If you’ve ever listened to over-the-air radio or watched late-night television, chances are you’ve heard or seen advertisements for credit repair companies. You will often find credit repair companies on these media. They claim to be able to repair your credit to improve your credit score. Why? One because it’s cheap to advertise. And second, they usually make outlandish claims.
Things like:
“We can remove negative items from your credit report for good!”
“Problems with a loan? No problem!”
“Is the credit really bad? We will help you create a new identity – legally. “
Chances are, if you hear any of these statements, they are most likely signs of fraud. The company most likely just wants to separate you from some of your money. They may not even perform credit repairs.
Then what if they need to rebuild their credit and improve their credit rating? Understand that there is no quick fix to your creditworthiness problem. Let’s take a look at your rights, steps and the best credit repair companies.
Our passion for credit rating
Boy, we love numbers and counters that help us feel comfortable and confident. Social media has made this kind of a game for many of us. Who has collected the most likes, subscribers or reposts.
Our credit score is another of those numbers, but unlike social media, your credit score can have real impact on you and your money. According to the credit agency Experian, here is the range of credit ratings:
- 300-579 – Very bad
- 580-669 – Satisfactory
- 670-739 – Good
- 740-799 – Very good
- 800-850 – Excellent
Depending on where your rating is, this range will determine your level of risk as a borrower and whether you will have access to Superprime, Prime and Subprime loans.
Subprime loan
Subprime includes very bad and fair credit. Prime covers well and very well. A superprime is used to include the highest level of exceptional.
But what does all this mean? The higher your credit rating, the better the interest rates on credit cards and loans that you will have access to. Lenders use your credit score to check your creditworthiness, for example on apartment rentals, smartphone contracts, and insurance premiums.
This is a big deal because if you are borrowing money for a mortgage or car loan, the best interest rates can save you thousands of dollars in interest payments over the life of the loan.
What is your credit score made up of?
- Payment history – How reliable are you when making payments.
- Use of credit – How much do you have and what kind of loan do you have.
- Credit history length – How long have you had a loan.
- Credit mix – Various types, credit cards, student loans, etc.
- New loan – The older the better.
Each of the above categories affects your overall score in different ways. If you need credit repair, you need to get a copy of your credit report and study the details.
Your rights
As a consumer, you have rights when it comes to your credit history and credit score. The Federal Trade Commission defines these rights in law as:
- Each of the national credit companies – Equifax, Experian and TransUnion – are required to provide you with a free copy of your credit report every 12 months. All you have to do is ask for it.
- You are entitled to a free credit report if the company takes “adverse action” against you, such as denying your application for a loan, insurance, or employment. You must request a report within 60 days of receiving notice of action. The notice includes the name, address and telephone number of the consumer reporting company. You are also entitled to one free report per year if you are unemployed and plan to look for work within 60 days; if you are on benefits; or if your report is inaccurate due to fraud, including identity theft.
- Challenging errors or outdated items on your credit report costs nothing. Both the lending company and the information provider (the person, company, or organization that provides information about you to the credit reporting company) are responsible for correcting any inaccurate or incomplete information on your report.
No one can legally remove accurate and timely negative information from a credit report. These are often the claims of credit repair companies.
You have the right to request a free investigation of information in your file that you dispute as inaccurate or incomplete.
Credit repair companies
If you are not disciplined enough to draw up a budget, develop a repayment plan with creditors, or keep track of your monthly bills, or simply don’t have the time to do the job, you might consider contacting a credit repair company.
The Department of Justice (DOJ) has a list of approved credit repair companies on its website. You can also check with your financial institution. Many banks offer credit drain services free of charge to members.
Many credit repair companies are non-profit and work with you to solve your financial problems. But remember that being a “non-profit organization” does not guarantee legal services. Some lending advisory organizations, even those that claim to be nonprofit, may charge high fees or hide their fees by forcing people to make “voluntary” contributions that only increase debt.
So do your homework and research the company before contacting him. Check the DOJ list, search the Better Business Bureau (BBB), ask for recommendations from a trusted source.
Two popular credit repair companies, Lexington Law and Sky Blue, are not even listed as Justice Department-approved companies. But Greenpath Inc is listed by the Department of Justice and has an A + BBB rating.
The Credit Repair Organizations Act (CROA) prohibits credit repair companies from lying about what they can do for you and charging you a fee before they provide their services. CROA is adhered to by the FTC and requires credit repair companies to explain:
- your legal rights in a written contract that also details the services they will provide
- your three-day cancellation right at no charge
- how long does it take to get the result
- the total cost you will pay
- any guarantees
DIY Credit Repair Steps
Some people hire a credit repair company to investigate their credit report for them, but whatever a credit repair company can legally do, you can do for yourself for little or no cost.
Step 1. Review your credit report
Get a copy of your credit report by contacting one of the three major credit reporting agencies, or another option is to use Credit Karma. This free service offers credit ratings, reports and analytics. The advantage of Credit Karma is that you can access it at any time.
When you receive the report, review it and write down any information you believe is inaccurate.
Step two – challenging negative signs
Once you have identified negative information that you believe is incorrect, such as invoices or court decisions, you need to dispute that information. You can dispute errors through each of the TransUnion, Equifax and Experian credit bureaus.
Credit Karma also offers an easy way to dispute incorrect information after creating an account.
Step three – challenging incorrect information about late payment
The credit card company or mortgage lender may delay a payment that was paid on time. Errors do happen, so be sure to dispute inaccuracies.
Keep in mind that the time it takes for them to resolve any disputes and correct them may vary.
Step four – be polite and patient
You can also call your creditors and ask them to update incorrect information. Lenders can instruct credit bureaus to remove entries from your credit report at any time.
The main thing is to ask politely, be persistent and patient. Remember to use the time you have been a client of the lender, or the fact that late payment may be the only one in your history.
If the representative you are talking to gives you a “no” answer, ask the manager. A request to remove incorrect information from your report might sound something like this:
“I have been a client for over five years and this is the only payment ever delayed. Is there anything you can do to fix this? “
Step five – working with the system
After eliminating negative ratings and late payments, there is one more thing you can do to boost your score. The use of credit is 30% of your total points. Remember that using credit is how much credit you have and how much credit you have.
So, you have two ways to improve this. You can either aggressively repay any of your balances in any open account or ask for more credit. So, for example, if you owe $ 5,000 on a card with a $ 10,000 limit, your debt to credit ratio is 50%. If you ask and increase the limit to $ 12,500, your ratio will instantly improve to 40%.
Increasing your line of credit is probably the fastest way to boost your rating, but remember, don’t add extra debt.
Final thoughts on credit repair companies
Not all credit repair companies are created equal. Do your homework before signing a job contract with a specific company. Many of the things that credit repair companies offer you can do on your own with a little time and patience.
Key findings
- Receive and view your credit report.
- Determine if you want to go about your business or hire a loan repair company.
- Be polite, patient, and persistent when calling your creditors.
- Credit repair takes time.
- Enjoy your new account.
Good luck!
This article originally appeared on The Money Mix and has been republished with permission.