Credit Repair: What It Is and How It Works
What Is Credit Repair?
Credit repair is the process of fixing a credit history or standing that may have deteriorated for a variety of different reasons. Repairing credit standing may be as simple as disputing mistaken information with credit agencies. and identity theft. The damage incurred may require extensive credit repair work. Credit repair may also involve dealing with fundamental financial issues, such as budgeting, and beginning to address legitimate concerns on the part of lenders.
How Credit Repair Works
Though numerous companies claim they can clean up bad credit reports, correcting erroneous information that may appear on credit reports takes time and effort. The details cited by credit reporting agencies cannot be removed by a third party. But the details can be disputed if they are misrepresented or inaccurate.
Credit repair companies may investigate such information, but so can the individual the report is assessing. Individuals are entitled to free credit reports every 12 months from credit reporting agencies, as well as when an adverse action is taken against them, such as being denied credit based on information in the report.
Consumers can file disputes when incomplete or inaccurate information appears on their credit reports. Aside from correcting such information or catching fraudulent transactions on one’s credit, rebuilding and repairing credit often rests more heavily on credit usage and credit activity.
The following are some of the key factors that affect an individual's credit score:
- Payment History: Ensuring that payments are made on time or improving the payment schedule for outstanding credit can benefit credit scores.
- Usage of Available Credit: The size of the debt an individual carries based on their available credit can negatively affect their credit rating even if they make minimum payments on time. The issue is that their liquidity may be pressured by the overall debt against them. By taking measures to reduce their overall debt load, they may see improvements to their credit profile.
Taking steps to adjust or fix these issues can help lead to credit repair.
Warning: Be sure you know the difference between legitimate credit repair companies and credit repair scams. Scammers pressure you to pay upfront fees, make lofty promises, don't explain your rights, and advise you not to contact creditors or credit bureaus.
Credit Repair Services
A number of businesses that claim to do credit repair have sprung up over time. While some of these businesses may provide services to assist consumers, there may be some concerns about the results of their efforts. In some cases, credit repair may require legal and financial expertise. Depending on the extent of the problem, it may require simply cleaning up misunderstandings, while in other cases professional intervention is needed.
The fees a credit repair company charges can vary. There are generally two types of fees: an initial setup fee and a monthly service fee. The initial fee can range from $10 to $100, while the monthly fee typically runs between $30 and $150 a month, although some companies do charge more.
It’s important to weigh what you’re getting in return when you consider the fees involved. According to the Federal Trade Commission (FTC), credit repair firms can’t legally do anything for you that you can’t do for yourself. You just have to be willing to spend the time reviewing your credit reports for negative or inaccurate information, reaching out to the credit bureaus to dispute that information, and following up to make sure they’re being investigated.
If you're unable or unwilling to spend that time, then do your research to ensure you'll be working with one of the best credit repair companies.
Frequently Asked Questions
Is Credit Repair Illegal?
No. Credit repair is a legal way to improve a damaged credit history and raise your credit score. You can hire a professional firm to help you repair your credit, but it won't be able to do anything for you that you can't do for yourself.
How Long Does It Take to Repair Credit?
There is no quick fix for your credit. Information that is negative but accurate, such as missed payments, charge-offs, or collection accounts, remains on your credit report for seven to 10 years.
What Does Credit Repair Include?
Credit repair is the act of restoring or correcting a poor credit score. Credit repair can involve paying a company to contact credit bureaus and point out anything on your report that is incorrect or untrue, then asking for it to be removed. Another form of credit repair is to deal with fundamental financial issues, such as budgeting, and begin to address legitimate concerns on the part of lenders.
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The Bottom Line
Credit repair is the act of restoring or correcting a poor credit score. Credit repair can also involve paying a company to contact the credit bureau and point out anything on your report that is incorrect or untrue, then asking for it to be removed. You can choose to do your own credit repair or hire a company to do it for you. Keep in mind that credit repair firms can’t legally do anything for you that you can’t do for yourself. However, repairing your own credit can be labor-intensive and time-consuming.
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