Are credit repair companies effective?

Here’s what you need to know about credible credit repair

Can credit repair companies help fix your credit score?

If your credit score is suffering, you might be asking yourself “can credit repair companies help me improve my score”?

The short answer is, yes. But that’s only if your credit history contains incorrect information, whether that’s one incorrect listing or dozens. But keep in mind that you can attempt to have those errors changed yourself, so a credit repair company wouldn’t can’t anything you can’t do yourself.

The advantages of using a credit repair company become more apparent when there are so many incorrect listings that it would take too much time for you to handle them all yourself.

What is credit repair?

Credit repair is the process of improving your credit score. Generally speaking, this can be done in two ways:

  1. You can improve your borrowing habits so that your credit score improves naturally over time.
  2. You notice incorrect listings in your credit history and successfully challenge to have them removed.

For purposes of this guide, we’ll be focusing on process number 2. But notice there’s no way to remove a negative listing from your file unless it’s been placed there incorrectly and even then it might be tricky and take some time.

Neither you nor a credit repair company can remove a negative listing from your history if it’s on there correctly.

What types of listings can you challenge?

Here are some examples of incorrect listings you can challenge to have removed from your credit history:

  • Behaviour you never engaged in. For example, it shows that you were 30 days late on a payment that you actually paid on time. If the credit provider disagrees with your assessment, you will have to show proof that you made the payment on time.
  • A negative listing that should have dropped off due to time limits. For example, by law, credit reporting agencies can only report defaults for five years, after which the listing should be removed from your file.
  • A negative listing that you shouldn’t have been responsible for. For example, if a judge determines your ex-partner should take sole responsibility for the credit card debt on a joint account, negative listings related to that account shouldn’t appear on your personal file To challenge this, you will need to provide the court documents that prove your case.

How do you know if you need credit repair?

Everyone should have a look at their credit history from time to time to make sure there are no incorrect listings on their file.

It’s easy to do that using Credit Simple, where you can access your illion credit score and history for free whenever you want – without negatively affecting your score.

If your score falls below 500 you should be especially diligent. Since that’s considered below average, you might find it difficult to be approved for a loan or a credit card. And if you are able to get one, you might find that the interest rates are higher than average.

How do you challenge an incorrect listing?

There are two major ways to challenge incorrect listings:

1. Challenge them yourself

You can challenge incorrect listings yourself, and this shouldn’t cost you anything. So if you have time to do it yourself, this can save you money compared to hiring a credit repair company.

Here’s what you need to do if you see something that doesn’t look right:

  1. Contact your credit provider. Dispute the listing with your credit provider and provide evidence of your claim if possible. If they side with you, be sure to have them ask the credit reporting body to remove it from your credit file.
  2. Contact the credit reporter that issued your report. If your provider disagrees, you can take your case to the credit reporter. Illion is the body that issues your report in Credit Simple, and there are others such as Equifax and Centrix. Again, make sure you have evidence to back up your claim.
  3. Contact the Office of the Privacy Commissioner. This independent body can help you if your provider or the credit reporter do not side with your complaint.
  4. Contact the Human Rights Review Tribunal (HRRT). If all else fails, you can contact the HRRT.

2. Hire a credit repair company to help you

As we mentioned, there’s no way to remove a negative listing from your file unless it appears there incorrectly. So at the end of the day, there’s nothing a credit repair company can do that you can’t do yourself.

What they can do is go through the process described above on your behalf, thereby saving you time.

Can you trust credit repair companies?

Credit repair companies are a mixed bag.

On the one hand they can truly help someone with a long and complicated borrowing history, such as an older divorcee who has a long shared borrowing history with a financially irresponsible ex-spouse.

On the other hand, they aren’t always up-front about what they can and can’t actually accomplish.

You’ll want to avoid high-pressure sales tactics, especially if they claim they can have a correct listing removed. They can’t.

Plus, if your credit history is relatively short and the incorrect listings are few, you’re probably better off spending the time challenging the listings yourself.

Pros and cons of using a credit repair company.

As you can see, using a credit repair company isn’t always a bad idea. Here’s a table that breaks down the pros and cons of using a credit repair company vs. doing it yourself:

Pros Cons
Using a credit repair company
  • Can help you save time, especially if your credit history is complex
  • Knows the relevant credit reporting laws
  • Some may be misleading about what they can actually fix
  • Will be more expensive than doing it yourself
DIY credit repair
  • Cheaper than using a credit repair company
  • Can be no less effective than using a credit repair company
  • Can be time-consuming for someone with a complex credit history
  • Might require you to know and/or research some relevant credit reporting laws

How to fix your credit score the natural way

Don’t fret if your score is low and there are no incorrect listings for you to challenge. You can still rebuild your score the natural way, albeit it will usually take a little longer.

New Zealand uses positive credit reporting, meaning your score will improve the more you demonstrate good borrowing behaviours like:

  • Paying your bills on time. The simple act of paying your bills on time will help your score naturally improve.
  • Clearing up your debts. Paying off your debts means late payments won’t turn into defaults and minor defaults won’t turn into major ones.

Bottom Line

While New Zealand credit repair companies can sometimes be helpful, it’s important to know when to use one and when not to. It’s also important to know what they can and can’t actually accomplish before meeting with one.

If they claim they can remove a correct listing from your file, they are misleading you and you should stay as far away as possible.

If they try to pressure you to pay them a high fee just for removing one or two incorrect listings, you should also steer clear. You can challenge incorrect listings yourself relatively easily.

Credit Simple
Credit Simple

Credit Simple gives all Kiwis free access to their credit score, as well as their detailed credit report. See how your credit score compares by age, gender and community and gain valuable insights into what it all means.

All stories by: Credit Simple