Avoid These Credit Repair Mistakes
Credit repair is all about removing or correcting inaccurate information from your credit report to provide a fair and complete picture of your finances, taking action to increase your credit score, and resolving to avoid credit problems in the past. ‘to come up. You can do it yourself or hire a credit repair company to do it for you. Either path may present possibilities for error. Make sure you know your rights and avoid the 16 mistakes listed below.
Key points to remember
- Know your rights under applicable credit laws.
- Get and read your credit reports once a year and check for errors.
- Only dispute information that you believe is incorrect.
- Keep track of everything and write everything down.
- Avoid unsavory credit repair companies.
Know your rights
Several laws protect consumers when it comes to credit. These include the Credit Repair Organizations Act (CROA); the Fair Credit Reporting Act (FCRA); the Fair and Accurate Credit Transactions Act (FACTA) of 2003; and the Fair Debt Collections Practices Act (FDCPA) of 2010. These laws stipulate, among other things:
- You should have free access to your credit reports once a year.
- You can dispute errors on your credit reports, and credit bureaus must correct them if proven.
- You should be notified when your credit report has been used, for example, to deny you a loan.
- You must allow your credit information to be provided to someone else.
- The length of time that negative information remains on your reports is regulated.
- Creditors should follow rules when it comes to contacting you about a debt, including sticking to certain hours and not making threats or telling family members about your debt.
- Credit repair agencies cannot lie to your creditors or encourage you to lie, alter your identity, or misrepresent their services. They should also provide you with a contract and a three-day cooling off period. If a company does not meet any of these standards, you may be dealing with a scammer, instead of one of the better credit repair companies.
Knowing your rights is only part of the picture. You should also avoid making mistakes along the way. Here’s what to watch out for.
Mistake # 1: Not Checking Credit Reports
The first step in repairing your credit is knowing what your credit reports are saying. If you’ve never requested your reports, or if it was at least 12 months since you last viewed them, you can check your reports by going to the Federal Trade Commission (FTC) Free credit reports page and the following instructions. Other websites sell access to credit reports and a few even offer selected reports for free, but the FTC gateway guarantees that you get the FCRA guaranteed reports. Read all three reports carefully, looking for information that you believe is false or inaccurate.
Mistake # 2: procrastinating
Don’t put off credit repair. If you discover negative information on any of your credit reports and believe it is wrong, you should try to correct the file as soon as possible. Although most negative information goes away after seven years, it is a long time to live with an inaccurate credit report.
Mistake # 3: Avoiding Credit Education
Whether you’re trying to remove or correct bad information on your credit reports or just trying to reduce debt and chart a new financial course, the more you know, the better. This includes knowing how to dispute the wrong information on your credit report as well as knowing that you probably need to pay off high interest credit card debt before installment loans.
Mistake # 4: not keeping documentation
Complete and accurate documentation of all debts is essential to contesting misinformation, protecting your rights, and keeping expenses within parameters that are meaningful to you. You must know the penalties for non-payment as well as the optimal conditions for requesting a credit increase. Be able to show that payments were made on time and always be prepared to document your claims.
The approximate number of “credit report” complaints reported to the Consumer Finance Protection Bureau in 2020.
Mistake # 5: arguing too much
Obviously, you should only dispute the things that you honestly believe are incorrect. Some credit repair companies like to challenge everything in the hopes that one or two things will “stick.” The problem is, the credit bureaus are unlikely to take such an approach seriously. Even if they do, you might end up removing positive information that helps your credit score. It is also important to submit your dispute to the right entity. In most cases, it will be the credit agency, not the creditor.
Mistake # 6: contesting online
All three credit bureaus offer online dispute resolution systems, but critics say using these systems may deprive you of some of your rights under the FCRA. Online systems allow credit bureaus to avoid doing things such as passing your information on to creditors, providing you with written responses to your disputes, and providing you with the “verification method” of the item you have. contested. Instead, you should file your dispute using hard âhard copiesâ and certified postal mail, critics say.
Mistake # 7: Challenging boilerplate language
In addition to not contesting âeverythingâ, it’s also wise to individualize the language in your dispute file to prevent the credit bureau from âflaggingâ your documents because they are repetitive. Instead, use the template as a guide and make sure the words are your own.
Mistake # 8: sending uncertified mail
All documents you send to a credit bureau, collection agency, or creditor should be sent by certified mail with the requested acknowledgment. This provides you with the documentation mentioned above as well as proof that the agency received your letter. The same rule of âproofâ applies to any communication addressed to you by any of the above entities. Do not accept anything verbally unless it is also in writing. This way you will know what the agency agreed to and, more importantly, you will have written proof.
All communications must be in writing; you should not verbally accept anything unless it is also in writing.
Mistake # 9: falsifying documents
Offering false and misleading statements or written communications is not only illegal for creditors and credit bureaus. If you are lying, there is a good chance you will be sued. Any documentation you provide in connection with a dispute or question regarding a credit issue must be accurate. You don’t have to elaborate, but what you say must be true.
Mistake # 10: Transferring Credit Card Balances
Transferring a balance from one credit card to another is not a good credit repair tactic. You will still owe the same amount and in most cases the balance transfer fee will outweigh any interest benefit you might get. The same applies to consolidating debt on a single credit card, especially if you close the other cards, thus losing any available credit they would display.
Mistake # 11: Missing payments
Another credit repair mistake some people make is when they miss payments on some accounts to make payments – or larger payments – on others. The only exception may be if the account in question has already been debited or has been collected. If you choose between paying a collection account and a checking account, always pay the checking account to keep it that way.
Mistake # 12: canceling credit card accounts
Since 35% of your credit score is based on your credit history, it’s rarely a good idea to close a credit account. It may be better to keep a small balance and pay it off monthly instead of canceling the account or cutting the card. It will take discipline to avoid getting into debt, but your credit score will be higher for the effort.
Mistake # 13: Applying for new credit
If you are trying to repair your credit, the chances of getting approved for additional credit, especially unsecured credit, are not great. You could lose a difficult investigation that ends up lowering your credit score just as you try to increase it. It’s best to save up to apply for new credit for later, after your credit has been repaired.
Mistake # 14: Paying Debt Collectors
It may seem counterintuitive, but paying a debt collector can cause unforeseen damage. If, for example, you have old debt that is past the statute of limitations, making a payment on that debt could update the debt. If you are unsure of the validity or status of the debt, it is important not to pay until the debt collector has proven that the debt is legitimate and current. It’s important to remember that debt collectors are experts at trying to scare you and get you paid. Don’t pay on the basis of anything verbal. Written communication is the only acceptable form of communication.
Mistake # 15: hiring a shady credit repair company
Some people feel that they don’t have the time or the expertise to do their own credit repair. For these people, hiring a credit repair company can be beneficial and convenient, although the convenience comes at a price. According to Credit Karma, the cost of professional credit repair services could include a fixed or âper-removalâ charge of $ 35 or more. The total cost could go up to $ 750 or more. Some companies charge monthly fees ranging from $ 50 to $ 130 or more. Only you can decide whether the cost of paying someone else to repair your credit is worth it. It should be noted that credit repair companies, in general, do not have a good reputation, so review your rights above and as outlined in the CROA.
Mistake 16: declaring bankruptcy
Some people think they need a fresh start and decide to âfixâ their credit by filing for bankruptcy. Unfortunately, bankruptcy won’t improve your credit rating, it will stay on your credit report for up to 10 years, and even when it’s gone, many lenders will ask you if you’ve ever filed for bankruptcy under the bankruptcy. loan application and use process. this as a reason not to approve a loan.