The Credit Repair Process Broken Down


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Credit repair can be a critical process for anyone who has invalid items on his or her credit report, and the government estimates that a surprising 79% of credit reports contain inaccurate information. It is important for people to check their credit reports regularly and make sure that they get anything that shouldn’t be there removed. Because your credit can impact your ability to buy a house, qualify for an auto loan or lease, or even get a job, it is important to understand your credit worthiness and how to dispute invalid items.

What Is a Credit Report?

Your credit report is a comprehensive file that contains all of your financial information as reported to the credit bureaus. There are three different credit bureaus, Experian, Equifax, and Transunion. Creditors do not all report to the same credit bureaus, so your credit reports may differ.

However, there are rules and regulations that protect you, and the information in your credit reports is required by law to be accurate. If your balance is incorrect, they must correct it. If there are accounts that don’t belong to you on your credit report, they must remove them. You won’t know if these items are there unless you review your credit report regularly. The law allows you to receive a free credit report every year, and this is a great place to start.

Your credit report starts with a section that contains your personal information. You will find your name, any other names you may have used, your address, your phone number, and your employment. This is an important section to check because sometimes they include the name of a relative that might be similar to yours, even though it should not be on your credit report.

The next section will have any court-related financial information. You will find bankruptcies, liens, wage garnishments, and judgments here. Nothing should be there that isn’t yours.

There is also a section that lists your creditors, including mortgages, auto loans, credit cards, and student loans. This section has a lot of detailed information, including how much you owe, your original loan amount or your credit limit, your payment information, including late payments, and the status of the account. You will find charge offs in this section, which are accounts that closed after you defaulted.

It is common to find errors in the creditor section because some creditors might report your balance one month, and then they may not report it for a few months. Your balance will go down if you are paying it each month, and it helps your credit to show these on-time payments. You can find other errors too, so make sure that everything in this section is correct.

There is also a section for collection accounts. These are accounts that have been sold to collection companies. This article will address how to handle these accounts later on.

Finally, your credit report will show any credit inquiries from the past two years. It is important to make sure that you never apply for a lot of different credit cards at the same time because creditors look at this and assume that you were in financial trouble.

What Is a Credit Score?

Your credit report is used to determine your credit score. Your credit score can range from a low of 300 to a high of 850. It gives creditors an idea of how risky it is to lend money to you. They break this number down into the following categories:

  • Excellent: 800 to 850
  • Very Good: 740 to 799
  • Good: 670 to 739
  • Fair: 580 to 669
  • Poor: 300 to 679

If your credit score is 700 or higher, you are usually eligible for better interest rates, which means that your loan will cost you less money over time. If your score falls below 640, you may find that you are hit with high interest rates, and some creditors will require you to have a cosigner. Your credit score can play a factor in many aspects of your life, from obtaining credit to being hired for certain jobs, to renting a home, to a required deposit for utilities, cable, cell phones, and more.

Your credit score is calculated by taking different categories that are weighted in the following way:

  • Your payment history (35% of score)
  • Your credit usage (30% of score)
  • The length of your credit history (15% of your score)
  • The type of credit you have (10% of your score)
  • Credit inquiries (10% of your score)

Your payment history and your credit usage make up 65% of your score, and they play a huge role in your creditworthiness. This means that paying your bills on time and keeping your credit usage below 30% of your available credit is the most important part of your score.

The length of your credit history is also important, and you should not close old accounts. If you have an old account that you no longer use, you should make a small charge every month or two and pay it off when the bill comes. This will keep it active and keep your length of credit longer.

The type of credit refers to the diversity of your credit portfolio. They are looking for a mix of accounts, including credit cards, revolving loans, auto loans, student loans, and mortgages. Having a good mix of credit with on-time payments gives creditors confidence when they are deciding whether to lend to you.

The last portion, your credit inquiries, also plays a role. They do not want to see you applying for credit often. Make sure that you only apply for the credit you need, and think carefully before you fill out credit applications.

What Is Credit Repair?

Credit repair is when you dispute invalid items that you find on your credit report. You can find these items yourself by reviewing your credit report, and you can file disputes online or by mail. You can also hire a credit repair company to help you file these disputes. Some people prefer to hire them because they are professionals with years of experience in dealing with the credit bureaus, and they simplify the entire process.

You can find different types of inaccurate items on your credit report, including the following:

  • Duplicate accounts
  • Inaccurate accounts
  • Accounts that don’t belong to you
  • Incorrect inquiries
  • Inaccurate address or name

Credit repair companies are well-versed in the Fair Credit Reporting Act, which regulate credit reporting agencies, your creditors, and others who want to see your credit report. This law allows you to see what is in your credit report, and it gives you the right to dispute anything that is inaccurate. It also limits the length of time that negative items can remain on your credit report. Most negative items can stay on your credit report for seven years, including the following:

  • Foreclosures
  • Repossessions
  • Late payments
  • Short sales
  • Charge offs
  • Tax liens (from the date of the payment)
  • Chapter 13 bankruptcy

In addition, collection accounts can remain there for seven years and 180 days. Bankruptcies other than Chapter 13 can stay on your credit report for 10 years from the date of filing.

When you find items that don’t belong to you, items that are on your report more than once, and items that should have fallen off of your credit report, you have the right to file a dispute to have them removed.

What Does a Credit Repair Company Do?

If you choose to work with a credit repair company, they will dispute inaccurate items for you. You can go over your credit report first to see if there is anything that is invalid. They will usually offer you a free initial consultation to go over your report with you to make sure that there are items that they can dispute.

You cannot dispute items that are valid debts or legitimate late payments. You can only dispute items that should not be on your credit report. The credit repair company will order copies of your credit report from all three credit bureaus. They have experience in reviewing credit reports to find inaccuracies, and they will also talk to you to confirm any debts.

Once you move forward, they will file disputes on your behalf. They know what documentation you will need to prove the invalidity of the debts you dispute. They also have a lot of experience dealing with these credit bureaus, and they will monitor your cases and stay on top of it for you.

Once a dispute is filed, the credit bureau is required to verify the debt by asking the creditor to provide evidence that it is valid, correct a mistake, or remove it from your report. This can take some time, but it is very important to make sure that you have invalid items removed as soon as possible before they are able to impact you and prevent you from getting credit that you rely on.

Are Credit Repair Companies Legitimate?

People often wonder whether credit repair companies are legitimate. The reality is that as with any business, there are good companies and others that are not so good. It is important to research any credit repair company before you hire them. The Federal Trade Commission passed the Credit Repair Organizations Act to protect consumers from unscrupulous companies. You can use some of this information to make sure that a credit repair company is worthy of your business.

This Act issues the following guidelines and regulations for credit repair organizations:

  • They cannot remove valid debts or items from your credit report.
  • They cannot tell you to lie to remove a valid debt.
  • They cannot promise that they will raise your score.
  • They cannot recommend that you open a new credit file with an EIN (Employer Identification Number).
  • They cannot charge you before they perform their services.
  • They must explain your legal rights in a written contract and write out the services that they will perform.
  • They need to let you know that you can dispute the items on your own.
  • They need to tell you that you have three days to cancel without any charges.
  • They must tell you how long they estimate it will take to get results.
  • They must tell you your total cost.
  • They need to disclose any guarantees.

There are a lot of rules, and if a credit repair company isn’t following them, you should stay far away from them. In addition, you should check to see how many people a credit repair company has successfully helped, and you will want to look for customer complaints. This will help you to learn more about the company and past customers’ experiences with them before you make a decision.

Why Is Credit Repair Important?

Whether you file disputes on your own or you hire a credit repair company, credit repair is important because invalid items can do damage to your credit score. The longer you go without fixing it, the more damage it can do, and it can impact your creditworthiness.

Your credit can impact different aspects of your life, so you need to understand it, review your credit report regularly, and dispute items that are not valid. You can choose to dispute them yourself or hire a credit repair company to help you. When you have any invalid negative items removed, your score will increase.

How to Handle Valid Negative items

Unfortunately, credit repair is only for invalid items on your credit report. If you have legitimate negative items, you will need to negotiate and catch up to improve your credit. The good news is that you can start rebuilding your credit right away.

Late payments will have the biggest impact on your credit score. If you have any accounts that are past due, your first action is to bring them current. Late payments account for 35% of your score, so it is the most important place to start. Once you get them caught up, you need to continue paying them on time. After six months, you will see an improvement in your score, and after a year, most creditors will not be as concerned about them.

This is important because having more than one late payment in the prior 12 months can disqualify you from some loans, including mortgages. You might also pay higher interest rates if you have late payments.

Once your late payments are caught up, you need to focus on your credit usage. This accounts for 30% of your score. They want to see you using less than 30% of your available credit, so if you have available credit of $1,000, you should carry a balance of less than $300. It may not be possible to bring your balance down as low as you need it; sometimes people have built up their balances over years. There are other ways to reduce your credit usage.

You can apply for another credit card. This will increase your available credit, which will, in turn, reduce your credit usage. If you have good enough credit to qualify for another card, this can be a good solution. However, it is important not to let this new card burn a hole in your wallet. You do not want to use it because you will end up in the same boat, but this time you will owe even more money.

It is important to remember that credit is not spending money. It is a convenient way of paying for items that you can otherwise afford. It is important to create a mindset where you understand this and use credit for purchases that you would make anyway. If at all possible, pay your balances down every month.

If you do not qualify for an unsecured credit card, you can get a secured card. You will make a deposit with a bank, and the amount of your deposit will be your credit limit. You will still make payments each month, as you would with an unsecured credit card. This is a great way to build up your credit. Often these banks will return your deposit after you build up a good credit history with them.

You can also try to get a line of credit from your bank. Another option is to get a debt consolidation loan. Any of these creative ways to increase your credit limit without increasing your debt will help you improve your credit score.

The most difficult thing to remember is that credit should not be used to expand your standard of living. It is a good thing to have in an emergency, and without it, many people could never afford to buy a home. When you buy a home, you are investing in an asset that (hopefully) appreciates in value, so it is a sensible use of credit. Cars are expensive, and it makes sense to spread out your payments with credit so that you can afford it.

Credit cards are expensive, and they should be used to buy and pay for things that you already need. They can be critical in an emergency, and they are convenient for paying for things online or at stores. If you are recovering from a situation where you have bad credit, it is important to change your perspective on credit so that you can improve your credit score and your financial health.

How to Handle Collection Accounts

Collection companies buy debt from banks, doctor’s offices, and other people who aren’t paid for a debt. The company will send you a letter, and they will likely call you often. Some collection companies will use scare tactics to frighten you into paying, and others will take you to court. They buy these debts for varying amounts of money, and some collect on behalf of the original creditor. Without speaking to them, it is hard to know what their role is.

Many people are afraid to talk to them, but there are rules that regulate how they can interact with you. In fact, they aren’t allowed to threaten or harass you, nor are they allowed to intimidate you. If you want to resolve the debt, you are actually in a strong position because many people simply avoid them until they sell the debt to another company.

First of all, remember that a debt can only appear once on your credit report. The most recent entry will be the company that currently has the debt. If the debt appears more than once, you need to dispute it. If you have a valid collection account on your credit report and you want to settle it, you should give them a call.

When you speak to them, you might be able to negotiate a deal. They normally buy these debts for pennies on the dollar, and they will often settle for less than the full amount due. You may also be able to convince them to remove the item from your credit report when you pay the debt. The key is to get any deal you make in writing before you pay them. This helps you enforce the deal if they don’t live up to their end of it.

If the collection account has been there longer than two years, it will not improve your score too much to have it removed. However, having it there shows creditors that you ran into trouble in the past, so if you can negotiate removal, it will help.

What Is a Goodwill Letter?

A Goodwill Letter is a request to a bank that they remove an uncharacteristic negative item from your credit report. This is a great tool to use if you missed a payment or had some other oversight. It is up to the lender whether they will grant this adjustment, but often they will do it for you. Missing a payment can cause your score to drop by as much as 110 points, so it is a good idea to make every effort to fix it. Some credit repair companies include this in their credit repair services, but you can also write the letter on your own. Just write a letter, explain the situation, and request the Goodwill adjustment.

How to Improve Your Credit

Many of the items above will help you to improve your credit, such as making your payments on time for more than six months and bringing your credit usage down. These two factors will have the largest impact on your credit score.

In addition, you should keep your oldest accounts active. This means you need to use them every month or two, and pay off the balances. If a credit account isn’t used for a period of time, usually six months, the company may close your account. Make sure that you use the account to keep it active.

Another way to improve your credit score is to pay your bills twice a month if you can. Creditors only report to the credit bureaus once a month, and you won’t necessarily know when that is. By paying your bills twice a month, you can ensure that your balance will go down before they report to the credit bureau.

If you have several credit cards with high balances, you should prioritize which one you are paying off. You need to be strategic and methodical about paying off the balances. Take the highest one, and pay extra each month.

If you have a charged off credit card, you should be cautious about making any payments. Often, the credit card company does not expect to be paid on a charge off, and they will have sold it to a collection company. However, making a payment on this account will reset the date that you stopped paying. Since these debts fall off your credit report after seven years, you could reset the clock.

Instead, you should find out who holds the debt, and offer to settle it when you are able. You may be able to work out a payment plan that you can afford, and they may agree to knock off extra interest that has accrued. Make sure that you investigate your options before paying this kind of debt because making a random payment could hurt your credit more than it helps it.

Another way to protect your credit score is to call your creditors if you are going to be late with your payment. You can ask them if they have a grace period, and tell them when you will be able to pay. If you try to work with them, they will often hold off on reporting a late payment to the credit bureau.

You can also use a service called Experian Boost. This service allows you to report your on time utility payments and cell phone payments, and they never penalize you if you are late. It can give your credit score a boost at a time when you need it. It is a risk-free service, and it is only offered by Experian. It will not show up on your Equifax and Transunion credit reports.

Another way to improve your credit score is to become an authorized user on a family member’s account. Make sure that they have excellent credit. If they do not pay the bill on time, it can hurt your score. This can be very helpful, but you need to make sure that you do not make charges that you cannot afford. The bill has to be paid on time every month, and running up a balance or paying late will hurt both of you. However, it can increase your overall available credit and give a boost to your score.

Tips to Paying Your Bills on Time

It can be easy to forget to make a payment, and you might fear that your credit score will take a hit. You have options, but the best scenario is not having a late payment. Many creditors offer a service that allows you to automatically pay your bills. You can put it on autopay, make sure you keep the money in your account, and you never have to worry about making the payment late.

If your bills are more than you make each month, you have a different kind of problem. This happens to many people who simply do not make enough money to pay their bills. The first step is to evaluate your expenses to determine where you can cut your spending.

You can make a spreadsheet with all of your expenses. You should include your mandatory living expenses, such as mortgage or rent, insurance, utilities, phone, and other fixed expenses. You will also want to include your gas and food each month. If you have children, you need to include all of their expenses as well. Then, you can determine what you spend on clothing, entertainment, and other more discretionary expenses.

Trimming your budget is never easy, but it can help you achieve financial freedom. It is important to cut out things that you don’t need now so that you can buy them later. Once you get your spending in order, you will be able to take steps to improve your quality of life.

If you make less money than you need, you might consider adding to your income. There are many different creative ways to make extra money. Some people take their children’s old clothing and sell it on eBay or Facebook, and others pick up gigs such as driving for Uber, delivering groceries, or pet sitting. If you want to get creative, you will find that there are many opportunities out there to help you keep paying your bills on time.

When to Call for Credit Repair

You may wonder when you should call for credit repair. You cannot call for credit repair to help you with valid items that are on your credit report, but you should call when you find a debt or other item that is invalid. Even if you have bad credit, anything on your credit report that shouldn’t be there should be disputed.

If you have invalid items on your credit report and you want the help of a professional, you should go to your free consultation. You can make your decision afterward, but you will know what they can do. You can decide whether or not you find it worthwhile to use them.

Either way, you should dispute these items as soon as possible because they will impact your credit score if you leave them on your report.

What Do Credit Repair Companies Charge?

Most good credit repair companies will meet with you in a free initial consultation and discuss your credit report with you. If they see invalid items, they will draw up a contract with you. Often you will pay an initial setup fee for this service, followed by a monthly charge as long as you work with them.

Different companies have different price plans, and they include different services. It is free if you dispute items yourself, but you will need to follow-up and complete the entire process on your own. The initial fee can range from $30 to $100 depending on the company, and the monthly fee is about the same.

When you hire a credit repair company, they will pull your credit reports for you. Some companies include this in their fees, and others will charge you each time. This is something you should find out before you work with them.

Some companies offer one plan, which will include disputing invalid items and providing you with resources and information on how to improve your score. Others will offer different tiers with added services. These added services may include credit monitoring, credit coaching, fraud protection, credit simulation, and more. You should look at these services carefully to determine whether you need them or not. They cost money, and it needs to be worth your while.

If you are planning to buy a home in the near future, some of these services might be beneficial because they can help you get your score where you need it for your mortgage. If you already own a home and simply find an invalid item on your report, you may not need more than its removal. Make sure to read through your contract and only pay for services that will benefit you.

How Long Does Credit Repair Take?

Removing invalid negative items from your credit report is one of the quickest ways to improve your credit score. When you dispute an item, the credit bureaus have to verify it, correct it, or remove it. Once the dispute is filed, they have to resolve it within 30 days. This means that you should have your result within 45 days.

While this timeline for a straightforward dispute is the standard, some issues are more complex. For example, if you have a debt on your credit report that doesn’t belong to you, it may take more extensive investigation. If this is an honest mistake, it might be easy to remove. If someone has stolen your identity, it can be more complex.

One in four people experience some form of identity theft, which is a staggering number. If you find fraudulent accounts on our credit report, you will need to close the accounts. You need to file a report with the FTC and file a police report. They may not discover who has done this, but you will need the reports to dispute your credit reports.

You can file disputes for the fraudulent accounts with all three credit bureaus. You should list the fraudulent accounts, the charges, and include your police report. They will have 30 days to respond to your dispute. You should also freeze your credit to protect you from further fraudulent activity.

Where the credit repair can help you is in filing these disputes. They will know exactly what you need to prove your case to the credit bureaus.

The amount of time it will take to remove these inaccuracies from your credit report will depend on how complicated your situation is, and a good credit repair company should be able to provide a viable timeline when you have your free initial consultation.

How to Spot a Credit Repair Scam

There are several sure signs that you are dealing with a bad credit repair company. If they tell you that they can get rid of valid negative items, guarantee you a better score, or give you a new credit identity, you should walk away.

A credit repair company should never tell you to provide false information, nor should they advise you to dispute items that are legitimate. They should always tell you that you can dispute items without their help. A credit repair company is a convenience for people who want to pay a professional to make disputes for them, but it is not something that you can’t do on your own.

Finally, a credit repair company should never charge you before they perform the service. They should be upfront about what they will do. You should walk away from your initial consultation with a written contract and a full understanding of what you are hiring them to do.

Final Words

Understanding all of the details of your credit report and your credit score is important because it can have an impact on many aspects of your life. You should know that it is quite common for people to have invalid items on their credit reports. You need to dispute these items and have them removed so that they don’t have an effect on you.

A credit repair company can provide this service for you. We help people with credit repair, and we can work with you to remove items that should not be on your credit report. We are experienced and transparent about the process. When you want the convenience of having a professional with years of experience assist you in this process, hiring a credit repair company can be a great choice.

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