How to understand credit reports and where to get the right advice.
Consumers must be beware of companies that say they can fix poor credit ratings, says the Australian Securities and Investment Commission (ASIC). Its campaign launched in early June seeks to help people understand that using such credit repair and debt management firms can mean they pay high fees and not get the solution they're seeking.
The initiative is being promoted via a multi-agency approach—with other Commonwealth, state, and territory agencies. And appears to have followed from an increase in complaints and its 2016 report that found that some debt management firms:
- Did not explain well enough the fees and costs associated.
- Often required payments before providing any service.
- Used high-pressure sales techniques.
It's been found that these companies frequently fail to fix credit and debt issues, leaving people in a worse financial situation. At Worrells, we've seen the devastation—when people are already stressed, then becoming even more vulnerable emotionally and mentally after taking (and paying for) bad advice. How stress can manifest and affect people is explained in our article, click here.
ASIC Deputy Chair, Peter Kell said in the ASIC media release: consumers may not know that free services exist to help them fix credit reports or resolve their debt problems, such as the National Debt Helpline (1800 007 007 or ndh.org.au). And that, "If people are having difficulty obtaining loans because of an incorrect default listing on their credit report, there are actions they can take that are free of charge to have it corrected".
ASIC's media release also outlined a simple step that anyone can take to remedy an invalid credit rating: contact the creditor requesting its removal. If the response is not satisfactory, ASIC explains that you can get help from the relevant dispute resolution service.
Critically, consumers should be aware that when applying for credit/loan that lenders review their credit report, and therefore applicants should check the veracity of their credit history. Consumers can obtain one free copy of their credit report each year from a credit reporting agency.
So, what's on a credit report? ASIC's MoneySmart website explains that it will include the following:
- Personal details—name, date of birth, current and past addresses, employment and driver's licence number.
- Joint applicant name—if both names appear on the credit card contract.
- Any current credit card/s information.
- Arrears brought up to date—any unpaid/overdue debts that have now been paid or settled.
- Defaults and other credit infringements. For example, utility bills or loan payments 60 days (or more) overdue and where debt collection activity was initiated.
- Guaranteed credit applications—if guarantor for any credit or loans.
- Formal insolvency or court judgements—debt agreements, personal insolvency agreements bankruptcies.
- Credit liability information. Each credit product held in the last two years: the credit provider's identity, its product type, credit limit, and opening and/or closing dates of the account are included.
- Repayment history. The last two years of dates credit payments were due, whether or not payments were made by the due date (non-payment or partial payment are considered missed payments), and the dates missed payments were made.
- Commercial credit applications—any commercial or business loans since March 2014.
- Report requests—which credit providers have requested credit report copies.
The relevance of credit reports is due to increase for some ABN holders with outstanding tax debts that meets certain criteria. Our article explains how this is proposed to work click here, and is due to commence "following the passage of legislation" accordingly to an ATO release.
We commend ASIC in its initiative and urge that people do their research on such financial matters via its MoneySmart website. Our Worrells Partners are qualified and regulated insolvency practitioners who will discuss any financial concern without any obligation. We welcome you to contact your local Worrells office to get the right information and advice for individual circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.