Nobody is flawless. Everybody makes mistakes that lower our credit score. missing one, two, or three payments, a bill being sent to collections, exceeding our credit card limits or going beyond our means. Every one of us has been there at some point.
Some of these errors you simply have to put up with until they disappear from your credit report. Regarding others, you can take action. This is where the concept of credit repair, which is just going over your credit reports and correcting problems, comes in.
Here is a look at what credit repair actually entails and the five key things you need to be aware of before beginning.
What exactly is credit repair?
Perhaps you’ve heard of credit repair before, sometimes in relation to debt consolidation or management. Simply having outdated or erroneous information removed from your credit reports is credit repair. These things can be harming your credit score, and you have the right to have them taken off your reports if they don’t belong there.
According to Leslie Tayne, a financial attorney and the author of Life & Debt, “people frequently choose to participate in credit repair when they feel as though they need further aid or guidance in getting their credit back on track or boosting their score.” This might be the case if they’re preparing to take out a sizable loan, like a mortgage, or if they’re just seeking to strengthen their general financial situation.
You can repair your credit on your own, or you can hire a company to help you through the process. But before you decide on either path, consider the following:
1. Credit repair can take a long time
Credit scores don’t change overnight, and the process of identifying and disputing entries on your credit reports takes time. Start by requesting credit reports from all three credit bureaus: Experian, Equifax, and TransUnion. You can make this request and get your reports for free at AnnualCreditReport.com, which will save you some time.
If you find information on your reports that’s inaccurate or should have been removed, you’ll need to contact either the bureau or creditor to dispute the item. There will be an investigation, and if it’s determined that the information should indeed be removed, processing that will take more time. A debt validation may also need to be provided, which involves contacting a debt collector in writing and asking for proof of what you owe and your liability for that debt.
It can take even more time for your credit reports to get updated and then more again for your credit scores to be affected. The bottom line is that credit repair is not an instant fix.
2. Not all negative information can just go away
Your credit report may contain inaccurate yet unfavorable information that cannot be changed. Disputing factual information will out to be fruitless. The dispute process is just intended to get rid of false information, not all negative information. You will just have to wait for the unfavorable comments to disappear from your credit record if they are real. This process might take seven years.
Bankruptcies, as well as some late payments and collections, are examples of such negative items. If you caused these, they are true and probably won’t be taken down after an investigation. The good news is that the unfavorable information on your credit report has less of an effect on your score the older it is.
3. Even if you do credit repair, you might not end up with a great credit score
Unfortunately, credit restoration doesn’t involve debt settlement or changing your credit history—it just involves getting rid of false information. There might not be much you can do in terms of credit restoration if the majority of the negative information on your credit report is true.
Even if you are successful in getting some unfavorable information from your reports erased, your credit score might only slightly improve. Your credit score will probably rise 5 to 10 points for each hard inquiry that is deleted. Having paid collections removed (a past due account that was sent to collections and then paid off) will, on average, boost your score by 10 to 50 points.
4. Credit repair companies will do the work for you (for a fee)
Legitimate credit repair businesses exist to make sure that your credit reports are as accurate as possible and assist you in obtaining the finest credit scores for your needs, according to Grant. Having a professional examine the correctness of your reports can be a valuable asset because handling complex financial information can be a strain.
However, he cautions that many businesses make false claims that they can eliminate your debts other legitimately unfavorable entries from your credit reports. The Credit Repair Organizations Act (CROA) was established to regulate credit repair businesses in an effort to protect consumers from fraud, however this does not imply that scammers still exist.
The Consumer Financial Protection Bureau says to look out for the following warning signs when considering a credit repair service:
- Pressures you to pay upfront
- Promises to remove negative credit information
- Asks you to dispute accurate information
- Doesn’t explain your rights under the CROA and Fair Credit Reporting Act
- Tells you not to contact the credit bureaus personally
Your credit score is always in your control
Credit repair alone will only get you so far in raising your credit score. Focusing on adopting healthy financial habits, such as making payments on time and checking your reports regularly, is a smart next step to take. This can help you avoid having to go through credit repair in the future and keep you on the path toward earning that great score you’re after. If you’re in need of credit repair services Kredaroo Credit Counseling is the perfect choice.