Having a bad credit score can cost you many thousands of dollars over your lifetime.
Are you shocked by this?
Well, it’s true.
If you have bad credit – meaning a bad credit score – you’ll pay a lot more in interest and in insurance premiums. A low credit score credit can even keep you from achieving some of your important goals such as buying a home, taking a dream vacation or being able to retire at a decent age.
Why is your credit so bad?
There may be several reasons why you have a bad credit score. It might be because you simply misused your credit. Or maybe you didn’t understand how credit works and just borrowed yourself into trouble by buying too many things on impulse or taking vacations you really couldn’t afford. However, it’s possible that you have lousy credit because of errors in your credit reports. If you haven’t reviewed your reports recently, it’s important to do so. You can get all of them free on the site www.annualcreditreport.com or one at a time from the three credit reporting bureaus,
It’s important to review your credit reports very carefully. Is there an item that’s 20 years old? Or just one item that appears multiple times? You might even find a debt that isn’t even yours. It would be very sad to lose out on buying a house because one or more of the credit bureaus had erroneous information in your credit reports.
The dispute process
If you find errors in your credit reports there is a process for disputing them. You will need to write a letter to the appropriate credit reporting bureau and enclose documentation proving your case. This can be a very complicated and time-consuming process, which is why many people end up choosing to use a professional credit repair company to handle this for them.
What the law dictates
The law says that credit reports must be entirely fair, 100% accurate and completely substantiated. Unfortunately, some of the lesser credit repair companies ignore the last two of these standards and depend instead on doing simple credit report disputes themselves.
DIY credit repair
While you can dispute errors yourself, here’s an example of where a good credit repair company could help. Let’s assume you have an account that had been sold to several different debt collection agencies. As a result, it shows up multiple times on your credit reports. While that information may be accurate it might not meet the “fair” standard because it’s a single item but that’s dinging your credit report multiple times. It would probably the difficult for you to get this fixed but a good credit repair company should be able to.
If you’re still interested in pursuing DIY credit repair, here;s a short video showing how you could get adverse items such as collections, charge-offs and adverse accounts removed fairly quickly.
How credit repair works
If you hire a professional debt repair company it will pull your three credit reports to pinpoint those issues that are causing you problems. They pull all three because each credit bureau has its own “data suppliers” or the debt collectors, lenders, and credit card issuers it relies on for information. So there may be a mistake on one of your reports that doesn’t show up on the others.
If the credit repair company identifies errors in your credit reports, you’ll need to provide it with any supporting documents that you might need or have. As an example of this, let’s say that there’s a bill on your credit report that, under your divorce decree, was your wife’s responsibly. You could use the decree to prove it shouldn’t be impacting your credit.
The supporting documentation
There may be instances where you don’t know what supporting documentation to provide. When this is the case a professional credit repair company could be of help. For example, let’s say you were the victim of identity theft and, as a result, there is a fraudulent account on your credit reports. It can be difficult to prove that’s not your account as you wouldn’t have any documents relating to it. But a credit repair company should be able to work with the credit bureau and the credit supplying company to have the item removed from your credit report.
If there is inaccurate or erroneous information on one or more of your credit reports then getting rid of them is one of the quickest ways to get your credit score improved. According to the law, credit bureaus are required to resolve any disputes you file within 30 days. This is so that if you wanted to get a new credit card, buy a car or a new house you wouldn’t be hung up for months waiting to get your disputes resolved. However, don’t expect the credit repair company to tell you exactly when you’ll see an improvement in your credit score as some of your credit issues could be fairly complex and require much more time to get resolved.
Are there credit repair companies that can be trusted?
If a credit repair company promises to get your credit score boosted by 100 points overnight, that’s a company not to be trusted. There are some other danger signs that the company may not be trustworthy such as charging you before they’ve actually done any work. If a company promises to get your credit reports fixed overnight or asks for money upfront, run, do not walk away from it.
What a reputable credit repair company will do is explain your consumer credit rights to you before you sign a contract. In addition, it will answer any questions you have regarding those rights. It will be able to understand why you’re disputing an item so that it can ensure that the three standards of fairness, accuracy and complete substantiation have been upheld by the data furnishers and the credit bureaus. And finally, it will be able to provide detailed explanations of what it can do for you so you will know exactly what to expect.
Frequently Asked Questions about credit repair
Q. Are credit repair services legitimate?
A. Credit repair services are legitimate. But it’s important to understand that not all credit repair companies can be trusted. Some make extravagant claims as to what they can do for you or, as noted above, charge you for their services before actually doing anything to repair your credit. If you think a credit repair company could help, be sure to check it out with the Better Business Bureau and look for online reviews from people that have used it.
Q. How long does it take to do credit repair?
A. This will depend largely on the credit issues that need to be repaired. If the company found a few simple errors in your credit reports it could file disputes and have them resolved in two months or less. On the other hand, if your credit problems are complex it will take longer. For example, one credit repair company says it takes five months on the average to repair its clients’ credit.
Q. What does credit repair cost?
A. Different credit repair companies charge different amounts for their services. Most provide a free credit report and consultation before you’re required to sign up for their services. One charges a flat fee of $59 a month and another charges $79.95 to 99.95 per month, plus a one-time charge of $14.99 to get your credit reports. In short, the only way you’ll know for sure what credit repair will cost you is to contact a reputable company, get a free consultation and ask how and what it charges.
Q. How to do credit repair myself??
A. If your choice is DIY credit repair your first step will be to get your credit reports and review them carefully. As you have read you can get all three on the site www.annualcreditreport.com. What you will want to look for are errors such as credit card accounts that aren’t yours, multiple instances of the same negative item, accounts with the wrong balances or accounts you had closed that are still reported as open. If you find errors, you can dispute them with the appropriate credit bureau by sending a letter along with the documentation that proves your case. The credit bureau then has 30 days to get the information verified by whatever company provided it. If that company is unable to verify the information or fails to respond to the credit bureau within 30 days, the item must be removed from your credit report.
Q. What does credit repair mean?
A. Credit repair means finding erroneous items on your credit reports and getting them removed to increase your credit score. The sad fact is that if there are no serious errors in your credit reports, there is not much that you or any company can do to repair your credit. A full 35% of your credit score is based on your credit history and if you have a bad credit history, there’s just nothing that can be done about it.
Q. Why to not use a credit repair service?
A. Credit repair can be expensive. If the repair company charges $79.95 a month and it takes five months to repair your credit it would end up costing you nearly $400. This could be worth it if you have numerous errors in your credit reports that are dragging down your credit score. But if you review your credit reports and find only a couple of simple errors then dispute them yourself and save some money.