One of the best ways to manage your finances is to keep your credit on track.
But what if you’re facing a less-than-perfect credit history? What should you do?
Calling credit repair companies is tempting. They seem to have a solution to your problem.
Before you book an appointment with the nearest credit repair company, find out how they work. Most importantly, identify if the credit repair companies are legit.
Credit Repair Company
Organizations that help consumers improve their credit score with a fee. They work hand-in-hand with credit bureaus and creditors. The credit repair company tries to remove destructive payment behaviors from your record.
Trusted repair credit company has good reviews. Look for feedback on your prospective company before signing up.
Legit credit repair companies work with you. They use the old-fashion way to repair and rebuild your credit.
Nevertheless, whatever they do on your behalf could be done by yourself. You pay for the convenience – less legwork for you. Still, there is no guarantee if your credit will improve.
Unfortunately, not all credit repair companies are legitimate. Some are scams. Look for the best and reputable repair companies to avoid paying costly monthly fees.
The cost of service by a legitimate repair credit company varies. Start-up services charge around $80 to $90 per month. Expect higher fees for more advanced tiers – credit monitoring and credit score analysis.
Some advertisements show free credit repair companies. But in reality, they offer only free brief consultation. Once they begin the repair service, charges start piling.
Credit repair is different from credit counseling. They say they do handle all the heavy lifting. Don’t be blinded by their words and promo. Do your research before agreeing to work with it.
How to Repair Your Credit Score
Credit repair companies use a couple of strategies when removing marks from your credit report.
Request for your credit report
Credit repair companies will first take a look at your credit report. It usually comes from these three credit bureaus: Equifax, TransUnion, and Experian.
Review credit reports
The next step for the credit repair is to look for negative remarks. They take note of any charge-offs and bankruptcies. Tax liens can also pull down your credit score.
Plan for dispute
Afterward, they will plan on disputing errors if there are indeed errors. They make necessary negotiations with creditors. The main goal is to get rid of the ugly marks.
Their credit recovery process deal with: :
- Request for information validation
- Dispute letters requesting to review the error
- Sending cease-and-desist letters to your debt collectors
Some companies recommend a new account application. This account will help you create positive information recorded in your credit report. However, you have to be cautious. This move is not advisable, especially if you had difficulty managing loans and bills in the past. If you can handle it, you are advised to get various types of financial services such as loans.
Must Watch-Out Credit Repair Services
Credit card scams and credit repair scams are everywhere. They target financially vulnerable people. Look out for yourself and avoid these credit repair services.
- Instructs you to avoid direct communication with credit bureaus.
- Requires an upfront fee payment before they begin their work.
- Insist dispute information on your credit report, even though it is accurate.
- Promise quick credit repair
- Assures a clean slate. Give you a new identity or an alternative Social Security number.
- Command you to lie. Worst case, instruct you to provide false information.
- Obscure your legal rights
Whenever you talk to a company, observe these behaviors. Ask questions and clarify before you sign up for any credit repair services. In case you don’t get clear answers, mark it as a red flag.
Also, consider if the company is worth paying, even if the service is legit. Some of the works can be done by yourself.
Tips On How To Do Credit Repair By Myself
On the other hand, repairing your credit score is possible. There is no need to pay companies to do it for you.
Check the credit report with the three credit bureaus.
Everyone is legally entitled to one free credit report each year. Make sure it comes from the three major credit bureaus.
Looking at your credit report helps you understand why you have low credit. Use this opportunity to spot errors. Any discrepancy might be the cause of why your score is down.
Dispute wrong information
If there’s misinformation on your credit report, file an online dispute. Address it to each credit bureau. You may also send a letter of dispute.
Prepare the additional supporting documents. These are needed once they investigate your claim.
Your credit score will climb slowly if your credit bureau approves the dispute. They will remove the false information in your report and update it.
Pay off credit card debts.
The easiest way to increase your credit score is by paying off credit card debts.
Besides improving your payment history, it also enhances your credit utilization rate.
Here’s the trick. Add all the credit card debt you owe. Then, add up your credit limits across all the open credit cards. Afterward, divide the overall debt by the overall credit limit. The answer is your credit utilization rate.
In short, it is the percentage of your overall available credit. As much as possible, stay below 30% of it.
Some people get a loan from licensed money lender. They can use the loan to pay off the credit card debt.
Make on-time payments
Your on-time payments are the simplest way to keep your credit score on top. Being diligent on your financial obligation reflects on your credit history.
Keep old accounts open.
The average age of accounts helps determine your credit score. That’s why it is necessary to have an older credit account on your credit history.
Maintain those old credit cards, even if you don’t use them. Take note of the annual charge fees; if there’s none, better. Remember how important keeping those credit cards open.
Monitor your credit
Repairing your credit needs constant monitoring. Credit scoring agencies offer these services for a monthly fee. Most of the time, their cost is lower compared to credit repair companies.
Tracking your score while repairing helps a lot. It allows you to see the progress. You can sense if you’re on the right path to recovering your credit. Also, you can identify if your actions are productive.
Most of the credit repair companies are expensive. If you’re on a tight budget and have extra time, put any effort into fixing your credit. Do it without spending too much. Follow the tips above.
Credit repair companies are somewhere out there. Always look for the legit and reputable one and consider making a list of things you need to buy. Beware of scams. Take note of this quick guide on how to identify legit repair companies.