“There are a growing number of companies offering to ‘fix’, ‘clean’ or ‘repair’ a consumer’s credit report for a fee. But as with all quick fix promises, consumers need to watch out, especially as credit repair companies often charge large fees for managing what consumers can do independently and for free,” said ARCA CEO Damian Paull.
“Consumers don’t need to pay anyone to ‘repair’ their credit report. Credit repair agencies have no greater capacity to remove information from credit reports than consumers do by going through an established, cost-free procedure,” said Mr Paull.
Australian law requires credit providers and credit reporting bodies to investigate and respond to consumer requests to correct their credit report within 30 days. Where such a request to correct an error may take longer than 30 days, consumers must be advised and agree to any extension of the investigation. If the matter is not addressed in a timely manner or if a consumer is unsatisfied with how their complaint has been addressed, they then have the right to lodge a direct complaint with an external dispute resolution service, such as the Financial Ombudsman Service (FOS) or the Credit and Investments Ombudsman (CIO).
CANSTAR caught up with Mr Paull for some more information.
Q: Why do you think so many Australians believe that they need to pay a fee to rectify credit report errors?
A: It’s common for consumers, as they read the paper or watch TV, to come across companies that claim to be able to ‘fix’, ‘clean’ or ‘repair’ their credit reports.
So when they are rejected for credit and it all seems ‘too hard’ they turn to these familiar voices for help.
The uptake of these services is a worrying trend as credit repair companies may charge large fees for processes individuals can do independently and for free. Consumers may also fall for a promise of being able to ‘repair’, information on a credit report which is actually accurate and cannot be changed or removed.
Credit providers and credit reporting bodies have an important part to play in educating consumers on the credit reporting system and giving them the confidence to resolve errors independently and work to improve their creditworthiness where they have a less-than ideal credit report.
This is the aim of the CreditSmart website, a resource developed by ARCA Members to provide impartial, accessible advice on matters related to credit reporting.
The latest CreditSmart fact sheet tackles the issue of credit repair.
Q: How often do you recommend Australians to access a copy of their credit report, to check?
A: Even if a consumer pays all their accounts and bills on time and doesn’t have any outstanding debt, they should check their credit report at least once each year- to ensure there are no errors and that they haven’t been a victim of identity theft. A consumer is entitled to free annual access to their credit report, in addition to free access where any credit application by the consumer has been rejected in the past three months. The CreditSmart website provides a guide to this straight forward, free process.
If they are a victim of identity theft, or their credit card details are compromised, defaults, late payments and new credit accounts may appear on their credit report and damage their creditworthiness.
By checking their credit report annually and proactively addressing any issues, consumers may save themselves from potential headaches and disappointment down the track when they apply for a loan or credit card.
If a consumer has a less-than-ideal financial record, the move towards comprehensive credit reporting means they can improve the picture of their creditworthiness over time. This is because comprehensive credit reporting will include details of a consumer’s credit accounts and their repayments, so any improvements in payment behaviour will appear on the credit report. Checking their credit report annually is a way of tracking improved repayment behaviour and creditworthiness.
Q: Has comprehensive reporting been beneficial in improving the transparency of credit capacity?
A: Comprehensive credit reporting (CCR) aims to improve the ability of lenders to assess a consumer’s true credit capacity. Where previously only negative information, such as defaults and late payments, was included on credit reports, more diverse and ‘positive’ data will be progressively available to credit providers under CCR. This new data will paint a more complete picture of a consumer’s ability to pay, as it takes account of the true number of credit accounts they hold, what their limit is, and a consumer’s repayment behaviour.
However, CCR is not yet fully operational in Australia. The retail credit industry is in the process of finalising rules which will assist with transition to the system and promote broad participation amongst credit providers. These rules should be finalised by the end of this year.
For further information, or a copy of the credit repair fact sheet, consumers can visit ARCA’s CreditSmart website at www.creditsmart.org.au.