The Three C's of Credit:
How Does Credit Repair Work?
Credit repair involves correcting errors on your credit report and making improvements on factors that are lowering your credit standing. The process is essential to people with bad credit looking to access credit at favorable terms and fast.
Repairing your credit can help you get approved for a mortgage, lower your interest rate on loans, or get approved for an apartment. Coupled with rebuilding credit, the repair process requires a keen eye, patience, and determination.
With this in mind, below is a brief look at what it takes to fix a poor credit rating:
What Is Credit Repair
Credit repair is a multifaceted process involving reviewing credit reports, correcting incorrect information, disputing errors, and having damaging listings removed from your credit report.
Basically, once harmful items are removed, the information no longer plays a part in the calculation of your credit score. The effect of a repair is that your credit score gets a boost.
With successful repair, your score could improve from a few or hundreds of points, depending on the severity of the negative items removed.
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Do I Need A Credit Repair Company?
Credit repair can be a DIY project or require the services of a company that specializes in debt and personal finance.
Professionals in the industry operate on your behalf. They collaborate with credit reporting agencies and lenders to get the negative listings struct out from your records.
Further, the companies can also help you institute court proceedings or negotiate resolutions. Such legal solutions come into effect when dealing with FCRA violations.
The Credit Repair Process in 4 Simple Steps
Whether you are repairing credit on your own or through professional help, the process is as follows:
1. Get Your Credit Reports
There are three major credit companies charged with collecting and aggregating your credit information. You can request a report from each of the agencies (Equifax, TransUnion, and Experian) for free, every year.
The report takes a few days, or up to 30 days to arrive. Instead of writing to each of the bureaus, you can request all three reports by visiting AnnualCreditReport.com.
2. Review the Reports
Once your reports arrive, go through each for inaccuracies in the different entries. The errors you need to pay close attention to include:
- Identity errors (Name and Address)
- Account information (Type and Dates)
- Duplicate entries
- Account balances
- Credit limits
- Data management errors – such as different creditors reporting the same entry
- Collection data.
3. Gather the Relevant Documentation
Highlight any errors and get the right documents to verify the discrepancies. Supporting documents can be anything from bank account slips, court judgments, government-issued IDs, and letters from lenders.
4. Dispute the Errors
Armed with the supporting documents, get in touch with the credit bureau which reported the error. Raise a dispute asking the agency to review and remove the erroneous item.
Additionally, contact the furnisher of the incorrect information. Such entities include credit unions, collection companies, personal loan lenders, and credit card companies.
Expert Tip: The Consumer Financial Protection Bureau advises that you use certified mail for disputes. This will ensure you have a documented record of when your letter was received.
What Follows After You Raise a Dispute?
Credit agencies, as well as furnishers of credit report data, are required to investigate all issues and share with you their findings. It is also upon the companies to take the steps to ensure the errors are removed from your reports.
Typically, you’ll hear from them within 5 days, notifying you if your claims are frivolous or have merit. Normally, it takes up to 30 days for the bureaus to fix your report, with an additional 15 days required if additional documentation is deemed necessary.
How Long Does Credit Repair Take?
Repairing bad credit can take anywhere from 3 to 6 months, depending on the damage to your credit history. While there are no quick fixes, you may see wins within a month after you get started.
That said, do not expect a significant credit score boost in the short term when facing a serious issue like bankruptcy. In such cases, it can be several years before your financial standing gets back on track.
Know Your Rights
Consumer Credit File Rights Under State and Federal Law Section 405 of the CROA Credit Reporting Organization Act. You have a right to dispute inaccurate information in your credit report by contacting the credit bureau directly. However, neither you nor any ”credit repair” company or credit repair organization has the right to have accurate, current, and verifiable information removed from your credit report. The credit bureau must remove accurate, negative information from your report only if it is over 7 years old. Bankruptcy information can be reported for 10 years.
You have a right to obtain a copy of your credit report from a credit bureau. You may be charged a reasonable fee. There is no fee, however, if you have been turned down for credit, employment, insurance, or a rental dwelling because of information in your credit report within the preceding 60 days. The credit bureau must provide someone to help you interpret the information in your credit file. You are entitled to receive a free copy of your credit report if you are unemployed and intend to apply for employment in the next 60 days, if you are a recipient of public welfare assistance, or if you have reason to believe that there is inaccurate information in your credit report due to fraud.
You have a right to sue a credit repair organization that violates the Credit Repair Organization Act. This law prohibits deceptive practices by credit repair organizations. You have the right to cancel your contract with any credit repair organization for any reason within 3 business days from the date you signed it.
Credit bureaus are required to follow reasonable procedures to ensure that the information they report is accurate. However, mistakes may occur. You may, on your own, notify a credit bureau in writing that you dispute the accuracy of information in your credit file. The credit bureau must then re-investigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge any fee for this service. Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau.
If the credit bureau’s re-investigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau, to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you.
The Federal Trade Commission regulates credit bureaus and credit repair organizations. For more information contact:
The Public Reference Branch
Federal Trade Commission
Washington, D.C. 20580