Knowing these credit repair myths and truths can go a long way to improving your finances
Credit repair may seem like a complex concept at first glance. But that’s often because several misconceptions cloud the reality of the process and the potential for results.
The truth about credit repair is that it’s not as complicated as you might think. And if you’ve read negative reviews about credit repair, it’s important to note that the quality of your experience is often equal to the quality of the service provider you work with.
These myths can be detrimental if they end up preventing someone from fixing their bad credit and improving their personal financial situation, especially if that person is you.
To help you, let’s explore the real truth about credit repair and what some of the most common misconceptions are.
Truth: Credit repair is about your credit report, not your score
This is a fundamental fact for credit repair: the process focuses on your credit report, not your credit score. Believe it or not, your report and your score are two separate things. Whatever happens with your score is the result of the actions taken to repair your report.
The main thing to know here is that credit repair aims to ensure that your report is:
This means that the credit repair process is more about going through your report with a fine-toothed comb to find inaccurate information and trying to resolve the situation.
Myth: Your credit score will increase immediately
Credit repair is not a magic pill for your credit score. While this is a proven strategy for fighting bad credit, it won’t improve your credit right away. Typically, those who may be dissatisfied with the results or timing of credit repair watch their scores daily and expect them to increase.
Related: Your bank could reduce your credit card limit – what to do if this happens
A little patience is needed with credit repair; like many other good things, results come with time.
When an error or mistake is detected in your credit report, the next step is to dispute the inaccurate negative item with a credit reporting agency. Once a dispute is filed with a credit bureau, the reporting agency has 30 days, and in some cases 45 days, to respond. He may correct or remove the negative item at the end of this period, but the impact on your credit score will still take some time to show.
A general rule of thumb with credit repair is that you can expect it to take around six months for results to appear. Sometimes it can take longer, especially if you dispute several aspects of your credit report.
There may be other elements to a bad credit rating that are holding you back, which credit repair alone cannot fix. For awareness, the five factors of a credit score are:
1. Payment History.
3. Composition of accounts.
4. Difficult requests.
5. Aging of Accounts.
Truth: You Can Try Fixing Your Credit Yourself
Do-it-yourself credit repair is possible without the help of an outside credit repair company. The process includes a few steps, which consumers can follow on their own if they wish:
Checking the credit report for errors.
Dispute errors with a credit bureau.
Take the next steps to further analyze or develop credit.
Although you can do it all yourself, the effort and time required is immense. The actual mechanics of credit repair, like writing a dispute letter, can be time-consuming and require expertise. Some may have the time and resources to do the job on their own, but others may not have these benefits. Or they may not have the experience to challenge major credit report errors.
Myth: Credit repair companies are a scam
This is a particularly damaging myth because the services of a reputable credit repair company are invaluable to the process. The key word in this sentence is of course “reputable”. And there is an easy way to spot credit repair scams from the rest of the market, which largely consists of efficient and trustworthy credit repair companies.
Also see: 7 signs of a bad credit card
It is essential that you research the credit repair companies you are considering working with and ensure that they follow the guidelines of the Credit Repair Organizations Act (CROA). This consumer protection regulation “prohibits false or misleading representations and requires certain affirmative disclosures in the offer or sale of credit repair services.”
There are a few key consumer protections that CROA enshrines:
You cannot be asked for an upfront payment before the company provides a service.
You have the right to receive all contracts in writing.
You have certain cancellation rights which the company must inform you about.
While the CROA regulates what credit repair services can and cannot do, you still have a role to play in finding out which company is the best option.
Consider asking these questions:
Does the company care about the personal aspects of my story?
Are they transparent about the process?
Will they update me on progress and ask me to collaborate?
These answers will help shape your final decision. Before you get to that, though, start by looking at reputable, results-oriented services like Lexington Law and CreditRepair.com.
Finally, beware of any company that offers you a guarantee of results. This is a major credit repair red flag to watch out for, as well as an illegal practice.
Truth: Credit report errors are common
The reason the credit repair process can be so intensive is that credit report errors are quite common. A Federal Trade Commission study found that 5% of Americans had a credit report error that could negatively affect their score.
Most consumers want to be sure that their credit report is fair and accurate, and sometimes assume it. But credit bureaus aren’t perfect and mistakes can creep in. Some errors are attributable to the creditor.
On a deeper level, inaccurate information on your credit report can be harder to see from a consumer perspective. For example, duplicate accounts, incorrect inquiries, and inaccurate accounts can all be present on a credit report. Without remedying these errors, or even knowing that they exist, consumers may be unable to establish credit no matter what they do on their own.
Look: How bad is it if I don’t pay off my credit card every month?
The experience of a reputable credit repair company can help bring these inconsistencies to light, as they know what to look for. CreditRepair.com reported that in 2018, the average customer they worked with disputed 28 credit report items.
Myth: Credit Repair Can Remove Negative Items That Are Correct
That said, no amount of credit repair can cause a correct negative item to be removed from your credit report. After all, the purpose of credit repair is to identify and challenge incorrect or inaccurate information on your credit report.
If a certain item is substantiated and verified by the responsible credit bureau, credit repair is not the solution. Some may enter the credit repair process with this expectation that there can be a panacea even for the negatives. If the negative information is correct and affects your score, additional strategies such as debt validation may be required.
Truth: You can do more to build your credit
Credit repair is best leveraged when you take action on your own to build credit. Do you remember these five factors that make up a credit score? Each of these elements is partly within your control as a consumer, and it may take new lifestyle choices or new spending habits to have bad credit. For instance:
Always make timely payments. If you need to, set alarms on your personal devices, circle dates on a kitchen calendar, or just sign up for autopay. Many organizations also give a small discount for automatic bill payment.
Don’t open too many new accounts at once or in a short period of time. This could act in a doubly negative way. Every account you open will come with a thorough investigation while reducing the average age of your accounts.
Keep your credit utilization around 30%. This is the amount of your credit balance that you use or owe. Accessing too much of your credit can hurt your score and make it harder to pay off your debts.
The most important truths to remember about credit repair are that it is not a scam, it can improve your credit score over time, and there are many services available to help you. take control of your credit situation. Additionally, these companies may be able to provide more in-depth credit analysis, next steps, and credit monitoring to help improve your situation.