When you first get approved for a credit card, it’s a great feeling. You feel empowered and are able to unlock financial milestones that you couldn’t previously reach. For many people, the thought of credit repair is something that never crosses their minds. Unfortunately, mistakes happen and sometimes life can cause us to lose the ability to pay our credit card bills because we’re also trying to pay things like rent, bills, and groceries.
In situations like this, you’ll ask yourself: how does credit repair work? More importantly, you’ll ask if it can truly help you get back on your feet in the face of calamity. The answer is a resounding yes, my friends. Today, we’ll look at how credit repair works, and how today’s top companies can help you get your score back where you want it.
The Truth Behind How Credit Repair Works
When you start doing research into credit repair, you’re going to see a lot of options. Some companies will promise incredible things like a “clean credit report” or they’ll promise to remove all those negative things that are dragging down your credit score.
The truth is that there are a lot of different credit repair scams out there that are looking to take advantage of people who are desperate to fix their score and get their lives back on track. When you’re looking for a credit repair service, keep these things in mind:
- They can only remove items that are inaccurate, unfair, or unsubstantiated.
- There’s no guarantee that any specific items can be removed, or how well it will affect your score
- There’s no set timeline for how long it will take
- You can DIY your credit repair
Now that we’ve covered some of the ground rules in regards to legitimate credit repair, let’s explore how this practice works, and how you’ll know you’re working with a legitimate company.
An Overview of Credit Repair (And Why it Works)
The concept behind credit repair involves leveraging your rights as a consumer to have a fair, substantiated, and accurate credit report. Since credit reports are used by lender, creditors, and even employers in some cases, they need to be perfect.
Unfortunately, in many cases, they are not. This is because credit reports are generated by three different credit bureaus: Experian, Equifax, and TransUnion. These bureaus all collect information on your finances from a variety of sources. These include, but are not limited to, the following:
- Credit card companies
- Car financing providers
- Public records
How they gather this information varies from one bureau to another. Because of this, the information on each report is naturally going to be different. In fact, according to a study done in 2012, 1-in-5 people have inaccurate information on their credit report.
There have been several follow-up studies as well, all of which point to people having inaccurate items on their report than can negatively affect their credit score. Credit repair works by targeting and disputing these items so they aren’t constantly dragging your score down for reasons beyond your control.
While you can certainly do this yourself, let’s consider an example of a complex dispute. In this example, you have an amount that has been charged-off and is now in collections. If this amount has been sold to more than one collections agency, it could very well appear on your report more than once.
Each of these duplicate entries are causing further damage to your score, but only one of them is accurate. In this situation, a credit repair company could work by using the credit repair process to get these duplicates removed from your report.
The aforementioned process involves pulling your credit reports from the three bureaus and examining them line-by-line to look for errors or discrepancies. Filing disputes towards these issues, along with providing the correct evidence, allows you to get them removed as part of credit laws in place.
So, what do you get when you hire a credit repair company? Let’s take a look at the benefits.
The Benefits of Using Professional Credit Repair
When you hire a credit repair service, you pay per month to have them perform the steps listed above. In doing so, their goal is to get as many items removed from your report that they can through legal means.
While there’s no exact timeline or guarantee as to when you’ll see benefits resulting from credit fixer companies, there is a lot of potential for positive results. Consider first that negative items remain on your credit report for a minimum of 7 years.
If your efforts surrounding credit restoration get these items removed, you’ve saved yourself years of credit problems that could result from that inaccurate item. Successfully removing items from your report will also raise your credit score.
Credit scores come in different ranges based on the company or lender, but a vast majority of them use the FICO scoring method. This method puts your score on a scale from 300-850. When calculating this score for lenders, credit card companies, and other people who look, they weigh these aspects of your credit report:
- 35% payment history
- 30% amounts owed
- 15% credit history
- 10% new credit
- 10% credit mix
The exact method that they use isn’t public information, so these percentages are a general idea. What this tells us, however, is that your payment history is one of the most important things. That means that things like late payments or collections can be the most detrimental to your score.
Imagine if you had one or more late payments on your report that were incorrect. Now, imagine how it would effect your score if you were able to get those removed? This is the biggest benefit of credit repair.
With a higher score, you can get approved more often and enjoy lower interest rates on your loans or credit cards. This will make them easier to pay off and ultimately save you more money in the long run, especially with large loans like a mortgage.
How does credit repair work? It works by giving you the power and the ability to challenge items on your report that aren’t accurate. With the help of a legitimate credit repair company, you can increase your score and enjoy a lifestyle that gives you a higher quality of life, and access to the things you need.
Be sure to check out our pages on credit repair reviews and find out which companies are offering the best services for your needs.