Watch out for credit repair services

By Marianne Curphey

If you have made mistakes with credit, you may be tempted to use the services of a credit repair agency to improve your credit score or improve your chances of getting a new loan. But the credit repair path is strewn with perils -- so much so that regulators are planning new moves to oversee it.

Experts generally warn consumers to stay away from credit repair agencies. They say the firms may give you credit repair advice, even though what you really need is guidance on how to avoid credit problems in the first place. Or the agencies may suggest ideas that are just plain bad - particularly when it comes to county court judgments (CCJs), which are declarations from a court that you owe a creditor money.

"There used to be a problem with companies offering CCJ removal and credit repair, some of which was not possible or legal," says James Jones, head of consumer affairs at credit reference agency Experian. "These companies could ... potentially make people's situations even worse -- for example, encouraging people to lie in court about CCJs, [which] could land them in serious trouble."credit-repair-agencies

Such practices have drawn the scrutiny of government officials and prompted a reorganisation in the industry's oversight. In 2012 the Office of Fair Trading (OFT) issued clarifications on its standards for debt management and credit information services, including credit repair. Starting in April 2014, the Financial Conduct Authority (FCA) will take over the regulation of the consumer credit industry from the OFT and it is promising more robust enforcement of consumer protections.

"This should provide a more consistent approach to consumer protection," says a spokesman for the Department for Business, Innovation and Skill. "The FCA will have tough, responsive powers to tackle emerging problems in credit markets quickly and effectively from April 2014."

Even with the bureaucratic change, Paul Crayston, spokesman for the nonprofit credit advice firm National Debtline, says there is very little a credit repair firm offers that consumers can't do themselves, often for free. For example:

1. Removal of County Court Judgments from a credit report.
If you genuinely don't owe the money, you can ask the court to cancel a CCJ or High Court judgment. This is known as getting the judgment set aside. You can do this if you didn't receive, or didn't respond to, the original claim from the court saying you owed the money.

National Debtline provides a guide on how to set aside a judgment in the county court. Information is also available free from the county court.

You'll have to go to a private hearing at the court to explain why you don't owe the money. If you don't go to the hearing, your application will be rejected and you'll have to pay the amount in the judgment.

But be careful about trying to change CCJs.

"If you apply to a county court to set aside a judgement and have it removed and you don't have a good reason for it, then you can be in a worse position, ultimately," says Crayston.

Say, for instance, the court suddenly produces evidence that you did get the summons after you claimed in court that you did not. You could be prosecuted and sent to prison for perjury, says Jones.

Alternatively, if you had your debt removed, but it was found to be legitimate and you failed to pay it within a month, the county court will issue a new judgement, which will stay on your file for six years.

2. Removal of adverse credit account information.
Don't be fooled into believing promises about getting, say, a legitimate default eliminated from your file. "This information can only be updated by a credit reference agency under the instructions of the lenders who provide and own the data," says Jones. "Lenders will only consider amending their information if it is incorrect."

Get a copy of your credit report and make sure all your information is correct. If it's not, your first step should be to write to the creditor and see if it will resolve the problem. Beyond that, you can add a notice of correction to your credit report and as a last resort, you can complain to the Financial Ombudsman, which can order companies to correct errors.

3. Credit rating improvement.
"There are simple ways to ensure your credit rating is the best it can be, and you can do them yourself," says Crayston.

First, ensure you are on the electoral register. Consider closing unused cards and don't make too many applications for credit, as it will make you look desperate. Ensure all accounts show the same address and apply for credit before moving house.

If you are rejected because you have poor or no credit history, the best way to improve your chances is to get a credit card, then use it responsibly. Pay off the balance monthly and never miss a payment.

See related: Turned down for credit? What to do next, Payday lenders face severe crackdowns

Published: 11 February 2014