Credit repair is the process of trying to improve your credit score. Lenders use your credit report and credit score in order to judge your reliability as a loan candidate. Your credit report indicates your ability to handle debt responsibly and will help banks decide if you are a desirable loan customer, so cleaning up negative and inaccurate items will raise that score and help you save money.
How is your credit score computed?
Your credit score is determined by an algorithm developed by the Fair Issue Corporation (hence its other name of FICO score). Three corporations, called “credit bureaus”, specialize in collecting and reporting on financial histories. Those three companies are Equifax, Experian and TransUnion. While their calculations are secret, we do know that the basic building blocks of your credit score are founded on: Inquiries, Mix of Credit, Age of Credit, Debt Ratio, and Delinquencies.
Why is a good credit score important?
A good credit score can save you thousands or tens of thousands of dollars on mortgage loans, credit card interest rates, car and student loans, and even insurance. Many employers are even now looking at credit reports when screening applicants!
Are there quick fixes and tricks that are guaranteed to improve your credit score?
No. Credit repair is an ongoing process of making good choices to manage your debt load and finances responsibly, and then making sure accurate information shows up on your credit reports. Stay far away from anyone who promises guaranteed results, quick fixes, or tricks.
So how does it legitimately work?
Credit repair is a process of identifying incorrect, misreported, and duplicate items on your report and then sending dispute letters to the credit reporting agencies to challenge the validity of negative information. The credit bureaus are carefully governed by the Fair Credit Reporting Act that requires them to either fix the problem or respond with evidence that it’s true within a certain timeline. Either they will fix the inaccurate negative credit item or if they don’t have evidence or don’t respond in time, the item will be removed. Either way helps your credit score to rise to where it should be.
Are there really that many errors on credit reports?
You’d be shocked! The credit bureaus are in the business of selling information first and foremost so duplicates, wrong addresses, misspelled names or aliases, identity theft, and old items that should have fallen off are all examples of the common mistakes that show up. According to the Consumer Data Industry Association, a trade organization for credit reporting agencies, credit repair disputes account for no less than 30% of disputes received by the credit reporting agencies.
What are credit repair companies?
Credit Repair companies act as advocates for consumers, doing the hard work and exercising the knowledge to dispute and remove negative items. Credit repair companies work for the client who hires them for their services.
Why do so many credit reporting companies have a bad reputation?
Unfortunately, it seems there are a lot of bad companies and services in the realm of finances. Far too many credit repair companies make claims that are not true, offer guarantees and promises just to collect large fees, don’t represent their clients to the best of their abilities, or claim legal representation when none exists.
Can you try to do it yourself?
Yes, you can try to repair your credit yourself and write dispute letters to the credit bureaus.
Why would you hire a credit repair company?
“Trying” it and successfully obtaining the desired outcome are two different things. A good credit repair agency has the knowledge, experience, manpower, systems, and dedication to achieve the best possible result.
Think of it like this: Do you do your own taxes? Trade your own stocks? Maybe you do, but most people chose to hire the best possible professional because it’s important enough to get right.
Other than dispute letters, what else should be included in a responsible credit repair plan?
First, devise an action plan for things you can do to maximize your credit profile; simple adjustments to the way accounts are being reported can have a massive impact on your overall credit grade, and profile. Next, review your credit line by line to identify items that are potentially reporting incorrectly, items that are outdated, unverifiable, misleading, or questionable. Assess all of your debts and loans to see what is helping you and hurting you, not only in regards to credit score but in the context of your whole financial picture. Last, there should be continuing education so you’re never left operating in the dark as you make important decisions about your credit score in the future.
What assurances do you have when you use a credit repair company?
Credit repair companies are prohibited from making promises or guarantees. They also cannot charge customers until after services have been performed. Make sure they disclose that you can try to improve your score yourself and follow all state and Federal laws and regulations as laid out in the Credit Reporting Organizations Act. Good credit repair agencies let you log in or check in at any time to track the exact progress of your disputes and your file. You will have direct access to a professional staff member who answers all of your questions and proactively coaches you.
How do you make the best-educated decision and find the right credit repair company?
Check in with the Better Business Bureau to make sure a credit repair agency is registered and in good standing with a good rating, or else do not hire them. You can also ask them for a statistical range of past results. This is not a guarantee that you will receive the same thing, but a reasonable range of expectations. Make sure your credit repair company has a physical brick and mortar office you can walk into if you wish and professional counselors you can call any time. Ask them point blank if all of their practices are ethical and legal and request documentation in compliance with the FTC and CROA.
Do you have any questions or would like more information about credit repair? Feel free to contact us for a complimentary consultation.