Credit Repair Definition And How To Go About It

When you are having trouble with your credit history, it may be a good idea to explore credit repair services and seek professional help. Still, if you feel you are up to the task, you may also take a crack at it yourself. We’re here to discuss the concept of credit repair and see what can be done to get yours back to a respectable level.

Defining the concept of credit repair

Credit repair involves engaging in activities that will help repair bad credit through the elimination of untrue and damaging entries from your credit reports. It may require challenging incorrect information to restore creditworthiness. Remember, the damage caused by errors, identity theft, and false or erroneous entries can drag your credit report down significantly.

You or a credit repair business can remove the inaccurate information by disputing them with the three credit bureaus

  • Experian;
  • Equifax;
  • TransUnion.

Other institutions that you can raise your disputes with are banks or finance companies.

The state of your credit plays a significant role in your ability to obtain loans, including those for cars, housing, and any type of credit card. An individual's capacity for a line of credit suffers when their credit score is poor. 

There may be some running around involved to get the job done but the ultimate goal is to eliminate inaccurate entries so your credit rating can bounce back.

Credit repair services and companies

Credit rebuilding might require some patience and expertise. Depending on the issue, it might only be necessary to clear up misinformation. But in certain instances, legal and financial knowledge could be essential. Many credit repair businesses have popped up through the years so make sure to do your research and verify their efficiency before hiring them.

The costs of their services can vary from company to company. Usually, the charges are setup fees and recurring monthly service fees. The upfront fee might be between $10 and $100, and the ongoing cost is generally between $30 to $150 per month. Some businesses may cost more. Don’t just look at the pricing options; compare the services you are getting so you can figure out which one gives you the best bang for your buck.

Here is a checklist of what to watch out for on a credit report:

  • A tax lien;
  • Judgment;
  • Bankruptcy;
  • Delayed payment;
  • Charged off account;
  • Collection account;

  • Repossession/Loan modification;
  • Removing long-standing credit cards;
  • Overdue credit card balances of 50% or more on even one card will result in a reduced credit score;
  • Having only revolving credit or a loan;
  • An excessive number of credit application inquiries.

Contact the credit bureaus to dispute errors and check up on any complaints to ensure they get scrutinized. Do the due diligence to ensure you deal with a trustworthy credit repair service.

How does it work?

A third party cannot alter the information provided to credit reporting bureaus. It is only possible for you to dispute inaccurate or misleading information, but so can an authorized credit repair company

The process of restoring credit relies on credit usage. Another important factor is payment history. The credit score improves with timely payments and/or a streamlined schedule for outstanding debt.

So, even though an individual makes the bare minimum on-time payments, but keeps using a sizable chunk of the credit available, the amount of debt may still harm their credit score. Liquidity is also affected by the credit amount used by an individual since their overall debt adds strain. Taking steps to reduce the prevailing debt limitation may improve credit profiles.

Things to keep an eye on

The accuracy and dependability of credit repair services might vary. The Consumer Financial Protection Bureau (CFPB) discovered most complaints mentioned fraud in their feedback regarding credit repair businesses.

Fortunately, consumers are covered. When you choose to work with a credit repair service, the Credit Repair Organizations Act (CROA) protects you with clear guidelines for how these services must conduct business. The critical points are listed here:

  • Contract cancellation is free for consumers for the first three business days;
  • An item removal from your credit reports is not a guarantee that can be offered by a company;
  • Businesses cannot suggest that you lie or assume a different identity to stop the credit bureaus from collecting information about you;
  • Services that are not complete can't get charged to customers.

When considering the services of any credit repair company, first confirm that it complies with CROA regulations. Watch out for potential warning signs, such as demands for advance payments or promises of results that appear unrealistic. The CFPB provides more tips on not getting tricked by credit repair businesses.

More importantly, you can take personal responsibility for disputing any mistakes on your credit report. Cleaning up your credit on your own won't cost you anything, and you'll steer clear of dishonest businesses that might profit from your bad credit. Remember, there is no assurance your credit score will improve even if you pay to have material deleted from your credit report.

Can I do it alone?

Yes, you might be able to clean up your credit by following these measures:

  • Get your credit reports: 

    Get credit reports from the three credit agencies: Experian, Equifax, and TransUnion. By visiting AnnualCreditReport.com, you can obtain weekly free credit reports from the three credit bureaus until December 31st, 2023.

  • Analyze your credit reports: 
    Verify personal data, and account details for inconsistencies.
  • Inaccurate information dispute: 

    File a dispute immediately if you discover any mistakes on your credit report.

  • Clear the outstanding: 

    A poor credit score and high-interest rates are possible outcomes of keeping debt on your credit card. Timely debt repayment can benefit your credit.

  • Pro Tip: 

    Many websites that provide free scores also feature free tools. A credit score simulator calculates the potential impact of financial activities on your ratings. Also, you can estimate how much time it will take to eliminate debt using a payoff calculator.

Conclusion

Having a healthy credit score makes a world of difference to our financial flexibility. Being permanently stuck with a bad score closes financial avenues for us and we can have a difficult time progressing with our plans for the future. The best advice we can give you is “Don’t ruin your credit score” but if things have already gone down this road do everything in your power to get it back to a decent number. Credit repair services are a way to go if you are stuck but make sure you are partnering up with a legitimate business.

About the author Greg Lorenzo

Greg is a financial expert who has been advising his audience on loans for over 10 years. He has a wealth of knowledge and experience in the area, and he is passionate about helping people get the best possible deal on their loans. Greg is an expert in negotiating loans, and he has a proven track record of getting his clients the best possible terms. He is also a strong advocate for financial literacy, and he regularly gives workshops and seminars on the topic.

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