What is Credit Repair?
Credit repair refers to the process of disputing mistakes and errors on your credit reports. Each credit bureau (Equifax, TransUnion, and Experian) maintains its own proprietary version of your credit report. The credit bureaus strive to maintain accurate information, but errors can occur.
Credit repair is the process you use to try and correct those errors. The Fair Credit Reporting Act (FCRA) lets you submit a dispute whenever you disagree with any information that appears on your credit report. If the information cannot be verified as accurate within 30 days (occasionally 45 days), the credit bureau must remove the item you disputed.
What Does Credit Repair Do?
Credit repair allows you the chance to dispute and then correct inaccurate negative items on your credit reports that could be hurting your credit scores. If you’ve been working to get out of debt, there is a wide range of errors it can potentially create.
- Missed payments that you made on time, which could happen when you arrange a repayment plan with reduced payments.
- Incorrect account statuses, such as an account reflected as “Settled in Full” instead of “Paid in Full.”
- Outdated information, since negative accounts can only remain on your credit report for a set period.
- Re-aging, which occurs when a debt collector or creditor changes the “purge-from” date of an account and causes it to remain on your report longer than it should.
Credit repair does not give you a way of removing negative information that’s accurate and verifiable. It isn’t a magic bullet that can guarantee you a clean credit report with no negative items. If a negative item can be verified by the creditor or lender, then credit repair can’t help you remove it.
But mistakes and errors happen in credit reporting. In fact, they happen more often than you might think, especially when you face challenges with debt.
Credit Repair Might Improve Your Credit Score
Credit repair isn’t guaranteed to raise your credit score. But there’s a good chance it could if negative, inaccurate information is deleted from your report.
In many cases, people who have errors corrected on their credit reports see their scores improve. However, the amount the score increases can vary based on:
- Where you score started – high scores tend to increase slower than low scores
- How many other negative items you have and how long ago you incurred them
- The age of any negative information that appears on your report
If your reports contain a lot of incorrect or questionable information, the potential credit score boost from credit repair can sometimes be huge. It just depends on your unique situation.
How to Repair Your Credit
There are a few different ways to repair your credit. Which path you choose depends on:
- Your budget – i.e. how much you can afford to pay
- Your confidence level in making disputes on your own
- The number of negative items you want to dispute
The more items that you wish to dispute, the more you may potentially boost credit score. If you have a range of items to dispute, it may be worth it to spend money on a professional credit repair service. In the long-run, the money you save by securing lower interest rates with a better score may justify a little money spent upfront.
However, it is possible to repair your credit on your own for free. That’s also part of the rights protected under the Fair Credit Reporting Act. You can also find paid credit monitoring tools that help you make disputes on your own. This type of tool generally costs less than a paid repair service.
Still, whether you use the free credit repair process or work with a company, the steps in the repair process are basically the same.
- Obtain your credit reports from each of the three credit bureaus.
- Review your reports to identify potential errors and mistakes.
- Dispute any items you find, either with the credit bureau that issued the report or with the credit issuer that furnished the information.
- Wait 30-45 days while the credit bureau or issuer attempts to verify the information.
- If the information can’t be verified, then it must be removed.
- You will receive a free copy of your credit report, so you can confirm the information was removed.
The Free Process
If you go through the credit repair process for free, you do all of the above steps on your own. Here’s what your part of the process will look like in practice:
- You can download your credit reports for free once every twelve months. Simply go to annualcreditreport.com to get your free copies each year.
- Then you review your reports for errors focus on the section that details negative information since those are the items that are hurting your score.
- Submit your disputes online or through physical mail, making sure to provide documentation that proves your case.
It’s important to note that there’s a certain art to do-it-yourself credit repair. So, if you decide to go through this process on your own, you may need some additional guidance.
Should I Use Credit Repair Software?
Credit repair software helps you to keep a track of all the records and functions during your credit repair works. This software will let you keep everything on your pc, which you need to complete the credit repair process. You can refer any materials you need or check the status of your works and efforts, all this with just a few mouse clicks.
The main reasons for you to use credit repair software are given below:
- If you want to increase your credit score
- It helps you to decide what all items to be disputed from your credit report
- It helps dispute items from your report
- You can create dispute letters and send it to the reporting credit bureaus
- Keep track on what all activities you have done for your credit repair and what all are to be done
- It helps you stay focused and organized
While some processes in the credit repair software’s are not automated, so you need to learn them in order to perform the credit repairing task effectively. For those people who don’t have time to learn it or use a software to repair their credit, the best way is to give this task to a credit repair company as they have professionals in this field to use the software in the most efficient way.
Credit repair software can provide you many advantages if you have planned to repair your credit report yourself. You just need to spend some time to educate yourself on how to use this software. But the decision is completely yours whether to do it yourself with the aid of this software or to hire someone else to do this hard task for you.
How to Improve Credit Score?
The first advice that any credit repair company or a financial advisor say to increase your credit score is to pay your bills on time. This is the most simple, yet useful tip to increase your credit score which most of the people underestimate its prominence. Most of the lenders tend to look on how timely you were to pay your bills in the past. Late payments can severely damage your score and the more recent your payment problems are the worst it is. 35% of your credit score is based on your credit history of paying bills on time. So to raise your score, start paying bills on time from today and you can see the raise in your score after a month.
Another method to generate credit score is to get a small loan. If you are applying for a big loan and you have no credit history or debt and thus no credit score, then it may be difficult for the lenders to prove that you are a good borrower. So go and get a small loan and pay it off in time and thus raise your credit score. Make use of this tip very wisely as many small loans and increased debt may affect badly to you.
To maintain your credit score you should not close paid-off accounts. If you close your old accounts, it reduces your total available credit, which in turn changes your utilization ratio. This can lower your credit score as shutting your old accounts shortens your credit history.
There are many other ways also to raise or maintain your credit score. Some of them are,
- Keep the balance low in your credit card
- Maintain multiple cards wisely
- Keep discipline on your spending habits
- Keep a discipline on buying more credit cards if you already have a debt on your present credit card
- Pay off your credit card balance
- Keep your debt always below 35% of your available credit
Tips to Avoid Credit Repair Issues
The credit repair services have to follow certain obligations towards their customers. All the genuine credit repair organizations are governed by a law known as the credit repair organizations act. This federal law requires every credit repair service to accomplish certain commitments towards their customers. You can avoid the credit repair service if they don’t follow the rules according to this act.
You can find whether a credit repair service is a scam or not by checking on the factors I am going to provide below.
- If the credit repair company asks for a payment before they perform their credit repair services, then you have to consider whether to believe them or not. Think wisely and make a decision. Check on the reputation of that company and if you find them trustworthy then you can make a payment. Otherwise don’t.
- If the company forces you to perform illegal practices to clear your credit report and raise your score, then don’t hesitate, quit that company and register a complaint against them. The illegal actions may include, creating a new credit identity, remove accurate information’s from your credit report, etc.
- The credit repair company must provide a copy of the “consumer credit file rights under state and federal law”. This will let you know your rights to obtain an accurate credit report and settle the disputes due to inaccurate credit report information.
- Ask the credit repair company to provide the contract to view before you are asked to sign in it. The contract must include the following information’s, if it’s a genuine company; the amount you are being charged for their service, the time period they require to perform their service on your behalf, the name and business address of that company, complete details of the services that they will provide you. Most of the contracts contain a statement that they can cancel the contract within 3 days.
How to Choose a Credit Repair Company?
First of all let me tell you that don’t go for a credit repair companies help and service, unless you have tried your best to sort out the problems in your credit report and failed to do it. Most of the credit repair companies offer services that you can do all by yourself. But in some cases you may need such companies help to sort out the problem and solve it. If you are a very busy person and you don’t have time to go after your credit report, then it’s ok to give your bad credit report for its repair to such companies on the fee they charge. Otherwise try yourself first and then only seek their services.
If you have decided to seek a credit repair company for your service, then don’t pick up your phone and fix an appointment. You have to consider certain things before doing so.
Most of the companies that offer credit repair services are scams. They might buy money from you as their fee and disappear overnight with your money. So beware of such companies and their traps. You can do this by doing a research on the company. You could get help from the state attorney general’s office or any other consumer assistance agencies run by the state. You can research on the companies track records, complaints registered against that company and the nature of the complaint, etc. if you find that company satisfactory, and then you can approach them.
Some companies may be promising you things that may be illegal, to correct your credit report. Don’t fall in such traps and sign any contract with them. You can go ahead and file complaint against such companies who offer illegal services.
After all these factors if you decide to go ahead with that credit repair company, then consider these things too.
- Get a written and signed blue print of the services which that company offers.
- Don’t make a payment before the render their services.
- Never listen to their misleading promises that they will remove all the negative information from your credit report.
- Don’t listen to their illegal advices that they will create a new credit identity for you.
Credit Repair Mistakes you Should Avoid in your Financial Life
If you find your credit report with a lot of negative listings and a low credit score, then it’s time to repair your credit. Credit repair is not a simple and a quick thing that you can do in one or two days. It takes some time and in most case it requires more than a month to raise your credit score. If you are going to repair your credit or if you are going through that process, then you have to be careful to avoid some mistakes that usually occur during the credit repair process. I’m listing here some of the most common credit repair mistakes that you should avoid in your financial life.
Completing ignoring your credit report : – the first and probably the biggest mistake most of the people make is to ignore their bad credit report completely without even trying to repair it. For such people, it may not be a big problem at present, but after a few years, the bad effects of your poor credit will began to come up. If ever you come in need of a loan or insurance or a credit card, then a bad credit can make it very expensive or sometimes even you get denied of these things. So, it’s better late than never. Go and check your credit report and repair it as soon as possible and try to maintain a good credit score throughout your life.
Cancelling your credit card accounts : – most of the people make this mistake without realizing the fact that by closing your credit card account can bring down a good portion of your credit score. Especially closing the credit card account with a balance or an older credit card can affect your credit score very significantly.
Following illegal schemes for credit repair : – if you are going after credit repair companies who give promises to repair your credit in a few days by undertaking illegal means, then you are doing a lot of harm to your financial position. You cannot repair your credit in any easy method. It takes time and effort to solve the credit issues, but still it can be solved. Some of the common illegal practices the credit repair companies undertake are, to create new credit identity, disputing every entry on the credit report, using new tax identification number to appear in good credit standing etc., which brings you into a lot of legal issues.
Failing to follow up with your repairing activities : – once you have begun your credit repair then do it sincerely and with patience. There is no way to repair your credit quickly and in an easy manner. So patience is required for this purpose. You may have to spend months to raise your credit score, but if you are not following up on the activity, then you cannot be sure that the credit repair is having the right impact.
Paying off debt with your credit card : – some of the people try to pay off their old debts with their credit card, thinking that they can raise your credit score. But, actually they are bring more debt with more interest rates by using their credit cards. So don’t fall in this financial trap.
Not checking your credit report : – most of the people tends to make this mistake. They begin to repair their credit without even checking well, on what all they have to focus to repair their credit. You must have a copy of your credit report in order to begin the repair from the start.
Would you Like to Know Which Credit Repair Software/Program Really Works?
Your credit history is a very important part of your financial life. It can determine whether you can buy a house or a car, and how much you’ll pay for it. There are many credit repair services that can help you raise your credit score; but there are just as many scams. Find the best credit repair companies that are sure to get results! Our recommendations can definitely help get you choose the best!
