How to Repair Your Credit? Follow These 4 Basic Steps

Repair Your Credit

Your credit score is very crucial in your financial life. Banks and lending corporations check your credit score before they can grant you a credit card or a loan. Car insurance companies consider your credit score in setting your insurance rates. Also, some employers base your promotion or salary raise through your credit score. That is why it is important to avoid a bad credit score.

For some having a credit score below 601, it is difficult for them to apply for loans and insurance. However, there are certain companies that offer credit repair services. They promise to remove all your bad records.

Well, let’s know better about credit repair.

What is Credit Repair?

According to Investopedia, “credit repair is the process of fixing a bad credit report.” It involves disputing errors on the report that put you to a bad credit status. Factors for a bad credit score include late payments, having an account charged off or sent to collections, loan defaults, bankruptcy and identity theft, among others.

What are Credit Repair Companies?

Some companies specialize in credit repair services. The first thing they do is to pull your credit report from major credit reporting agencies or bureaus to identify the issues. Once they identified the errors, they will ask for some supporting documents from you. They will then file a letter to dispute any credit report errors. The bureau and data furnishers will then work with the credit repair firm to find out if these errors should be removed from your credit report.

Should I go for credit repair services?

Accordingly, credit repair services take for at least 45 days to finish. It’s a short timeline for those who urgently want to purchase new house, car or open a credit card. But according to Federal Trade Commission, a consumer protection agency, credit repair businesses cannot guarantee you anything. Their claims are “very likely signs of a scam.” The Federal Trade Commission also have not seen yet any legitimate credit repair operations.

Moreover, some state that credit repair company cannot do anything to improve your credit score. Thus, you do not have to pay a lot of money for a “professional” credit repair company to fix your score.

So, what will I do now?

Well, you can do it yourself! The Federal Trade Commission suggests to repair your bad credit yourself. It is the safest way to fix your credit reports, plus, you get to review all your transactions for the past years.

Here are the four basic steps in repairing your credit:

Gather the latest copies of your credit reports

To start repairing your bad credit score, you have to gather the latest copies of your credit reports from three major credit reporting agencies. There are two ways on how to get your credit reports.

First, the law dictates that any individual is entitled to free credit reports from each of the major credit bureaus each year. You can ask it by sending an email or through a phone call. There are also some cases in which the state grants you another access to a free report if you have been turned down for credit due to fraud or identity theft.

Second, if you already enjoyed all your free credit reports, you can still order from the credit bureaus and just pay the corresponding fees.

Take note that you have to gather all three credit reports from three major credit bureaus because some lenders and creditors only send reports to one credit bureau.

Carefully review your reports for possible errors

Now, this is the most crucial part – reviewing the credit reports. Credit reports contain your personal information, detailed history and timeline of your transactions, list of items that have been forwarded to public records like a bankruptcy and the inquiries you have made to your credit report.

It may be exhausting to check line per line, but you have to be very careful in reviewing the credit reports so that you can be able to identify the errors.

In review, you have to look for some information that is incorrect. This includes accounts that are not yours, payments that have been incorrectly reported as late, past due accounts, maxed out accounts that are over the credit limit and more.

Make sure that you are organized by highlighting some information that needs attention.

Dispute credit report errors

Now, dispute any information that is inaccurate, incomplete or is not verified. The instructions on how to dispute errors are included in your credit reports.

To send a dispute, you can do it via online. Online allows you to send screenshots of the errors in your credit report. This will make it easy for credit bureaus to recheck and revalidate your credit report.

You can also do a phone call. However, this may lead you to misunderstanding, plus, it leaves you with no paper trail.

Lastly, you can also send your disputes directly to the lenders, creditors, banks, and businesses. They have legal specialists to work on the investigation.

Remember! It is part of your right to dispute any inaccurate and incomplete information at no charge. It is the primary obligation of the credit bureau and information provider to conduct an investigation or take legal actions in correcting errors in your credit report. Just make sure that you provide all the necessary documents that are needed for the procedures.

Usually, it takes 30 to 45 days for credit bureaus to respond to your dispute and investigate.

Get new credit

After all the errors are being corrected, it’s time for you to work on getting the positive information added to your account.

You are also now free to open a new credit by opening up a new account. In getting a new credit, try to apply to one or two so that you can be approved for a major credit card. If you are denied for a major credit card, try a retail store credit card.

If you get approved, it is important that you have to be mindful of your primary responsibilities and obligations as a credit card holder to avoid future bad credit scores.