to show lenders that you can manage the credit you have responsibly and live within your means.
- Get ahead of your defaults. If you’re not sure you can make your payments on time, whether it’s a credit card or personal loan, contact the bank and talk through your financial hardship options. When you’re enrolled in a financial hardship program, your payments are not marked as late on your report, helping to protect your score.
» MORE: How to improve your credit score
Hiring a credit repair company
Credit repair companies typically work with you to correct errors on your report and implement healthy financial habits. These services typically investigate whether mistakes were made during the listing of the negative information, such as not offering financial assistance after a default. Companies claim that calling out factual errors can lead to the mark being removed.
Be wary of any company or individual who promises to wipe your credit history clean. Only errors can be removed or fixed. Credit repair companies cannot remove correct negative information like missed mortgage payments from your report.
The cost of credit repair services
In general, you can expect to pay at least $1,000 for the service. Many professional credit repair companies charge a fee per removal in addition to a setup fee. One Australian provider, Credit Clean Australia, charges a standard flat fee just shy of $1,200, plus $600 per additional negative listing.
No matter what they charge, credit repair companies can’t guarantee results. This isn’t to say that these services aren’t valuable or that increasing your credit score isn’t important. What’s in question is sharing your sensitive financial information with a third party and paying for a service you can do yourself for free.
If you decide to engage a company, do your due diligence to understand your obligations, what they’re promising, the fees, and terms and conditions (read the fine print).
Frequently asked questions
You cannot pay someone to give you a good credit score, but there are professional services that may help repair your credit. However, credit repair companies can only correct factual errors on your credit report. They cannot ‘fix’ your credit or remove negative information like missed card payments from your report.
If you go through your credit report, check and communicate any errors with your lenders, you can repair your score by yourself. Or, you can pay around $1,000 for a credit repair company to do the work for you. That’s a high price to pay for something you could do for free. So, whether or not it’s ‘worth it’ depends on your budget and needs.
DIVE EVEN DEEPER
12 Questions About Credit Scores and Reports
Knowing how credit scores and reports work will help keep you on track to achieve your financial and lifestyle goals.
How To Apply For A Credit Card In 5 Steps
Understand your credit score, debt and income, and apply for a card that fits your profile. Make your credit card application a no-brainer for the banks.
Debt Consolidation: What It Is and How It Works
Debt consolidation rolls multiple debts into a single payment. It can be a good idea if you qualify for a low enough interest rate.
Financial Counselling: What It Is And How It Can Help
Financial counselling can help improve your relationship with money by helping you understand how it is influenced by social, psychological, familial, economic, and emotional forces.