Everything you need to know about repairing your credit
Good credit is essential if you’re looking to get approved for many financial services: credit cards, auto-loans, mortgages, personal loans, short-term debt and more. And the better your credit score, the better your interest rates on your debt will be.
If you don’t have good credit, a Possible loan can still give you money while rebuilding your credit history.
To have “good” credit you need a credit score around 700 (FICO Score). For those of us who aren’t quite there yet, credit repair work could make a world of difference.
We believe everyone deserves access to financial assistance and the opportunity to build toward a better future. That’s why we created a friendly, short-term loan product that doesn’t require good credit so it’s easier to get approved. Once approved, we report the status of your loan to the credit bureaus which helps build your credit history.
What is Credit Repair?
That being said, credit repair is traditionally thought of as the process of improving your credit by disputing errors on your credit reports.
The Fair Credit Reporting Act (FCRA) requires that information on your credit reports be 100% accurate and fair, otherwise it must be removed.
The Federal Trade Commission (FTC) conducted a study which revealed that one in five people had an error on at least one of their three credit reports, making credit repair a real option for improving credit for a lot of people.
Traditional credit repair can be done on your own or through a reputable credit repair company or agency. We’ll discuss the pros and cons of each method as well as provide some alternative methods to credit repair. We’ll also discuss what to do if you don’t have errors on your credit report.
Checking your Credit Report and Getting Credit Counseling
Before beginning the process, it might be good to take a look at your reports if you haven’t done so recently by obtaining your free annual reports. Checking your own credit report and keeping tabs on your credit file has no negative impact and could help you decide the best way to proceed based on what you find.
You might also want to consider free credit counseling from any number of non-profit organizations before committing to any credit repair service or company so you can gain a better understanding of your credit reports, debt load, and financial situation.
Credit Repair Process and Repairing Your Credit Yourself
Ready to take control of your financial health by doing credit repair work yourself?
Each of the major credit bureaus, Equifax, Experian and TransUnion, provide the ability to dispute inaccuracies on your credit report for free! We recommend checking each one, as each credit bureau is reported to separately and you may find errors on one credit report that don’t show up on another credit report.
However, simply disputing inaccuracies from debtors, creditors, reporting agencies, or collection agencies isn’t always enough to get them removed from your credit report. Many times you’ll need to provide sufficient documentation to prove that the information is indeed inaccurate. Additionally, there may be inaccuracies present you didn’t even think to look for, such as name misspellings or duplicate accounts. Lastly, if you’re dealing with multiple complex inaccuracies, such as identity theft and disputed late payments, the process can be long and complicated. Without a concrete understanding of your rights and limitations, it may be hard to get good and timely results.
If your situation seems fairly straight forward and you’re looking to save money, DIY credit repair could be a good option. If things are a little more complicated or you’re feeling unsure or confused, it might be worth looking into professional credit repair services and companies to do the heavy lifting for you.
How to Find a Reputable Credit Repair Service
Interested in using credit repair services but worried about falling victim to credit repair scams?
There are plenty of reputable services out there in the credit repair industry and the FTC put the Credit Repair Organizations Act in place to protect people from predatory services but you’ll want to do your due diligence. Before handing over any money or personal information, be sure to check the reviews of the company on the Better Business Bureau website. You should also stay away from any companies that guarantee improvements, claim they can remove inaccurate negative items and information or create a new credit profile for you.
Should you choose to work with a credit repair business or service, you should expect them to obtain copies of all 3 credit reports and review them for errors before putting a plan in place to work with the credit bureaus to validate the information on your credit report and remove negative marks that are inaccurate. They might also offer recommendations on how to build credit in the future.
Benefits and Costs of Credit Repair
Credit repair is a great option if you’re looking to make changes to your score quickly. If disputes are successful you could see changes in as little as 30-45 days instead of waiting for the 7-10 years for negative items to naturally fall off your credit report.
Credit repair agencies typically charge a monthly fee and some may also charge a one time setup fee. You can end up paying anywhere from $60-$200 a month. This sounds like a lot but if it’s effective you could end up saving much more over the long run if you’re eligible for better interest rates after your credit improves.
Another consideration is that improvement isn’t a guarantee. Everyone has a unique credit situation and some are more complex than others, there may not be errors to correct or efforts to correct them may be unsuccessful.
If you’re in a hurry to improve your credit, have the money to spare and are willing to do the research, working with a credit repair company could be the way to go.
Options for Credit Repair
We recommend doing some research on the following companies for traditional credit repair services:
Highlights: A credit repair company that’s an actual law firm that specializes in credit law, A rating from the BBB, has been around longer than most, on the cheaper end and doesn’t charge until the agreed work is completed.
Highlights: A credit repair company that offers a full 90-day refund no matter the reason, A+ rating from the BBB, and on the cheaper end.
Highlights: A credit repair company that partners with TransUnion so you’ll get access to extras such as credit monitoring and credit score tracking and analysis, A rating from the BBB and but a little more expensive.
Alternatives to Credit Repair
There are other ways you can help repair your credit besides turning to traditional credit repair companies.
One option is to take out a credit building loan.
It’s not exactly intuitive to apply for a loan if you don’t need extra cash but certain types of loans are reported to the credit bureaus which means they could impact your credit score, for better or for worse.
Credit building loans are designed so that people who have bad or no credit can still get approved. Once approved, payments are reported to the credit bureaus to help improve credit scores and build credit history. That’s exactly what we offer people here at Possible. Like any reputable company, we can’t guarantee your credit score will improve but with on time payments many of our customers have seen great success.
You might also consider getting a secured credit card.
Essentially, you set aside a chunk of your own money to be used as payment if you default. This way the lender or creditor is guaranteed to get paid so it’s much easier for you to get approved if you have bad or no credit. Otherwise, the card functions essentially like a regular (unsecured) credit card, with your deposit amount becoming your credit limit. You’ll pay interest for carrying a balance and receive monthly statements detailing the minimum payment required to keep your account in good standing.
It’ll be reported to the credit bureaus just like a regular credit card, which should have a positive impact on your credit as long as you make your monthly payments on time.
If you’re able to, opening up another credit card account or increasing your credit limit on existing accounts could be beneficial.
One factor that can affect your credit score is your credit utilization rate. It’s recommended that keeping your credit utilization below 30% is best. This means if you have access to $10,000 in the form of credit cards, you should keep your balance below $3,000 to indicate you know how to manage your credit responsibilities and won’t over-spend. By opening a new card or increasing credit limits on existing cards you can increase your access to credit without paying anything toward your balance, which could improve your credit.
If you’ll be tempted to run up a balance on a new card or take advantage of your increased limit by spending more, this option might not be for you. We also caution against opening up too many new credit accounts at once, as this could have a negative impact.
These alternative methods to credit repair can work wonders for those who don’t have errors on their report, have more time to build their credit and are looking to learn best practices for building credit in the future.
Everyone’s Credit Situation is Unique
As we’ve mentioned several times, everyone’s credit situation is unique so what might work for someone else might not work for you. It’s important to do your research on how credit scores are calculated so you can make informed decisions. If you’re uncomfortable doing research, free credit counseling is still a great option to learn more about how you can meet your financial health goals.
One tip we can give you is that payment history typically matters most. So if you’re looking to repair your credit, focus on consistently making all of your payments on time.
If you fall behind, try to get back on track as soon as possible. If you’ve gotten pretty far off track and accounts have been sent to collections, you should revisit those accounts and make arrangements to pay them off. The longer the debt remains outstanding, the greater the impact to your credit score.
Taking control of your finances can be overwhelming but there are companies out there, like Possible, who have your best interests in mind and are there to help make the process easier for you. Improving your credit is achievable and in the long run, will save you money and unlock opportunities so you can live your best life. The best thing you can do is get started today, whether it’s by researching and reading one article, contacting one company for more information or trying one thing suggested here.