Your Guide to Credit Repair
Having a good credit score is vital to financial sucess and security. It will help you secure loans more easily and with lower interest rates. If you have blemishes on your credit report like late mortgage or credit card payments, there is hope! Repairing your credit score may be one of the best decisions you’ve ever made. It will take time and energy, but the rewards for you and your family are endless: lower interest rates, better job offers, more loan options, and an overall better impression given to lenders.
What is credit?
Credit is the ability to buy and obtain goods and services before paying, based on the trust or promise that it’ll be paid for in the near future. Buying goods and services on credit allows individuals to afford particular products which they would never be able to purchase otherwise, by way of agreeing to pay for those goods and services at a later date. It's not difficult for credit users to forget their financial limitations and miss credit payments. This is only one way credit scores drop. And what's the consequence of falling behind on those payments?
- Harder to get a good interest rate on your mortgage
- Cost of living increases (insurance)
- Rejection on loan applications
- Paying heavy deposits on utility bills
Your credit report is simple enough: it includes your credit history and is used by financial institutions to determine whether or not you are responsibly with your money. A credit report is broken into four sections:
- Identity information - general information about you
- Trade lines - mortgage accounts, revolving accounts, installment accounts
- Credit Inquiries - this section includes reports of people that have asked about your credit report
- Public Record - this section includes foreclosures, bankruptcies, liens and law suits
When should I consider credit repair?
- When you fall back on your payments - Payment history amounts to 35% on the FICO scale that’s on your credit report.
- When you have over $10,000-15,000 in credit card debt or unpaid loans
- When you cant get an approval loan for a house or a car
- When you have to pay a security deposit on utilities
- When you’ve even been denied employment.
Why is it important to repair my credit?
The benefits of credit repair are directly proportional to your purchasing power. With a better score, you can easily enjoy low interest rates that open up doors to purchasing goods and services that you want. It also effects other aspects of your life as well, making it a bad idea to have debt lying around. Good credit scores will give you opportunities such as:
- Lower interest rates - creditors trust a good credit record
- Easier to get an apartment or house - easier for you to get into a lease agreement with your landlord
- Lower (or no) deposits on utilities - electric, water, phone, and cable companies may lower the security deposit
Can I repair my credit myself?
YES. You can singlehandedly write to the credit bureaus and dispute your own credit report errors.
Then why should I hire a credit repair company?
Fixing your credit is a daunting, time-consuming task that takes months or even years to complete. Credit repair services can take much of that stress away, and their years of experience can lead to unmatched results. Some companies keep attorneys on staff to help with the process; some offer educational opportunities to not only fix the symptom--a low credit score--but also heal the real problem: bad financial habits. Thus credit repair companies offer much more than simply raising your credit score.
What is the credit repair process?
- A request is made for your credit reports from all three credit bureaus (Experian, Equifax, and Transunion).
- Specialists analyze your report.
- Your negative items are ranked according to how much they hurt your credit score, such as:
- Loan Defaults
- Late payments
- Letters are sent to the bureaus to dispute errors and get them deleted from your report.
- Your results are analyzed again. If you still have negative items on your credit report, the process will be repeated.
Even with a credit repair company in the mix, though, it is important that you mail all certified letters that you have or are receiving to keep your credit repair company in the loop.
Note: According to the Fair Credit Reporting Act, credit repair companies will record all the efforts being made between you and the bureaus.
What other services do credit repair companies offer?
Credit Counseling - Many credit repair companies offer guidance and assistance from certified, trained consumer credit and debt management counselors. This guidance can help individuals develop plans that focus on their spending problems. Many companies provide this as a free service.
Credit management - Credit management services assess your credit-worthiness by helping you monitor your spending patterns. That way you can resolve issues that lead to debt and having a bad credit score before things get too out of control.
What should I watch out for?
Just like many other financial industries, the credit repair industry has its fair share of unreliable entities. Signs of a good, credible company include a good rating from the Better Business Bureau (BBB), following the Fair Credit Reporting Act, and registration with the Attorney General. Make sure to check out our comparison chart (above) and our company reviews for great credit repair company suggestions.