One of the primary aims of credit repair is to drive up a credit score.
A credit score is demonstrated as a number shown on the first page of a credit file. The lowest credit score a person can have is – 200 (other than a bankruptcy or Debt Agreement) with the highest being 1200. The higher the score the better however we like to see people with scores in excess of 600, we find that scores lower than 600 often represent problems for people when trying to secure credit. The reason for this is many credit providers use an automated system when assessing an applicant’s credit worthiness, in other words it’s a computer that makes the decision.
Many credit providers will trigger their credit scoring systems to react to a particular credit score, they may input a figure of say 600 and make a policy that anything under this will be declined.
This can be very tough for people that have say one small credit problem such as a Telecommunication default that has lowered their credit score to the 500’s. It is for this reason that even a seemingly unimportant negative credit listing can course people real trouble when they are applying for credit, in some cases for years.
A persons credit score is affected by a number of elements such as:
• Credit enquires or applications
• The type of credit provider an application has been made to (eg a payday lender)
• A change of employment
• A change of address
• Negative listings such as Payment Defaults, Clearouts, Serious Credit Infringements and Court Actions such as Court Judgements and Writs.
A credit score is affected by these events instantly, in other words the moment an event is listed such as a payment default a person’s credit score would move down. How the credit reporting agencies such as Veda Advantage calculate credit scoring is a closely guarded secret with only a select few within the organisations understanding this algorithm, however what is clear is negative credit listings drives a credit score down.
Now some good news, just as when a negative credit listing drives a credit score down, the removal of a negative listing will improve a credit score, in most cases instantly. It is important to note that the credit reporting agencies use computers to calculate a credit score so the moment a negative listing is removed a persons credit score will go up as if the listing had never been recorded.
There are a few variables to take into account such as the age of the listing. Once a negative credit listing is recorded the impact on a credit score will typically be large however the older the listing gets the less relevant it is considered to be. Let’s say a default listing is listed today and lowered a credit score by 200 points, as the years go by the credit score would slowly improve so after say three years the persons credit score may only be affected by say 100 points.
The process of credit repair involves identifying faults or errors with how a credit provider listed a negative credit item. Professional credit repair companies such as Clean Credit Pty Ltd understand the laws in this area very well and are very good at identifying such errors and in turn arranging for the permanent removal of these items from a credit file.
The effect on a person’s ability to secure credit once their credit file has been restored can be profound. Let’s say that a payment default had lowed a person’s credit score to 500 and as a result of this they were being declined for finance. After the default was removed their score improved to 600, as there would be no record of the offending credit item on their credit file a credit provider would be reviewing their credit file as it the listing had never been there and they would most likely be approved based on their new clean credit file.
John Dickinson
Clean Credit