Credit Repair: What are my options?
We all try our best to be more than just a number but, when it comes to our financial lives, one number can make or break our quality of life: our credit score.
This post may contain affiliate links and/or paid placement. Click here to read our full disclosure.
Having poor credit can feel like the end of the world. It becomes hard to make big purchases, rent property, or even land some jobs. You face high interest rates and the possibility of not qualifying for loans at all.
While having a low credit score makes life more difficult, everyone is capable of bringing it back up by taking action to improve their financial situation.
The question is: Should you take on this challenge alone or, should you call in the experts?
In this article, we’ll cover everything you need to know about credit repair. This guide can help you decide if you want to go the DIY route or hire a professional credit repair company.
Why should I care about my credit score?
Too many people ignore their poor credit. They think it’s just a number and doesn’t or won’t affect them.
This assumption couldn’t be farther from the truth. Your credit is a significant factor when it comes to major financial situations.
1. Your Credit Score Impacts Your Interest Rates
For instance, if your credit score is too low, lenders may not give you a loan. Even if you do qualify for a loan, a low score will translate to higher interest rates. The poor credit rating results in you paying much more than someone with a higher score borrowing the same amount of money.
But high interest rates shouldn’t be your only concern.
2. Having Bad Credit Could Limit Your Opportunities
These days, just about everyone has access to your credit report. Employers, mortgagees, insurance companies, and even cell phone providers may check your report to verify your standing. Your credit score can determine everything from whether or not you get that job to how high your monthly premiums will be.
Both of these scenarios are cyclical. If you have poor credit, you will have a hard time getting a loan without paying high interest rates or insurance or a job. This leaves you with even more financial burden to worry about and possibly more credit debt. But it’s totally possible to get out of the spiral and turn it around because...
3. Your credit is totally within your control!
Another reason people ignore their poor credit? They think it’s not worth fixing. They may reason that it’s too late or that there’s just no chance of it improving.
Again, these assumptions couldn’t be further from the truth. With a little dedication (or the help of professionals), you’ll be on your way to better credit.
How can I fix my own credit?
So, you’ve decided to tackle credit repair yourself. It’s a great route as it allows you to take control of your financial situation. Plus, it will save money since you don’t have to hire a professional.
Tackling credit repair on your own is possible. People do it all the time and see results. However, it can prove to be an extensive process. You have to be familiar with the law and set aside time to go through your report properly.
With all of that in mind, let’s take a look at what the DIY route entails.
Step 1: Request Your Credit Report
First and foremost, you will need to request your credit reports. The report will allow you to see your current status, catch errors, and find areas for improvement.
The Fair and Accurate Credit Transactions Act (FACTA) entitles everyone to free yearly credit reports from Equifax, Experian, and TransUnion. (These are the three major credit reporting agencies in the U.S.)
You may choose to order all of these credit reports at once. Or, you can stagger them throughout the year and get a report every few months. Regardless, the records are free to request and won’t negatively impact your credit.
Now that you have your credit reports, you must analyze them.
Step 2: Confirm Your Identifying Information
Start by confirming your identifying information. Make sure everything on your credit reports is accurate and spelled correctly. Mistakes here may mean that the rest of the information is also inaccurate.
Step 3: Check Fraud Alerts
Once you verify your identifying information, you can move on to the fraud alerts section of the credit reports. Here, you’ll find instances of identity theft or fraud that you’ve reported. If you see a new instance, you should investigate it further.
Step 4: Look for Discrepancies
Quite frankly, credit bureaus make mistakes when they compile your report. Even though these mistakes aren’t your fault, it’s up to you to find them. No one will find them for you, which means your credit score can diminish if you don’t regularly review credit reports and take action.
Some examples of discrepancies include:
- Debt from someone with a name similar to yours appearing on your account
- A previously joint debt showing up as yours after a divorce
- Duplicated instances of credit lines
Step 5: Contact the Credit Bureau
When you find a discrepancy, you should report it to that bureau ASAP.
Each credit bureau has its own proceedings. You will probably have to fill out forms, write a letter, and provide appropriate documentation.
Regardless, the institution has 30 days to look into the claim. If it agrees it made a mistake, it will remove the blemish from your report.
If the credit bureau claims it wasn’t an error, you can take further action. You may push your case to the Consumer Financial Protection Bureau to continue the dispute.
Step 6: Other Useful Information on Your Credit Reports
While you have your credit report, check out the other useful information on there.
For instance, you can look at the inquiries section where it lists who has requested your report. This information can be useful as some people want to know who is looking at their credit history.
You can also find where you appear in public records, numbers to calculate your debt-to-income ratio, etc.
How Do Credit Repair Services Work?
While the DIY route can be useful, it’s not for everyone. If it sounds too time-consuming or complicated for you, professional credit repair services are the way to go.
What are credit repair services and what can they do (and not do)?
Many people struggle with missed payments, bankruptcy, or other financial problems. Some people think that they can contact credit repair companies to resolve these issues.
The reality is that credit repair companies can’t fix the mistakes you’ve made. Their job is to find inaccuracies and report them to credit bureaus. Inaccuracies can involve anything from fraud to someone else’s debt showing up on your report accidentally.
Once the bureaus process the errors, they will remove them from your report, helping your credit to improve.
What Does a Credit Repair Company Do?
Credit repair companies do everything we’ve just described above. You are paying them to look at your report and find discrepancies. They report errors to the bureaus.
Many people choose to work with credit repair companies or professionals because they have years of experience working with bureaus and are good at finding issues and quickly resolving them.
Find the Right Credit Repair Professional
Finding the right credit repair company can be challenging. You want affordable services while avoiding all-too-common scams.
Scams are common because the Better Business Bureau (BBB) does not regulate the industry. Know that there are genuine services out there; you just have to be on the lookout.
Know Your Legal Protections
Before beginning your search, know your rights.
The Credit Repair Organization Act (CROA) protects you when you work with a credit repair company. Among its many points, the law says that companies must provide the cost of their services in writing. They must specify how long it will take to get results and can’t charge you until they complete the work. Also, companies cannot lie to you about the services they provide.
Beware of the Following Credit Repair ScamsScammer Techniques
Even though you have these legal protections, you should still be careful about which credit repair business you hire. Here are some scammer behaviors to look out for as you research your options:
1. Making False Promises
As we mentioned earlier, companies can’t get rid of the mistakes that are your fault. If a potential credit repair company is saying otherwise and overpromising, run for the hills.
You should also avoid companies that say they’ll boost your score within a certain amount of time. Due to the nature of the industry, they can’t guarantee specific results.
2. Demanding Payment Upfront
According to the CROA, a credit repair organizations cannot demand payment upfront. They must complete the services they promised before collecting payment.
3. Providing Misleading Information
A credit repair business must be honest with their clients. The law requires them to inform you of your rights. These agencies cannot lie or hold back information.
4. Asking You to Lie
A company cannot ask you to misrepresent your identity or credit information. If this is the case, they are using unethical tactics that can come back to bite you later.
Are Credit Repair Pros Worth the Cost?
In most cases, hiring a professional to help with your credit repair is worth the cost. You get experts with knowledge and training to analyze your credit, and these experts can save you thousands of dollars down the line.
Many companies also provide other services like fraud alerts and protection, score simulators, and financial coaching. These services will further help you improve your financial well-being.
How Long Will It Take for Your Credit to Improve?
As we mentioned above, bureaus must address potential errors within 30 days of you or a credit repair company reporting them. If they agree that it was a mistake, they will fix the issue in your report.
However, fixing these issues will only significantly increase your score if there aren’t other underlying financial missteps. If you have significant debt, you will have to fix this yourself. Paying bills on time, not getting new lines of credit, and waiting it out will help your credit score improve over time.
Unfortunately, your credit isn’t just a number. If it is poor, it can have a negative impact on your life. On the flip side, if it’s good or excellent, it can open doors to major benefits.
Whether you want to do it yourself or enlist a professional, you can improve your credit. Jump into action and take back control of your finances today!