In this credit law series, we look at bad credit mistakes. Do you have a bad credit rating and don’t know why? Have you had bad credit placed on your credit file you don’t agree with? You are not alone. Possibly millions of people in Australia have a bad credit rating, and many people are unaware they have black marks against our name until we apply for credit and are flatly refused. We look at the ins and outs of bad credit mistakes and what you can do about them.
By Graham Doessel, Non-Legal Director of MyCRA Lawyers www.mycralawyers.com.au.
What is a bad credit rating?
‘Bad credit’ in Australia is generally credit listings such as defaults, writs, Judgments or Bankruptcies recorded against your name on your credit file by a Credit Provider.
Most of these listings can make it very difficult to obtain credit for 5 years for defaults and up to 7 years for bankruptcy. This can affect many major areas of your life such as buying a home, taking out personal loans for vehicles, business loans and in many cases even credit cards and mobile phone plans.
Currently, most of the major banks are rejecting home loan applications where the credit history shows a default listing (an overdue account which has lapsed past 60 days). Many lenders are even rejecting loans for excess credit enquiries such as two in thirty days or six within the year.
How common are bad credit mistakes?
There are over 16.5 million credit files for ‘credit active’ people, held by the major credit reporting agencies in Australia; Equifax (Formerly Veda Advantage), Dun & Bradstreet, Tasmanian Collection Service. (16.5 million credit files are held by Equifax (Formerly Veda Advantage) alone).
Unfortunately, there are no current statistics on the number of credit mistakes which occur on Australian credit files.
But to give you some idea, in 2004 the Australian Consumer Association (now Choice) conducted a survey which revealed 34% of the credit files of the people surveyed possibly contained errors.
Most people that query Credit Providers and credit reporting agencies about their bad credit – especially where there’s a default, are told that the listing can’t be removed but can be marked as ‘Paid’ if the account was settled.
This is often not good enough if you need to use credit over the next 5 years (which is almost everyone nowadays).
What sort of bad credit mistakes are disputable?
You should know that any credit listing which you believe is inconsistent, unfair, or incorrect can, and should be disputed. Credit rating mistakes could be anything from the credit listing placed by your Credit Provider on the wrong credit file; to the basis of the credit listing being unfounded; to incorrect notices being provided to you; right through to system errors and incorrect spelling, to name a few examples.
How do I repair my bad credit rating?
One important aspect to disputing a credit listing in Australia (also known as credit repair) is to remember is that we usually only get one chance at clearing our credit file.
Sometimes we can attempt to deal with Credit Providers to remove the credit rating default ourselves and can do more harm than good by not understanding the legislation. This is where a firm focused on credit law can help.
What does a credit law firm do?
Disputing (or repairing) a credit file involves reviewing documentation– including the credit file and all the circumstances surrounding the default, writ or Judgment.
Then the credit repairer negotiates with the creditor who initiated the listing on your behalf to remove the default.
This can also often involve lengthy requests and submissions of documentation until an agreement is reached by the creditor and the repairer to remove the offending black mark.
Not every credit file is suitable for credit repair. The credit repair company can review your situation and determine whether your case is worthy of pursuing.
How do I seek out the best firm for repairing my bad credit mistake?
Credit repair with a law firm solely focused on credit law is arguably the safest choice for credit repair in Australia. The process of credit repair is often attempted by companies without a legal practising certificate.
Some of these companies can charge big bucks to perform the service for you. Some in the ‘credit repair’ industry may also claim to give quasi-legal or legal advice without adhering to the restrictions of the law.
A credit reporting lawyer can act in court processes; identify legal issues; provide legal advice; prepare binding agreements; conduct formal negotiations and follow through with enforcement where necessary.
A credit reporting lawyer can also make formal recommendations to Credit Providers making reference to the law, and make representations on behalf of clients.
Click here to find out more about how MyCRA Lawyers can help you with your bad credit mistakes.