Credit repair - The secret to rebuilding your finances

Bad credit may turn into a major headache, especially if you're trying to bring your finances on track. Just because you’ve been through stressful financial situations or have committed some financial blunders in the past, it doesn't mean you have to keep on suffering from its effects for a long long time. The credit bureaus usually offer you with credit repair options, which you can conveniently use to bring your report back in shape.

Why and when to choose credit repair

Your credit report is a reflection of your financial decisions, and it's always good to ensure that you have a healthy financial life. A good score ensures that you get better deals, whereas a bad score can leave a negative impact when you apply for new credit, insurance or job. Depending on your score, your rates may increase or your applications may get rejected when you try for mortgage, insurance, credit cards etc. or seek new employment.

There's no fixed time to opt for credit repair. You can start building your credit whenever you feel that your report and score are having a negative impact on your financial decisions. However, major reasons which can prompt you to fix your score are:

  • You have lots of old debts on your report
  • You have inaccurate information on your report which you want to remove
  • You have a bankruptcy filing on your report
  • You want to set up a new business
  • You want to take out a new line of credit or mortgage
  • You're either facing credit denials or afraid that your applications will be disapproved
  • You're searching for new job opportunities

How to repair your credit

It's never too late to start rebuilding your credit. The best part is that you can repair your credit for free if you do it yourself. So, instead of paying substantial amount to a professional agency for their credit repair services, you can put in your own efforts to improve your credit worthiness. The following steps will show you the way:

  1. Get your free credit report – Order your credit reports from Equifax, TransUnion and Experian. You're entitled to a free report each year from all three reporting agencies. You can also ask for a copy of your reports from a specific bureau, after credit denials. Check out this infographic.
  2. Scrutinize your reports thoroughly – Check your reports thoroughly for errors, omissions, inaccurate account histories, negative and incomplete information. Mark each of them out, since you need to get them removed.
  3. Dispute the negative information – You'll need to put in efforts for ‘self credit repair’ and dispute each of the inaccurate and obsolete information with your credit bureaus. You can either fill out the dispute form or forward a letter to the credit reporting agency, indicating each of the mistakes and explaining why you think they should be removed.
  4. Document every details – While disputing the errors on your report, you'll need to provide proof to support your claims. For this reason, you need to keep copies of every document including the letters, forms, details of the debt, etc. The credit reporting agency is supposed to investigate the disputed items within 30 days and if you're right, the errors will be removed or rectified on your report.
  5. Pay off your debts – Only removing the inaccurate information won't help your score. You also need to make sure you pay off your existing dues. You can negotiate with your creditors, opt for a debt-relief plan or practice budgeting; but it's extremely essential that you make regular payments and reduce your debts gradually.
  6. Add positive value to your credit file – Make timely payments on your store cards, utility bills and other forms of regular expenses, if you want your credit rating to improve. Don't close old credit accounts as you'll lose your positive histories. Maintain low balances and make sure you have sufficient credit available to you. Apply for secured credit cards and try to save with a savings account. Handle your credits responsibly to portray stability in your financial life. Read more »

Why you should choose credit repair companies to fix your report

You'll be able to save yourself some dollars if you chose to do credit repair yourself. However, it's a time-consuming process and you need to be very particular about it. If you don't feel comfortable doing it on your own, you can opt for a credit repair company to work on your behalf. Legitimate companies offering you credit repair services can help you in the following ways:

  1. Professional approach – They approach the credit bureaus, collection agencies and creditors in a professional way, and have the expertise to deal with them efficiently.
  2. Legal knowledge – They are more aware of the Fair Credit Reporting Act, Statute of Limitations on debt and other such legal intricacies.
  3. Follow CROA – They have to abide by the Credit Repair Organization Act (CROA).
  4. Aware of scoring system – They're aware of the FICO or Vantage scoring system and know what can be done to improve your score gradually.
  5. Scrutinize your reports – They pull your credit reports from three bureaus and review each of them thoroughly for errors and omissions.
  6. Maintain records – They maintain records of all the documents on your behalf, which makes sure that the inaccurate details can be proved while disputing.
  7. Dispute on your behalf – They customize your disputes and send out the dispute letters along with appropriate documentation.
  8. Saves you time – They help you to avoid the hassles of the tedious task and save your precious time.

A good credit is the secret behind a healthy financial life. So, if you want to give a fresh start to your financial life, you should try to fix your credit report as soon as possible. However, remember that it's a time-consuming process, and your score gradually improves as the negative or inaccurate information gets removed from your report. So, try not to expect immediate results while attempting to fix your credit.

Last Updated on: Mon, 12 Mar 2018