Living in America today with bad credit is very expensive, and may cost you more than cash straight out of your wallet. It can not only affect one’s chances of getting approved for a loan, but it could be the reason for not getting a dream job. Don’t let bad credit ruin your life. If you want to travel, continue your education, get a better job, or just have emergency money built up for emergency bills, to look into credit repair. While yes, you cannot push the rest button on your score, it is possible to fix it so you can begin growing your history again so you can move up on the credit scale. Read on to learn everything about credit repair – everything from knowing your rights to hiring a company for extra help. Bad credit doesn’t have to rule your life, so don’t let it.
Before I start going into what credit repair, I am going to go into what your rights are. The government can be very tricky to understand, and not everybody knows their rights all of the time, especially when it comes to lawsuits and credit scores.
First things first, no one can legally remove accurate and timely negative information from a credit report. All one can do is request an investigation of the information in your file that you dispute as inaccurate or incomplete. By law:
- You’re entitled to a free credit report if a company takes “adverse action” against you. For example, if someone denies your application for credit, insurance or employment. However, do know, you must ask for your report within 60 days of receiving notice of the denial. The notice will include the name, address, and phone number of the consumer reporting company. You are entitled to a free credit report once a year if you’re unemployed and are planning to look for a job within the next 60 days, you’re on Welfare, or inaccuracies due to fraud, including identity theft.
- Each nationwide credit reporting company – TransUnion, Equifax, and Experian – is obligated to provide you with a free copy of your credit report every 12 months, per your request of course. If you need to order your free credit reports, click here, or you can also give 1-877-322-8228 a call. You can either each three at the same time or spread your requests throughout the year.
- You don’t have to worry about the cost of disputing any mistakes or outdated items on your credit reports. It is both the reporting agency and information prover (the person, company or organization that provides your information to the credit reporting agencies) responsibilities for correcting inaccurate or incomplete information. Take advantage of all your rights and contact the credit reporting agency and your information provider today!
Bad Credit & Reasons to Look Into Credit Repair
Bad credit is a situation that can be both expensive and can cost you other things other than money with high interest rates and hidden fees. It could delay the new opportunities for both educational and employment purposes. It can even get stop you from getting promoted and getting raises with our current employer. If you have a dream of starting your own business, or just want to have the extra protection knowing you have money in your bank account, having bad credit can actually hurt those dreams. Not only does it stop those opportunities, if you have bad credit can make your insurance rates go through the roof after you sign the loan paperwork. Also, if you are getting new utilities in our name, you may have to pay a security deposit because of your bad credit. Everyone also knows that a bad credit score are bad marks and can get you a denial for a new credit card or loan.
All reasons above are good reasons to pursue credit repair, either doing it on your own or turning to a credit repair company. The absolute best reason to get your credit fixed is that having a good credit score can give you confidence when you need to apply for a loan offers, mortgage, credit card or any type of credit line. Monitoring your credit will help you achieve a healthy credit score. Having a healthy credit score can make lenders see that you have a good reputation of paying back the money you’ve borrowed in the past. This improvement can help your financial life a lot and give you a second chance.
What IS Credit Repair?
In a recent reserved study, the Federal Trade Commission study found that one in five consumers have an error within the content of one or multiple credit reports. This can result in a low credit score. In a nutshell, credit repair is finding these used errors or inaccuracies, and disputing them to the bureau that has error and having the Bureau fix the error or inaccuracy – as in the wrong identity using your name. They will have 30 days to get back to you. Removing these last problems or inaccuracies can bring your score up and save you money along the way.
DIY Credit Repair
Some people like to hire companies or a law firm to investigate for them, but do know, everything a repair company can do legally, one can do for themselves at little to no cost. I’m not saying this is going to be an easy process because it isn’t. In fact, doing anything to improve your personal credit score is difficult, but that is where this article comes in. Here is a step-by-step way to repairing your credit yourself, without having to hire any services to help.
Step One: Obtain Your Most Recent Credit Reports
Before you can begin fixing your credit already, you have to know if there are any errors in need of being fixed. Your credit report contains your personal finance data and the possible mistakes you’ve made to obtain a poor credit score. Once you’ve received all your reports from the major credit bureaus, read through them and see which negative items are affecting your score. You may get your free yearly reports from AnnualCreditReport.com, or order them by phone or mail.
Other Ways to Obtain Credit Reports
Also, remember, you are entitled to a free score if you’ve been turned down for something that has been reported in your reports, if you’re receiving movement assistance if you’re unemployed and want to find a job or if you think you’ve been a victim of credit card fraud or identity theft. If you need to order your reports, you can contact the credit bureaus.
Paying For Credit Reports
All major bureaus offer a paid service that allows you to receive your credit reports side by side. They also give you insurance to protect you against theft if you need it.
Obtaining a Free Credit Report
There are a lot of places that will let you see one of three credit reports for free. If you go to CreditKarma.com, you can receive two of three reports for free and get your score that is calculated based on the FICO credit calculations. They will even send you updates on your reports through email. It is a good option for those who don’t want to order their reports for a price.
Why Order All Credit Reports?
Not all creditors and lenders look at the same credit report. Also, they may not report to all of the bureaus as well. There could be some things either missing from one or maybe two reports that are on one of your reports. It’s always a good idea o see if each of them has listed your complete credit history.
Always make copies of your credit reports! Never send out the originals either, always a copy!
Step 2: Review Your Report for Errors
Depending on the length of your credit history, this may be a bit tedious, but don’t get overwhelmed. You need to become familiar with the information on all of your reports. Each of them will look similar, but you need to be able to seek the information that is missing.
Each report contains your personally identifying information, detailed history for all your credit accounts, any item on your public record – like bankruptcy, and the inquiries on your report.
I know this seems overwhelming, and it could be quite a process, but one should always know all the data on their reports inside and out.
How to Know What Needs To Be Repaired
If you aren’t sure what qualifies as information you’ll need to repair, here is a list:
- Incorrect information, including accounts that aren’t yours, and payments are incorrectly reported as late, etc.
- Past due accounts that are late, charged off, or have been sending to collections.
- Maxed out accounts that are over the limit.
The best thing to do is to use a different highlighter color for each type of information to help you make your repair plan to help your credit scores. You have to take a different approach for various types of errors, so color-coding everything will save you tie re-reading each time you’re ready to make a payment, call a creditor or send a dispute letter.
Step 3: Dispute Credit Report Errors
Remember, you have the right to dispute any information on your report that is inaccurate, incomplete, or information you believe to cannot be verified. If you need help disputing any information on your report, you’ll receive instructions on how to dispute errors on your report after you order your reports. Also, credit reports order online will typically come with instruction for making online disputes. If you prefer to make your disputes over the phone or by mail, you can do so as well.
Which Method Is Best For Credit Repair Disputes?
If you want the fastest and easiest dispute process, online is often both, but has certian factors that can pose as a problem. The biggest issue is that it won’t leave the paper trail that you may need – you could always take screenshots of your available dispute claims if needed. Also, the same thing goes for making a dispute over the phone.
By sending your disputes through the mail may take a little longer, but it does it it’s advantages. First off, you can send proof (copies of the original document only!) that supports your dispute claim, for example, a canceled check that shows proof of your on time payment. Always keep a copy of your letter for your records. You should always send your open dispute via certified mail with a return receipt, which gives you proof of the time you mailed it The credit bureaus have to respond to your letter within 30 days of receiving your dispute.
Always keep a credit report dispute template on your computer – you can find them on this site so that you can modify it for different disputes and different bureaus.
Step 4: Sending Your Dispute
Along with a copy of your dispute letter, send a copy of your credit report with the highlighted item you are disputing and send any proof you have that supports your dispute. If you don’t have enough information that supports your dispute, the bureaus can decide your dispute is frivolous and decline to investigate or update your report. However, if your dispute is legitimate, the bureaus will investigate and respond to your letter.
Alternatives to a Credit Bureau Dispute
You also have the option to write and dispute directly to the bank or business who inaccurately listed the information on your report.
What Happens After A Dispute?
If your dispute is successful, your report is updated, and the Bureau will make the change, alert the other bureaus, and send you an updated copy f your credit report.
If the disputed item weren’t removed, you would be given an updated report to show that you’ve disputed the information and then be given the opportunity to add a personal statement to your credit report. These statements won’t affect your score but provides additional insight into your dispute when a lender pulls your report up to review it.
Step 5: Tackle Past Due Accounts
Now you have tackled the inaccurate information in letters; it is time to address the correct information. Your payment history makes a significant impact on your credit score, 35% of it to be exact. Having several past due accounts on your report can hurt your score significantly and taking care of them is crucial to credit repair.
Get current on all accounts that are past due, but not yet charged off. An account that is delinquent but less than 180 days late can be saved from being charged off, if you pay the total amount that is past due. Contact your creditor soon to figure out what you can do to get current on your account.
Pay Charged-off Accounts
Just because they are charged off, doesn’t mean you don’t have to pay them off. Yes, as they get older charged off accounts affect your score less, but the outstanding balance will make it hard to get approved for new credit cards or loans.
Once you pay this account off, your report will be updated to show that the balance is zero and the account is paid. However, the charge-off status will continue to be reported for seven years from the charge off date. You can always contact your creditor and see if they are willing to accept a settlement and chance the rest of your outstanding debt. You may also be able to convince the creditor to delete the charge off status from your report in exchange for payment.
Take Care of Collection Accounts
Even accounts that aren’t generally reported within your report can go through collections. You should take the same approach as you would to paying charge-offs. You can pay it in full, or you ca try to get it settled. The collection will stay on your report for seven years based on original delinquency.
Step 6: Bring High Account Balances below Their Limits
Credit utilization is another large part of calculating your score – 30%. The higher your balances, the lower your score. Maxing out all your credit cards can be dangerous, and you’ll want to try to bring those cards below their lists and continue to pay them off completely. Your score responds better to balance that are less than 30% of their limit but posts below 10% is ideal.
Balances of loans can affect a credit score in the same way as a high credit utilization. The credit scoring model compares your current loan balance to the original loan amount. If your loan balance is very near the amount you have borrowed, it will hurt your score the most. However, if you have high credit card balances, you’ll want to focus on bringing those down faster than a loan balance, they affect your score more.
Step 7: Get New Credit
After you’ve brought your score up, you need to work on adding some positive information. Make sure you are keeping every payment on time and that every account is in good standing.
Where to Get New Credit
You can reestablish your credit by opening up a new account. Be careful with credit cards, you’ll want to keep one or two until your score improves, unless you can get auto declined.
If you are having trouble with getting approved by a major credit card company, try a retail store card. If you are still having issues getting approved, the only other way to go is through a secured credit card, which will require you to put down a security deposit.
Useful Repair Tips
- Keep What You Can: Don’t let an account that is in good standing go bad during this process. Make sure you are making timely payments on all other accounts.
- Don’t Over-dispute All At Once: You need to space your disputes out because the credit bureaus can become suspicious of too many disputes and consider them frivolous.
- Be Careful With Closing Credit Cards: Very rarely does closing a credit card help your credit score. It is more likely to hurt it than help it, especially if it has a balance. Keep up with your payments, and pay all late payments to keep your card valid.
- Learn What Does & What Doesn’t Hurt Your Score: To avoid making the same mistakes and problems twice, learn what brings your score up and down.
- Never Get Discouraged: It is possible your score could drop quick while going through this process but don’t let that cause you to think you’ve done something wrong! Just continue you the process and adding positive information onto your report.
- Consider Going Through Consumer Credit Counseling: If you are too overwhelmed by your debts, can’t build up any answers, and the creditors aren’t willing to work with you and aren’t being fair, and you can’t keep up with payments on your own, consumer credit counseling could get you back on track! Remember, there is always help for those who are willing to ask, you just have to ask important questions.
- File Bankruptcy Sooner Rather Than Later, Only If Its Inevitable: If bankruptcy is the only option, don’t waste your time, and money, getting you back on track! Evaluation with an attorney if you should file bankruptcy or not. Bankruptcy may seem like a scary process, but it can help you begin to rebuild your life up again if it is successful.
Credit Repair Companies
I know this is all about you doing the repair on your own, but a lot of people can get overwhelmed by doing it themselves. That is why I am going to talk about credit repair companies as well. A good repair company has the resources to pull each of one’s credit reports up and search them and create personalized repair plans for you. They will pull up all three credit scores because each reporting agency has its own lenders, credit card companies, and debt collectors who are reporting credit information to them. Some reports may have issues when others may be okay.
Credit Repair Company Warnings
While there are many legit companies out there that can help fix your credit score, there are even more out there that will promise you things that just cannot be done. We can all hear the ads on TV, the radio, or on an app on our phones that claim they can help get our scores back to normal within a short matter of time. That just isn’t how things are done. Be aware that some companies will get things taken off your reports right away, but within a matter of months, they can come right back.
The Credit Repair Organizations Act
The Credit Repair Organization Act make legal for repair companies to lie about their services they can provide to you, and to charge you before they’ve performed their services. The CROA is enforced by the Federal Trade Commission and by federal law credit repair companies are required to appear and explain:
- Your legal rights, in a written contract that also list the services they perform.
- Your three day right to cancel without a charge.
- How long it will take to receive results.
- The total cost you will be paying.
- Any guarantees
If you had hired a company that doesn’t live up to their promises here are some options:
Reporting Credit Repair Fraud
- You can file a judgment against them in federal court for your losses or for what you’ve paid them for because they violated the credit reporting act.
- Seek punitive damages – money to punish the company for violating the fair credit reporting act.
- Join other people in a small class action lawsuit against the company. If you win, the company has to pay your attorneys fees.
A lot of states have laws regulating repair companies. Report a problem you have with a repair company to your local consumer affairs office or visit your state attorney general.
Also, you have the option of filing a complaint under the Trade Commission. They may not be able to solve individual credit disputes; they can, however, they can take action against a company, provided there is a pattern of law violations. You can file your complaint online or call 1-877-FTC-HELP.
Hopefully, this article will help you turn a much needed new page in your financial book and get creditors off your back and keep you credit problems at bay. There should be no shame in asking for help managing credit repair. Looking into the future; hopefully, this will give you a few ways to keep your score high once you’ve improved it. Know that with a bit of credit monitoring, you can get your score up and running again, in 7 to 10 years.
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