Hi Nicole, I'm not sure why but I was just turned down for a car loan. I have a steady $80,000-a-year income. I don't have much in savings but have started putting away $200 a fortnight. I suspect there might be something dodgy on my credit record back from my student days. I called a credit repair service I found - please don't name them - that says they can clean up my credit file. I'd have to pay $1200 but they say I should be able to get my car after that. Is this a good idea? - Mike, Maroubra
No Mike??? if this is not a scam, it's darn close to it.
So-called credit repair agencies have the same ability to rescue your record as you do yourself. Many will also try and migrate you onto other products - everything from a "budget management" program where you hand over your purse/wallet strings "for your own good", to a negotiated "debt agreement" (if you were struggling with repayments) that's extreme and similar to bankruptcy.
For this they'll charge nose-bleed upfront fees and in many cases hit you with ransom-like, last-minute demands for more money.
But in the words of the Consumer Action Law Centre, which often deals with the messy aftermath: "These predatory companies are flourishing in a regulatory void. The current laws don't prevent the harm."
Do this instead Mike:
1. Obtain a free copy of your credit report from Equifax (Veda rebranded), Experian or Dunn and Bradstreet. Don't be fooled into paying for this; you're entitled to one snail mail copy a year (and Dun and Bradstreet will even email it after a three-day delay).
Also for free you can get your credit rating itself - yes, we're like the US now with a score and, increasingly, interest rates are based on it - from finder.com.au. But you'll need to create an account and (as with all such services) should expect emails from them.
2. Go through this with a fine-toothed comb. What's on there that has hurt you? A bill missed by 60 days or more? Perhaps your name was on a share house utility ??? and your flatmates skipped out on it? It will be five years before this is expunged from your history - and (sorry) you'll need to pay any outstanding debt.
3: Checking for errors is the only potential quick fix. Contact the provider first, then its ombudsman if necessary and finally a credit reporting agency to correct the mistake.
Meanwhile, don't make more loan applications until you're squeaky clean - they'll drive your score down further. And take heart: Australia's consumer ministers have just resolved to look at regulating debt management firms and announced a consumer education campaign to publicise the free alternatives. National Debt Helpline: 1800 007 007 or ndh.org.au.
Nicole Pedersen-McKinnon is a money educator and consumer advocate: themoneymentorway.com. You can write to her for help solving your money problem, or with a consumer question, at email@example.com.