Building good credit takes time. Whether you have made a few mistakes or fallen on hard times at no fault of your own, it can be tough to build it back up. That’s going to make it difficult to do things like renting an apartment, setting up utilities without having to pay a deposit, or even affect your chances of getting a job offer. Getting professional credit repair help could be the answer you’re looking for when you have poor credit.
What is a Credit Repair Company?
If you have poor credit, a credit repair company can help you re-build it. A credit repair company is an organization that provides services to help improve your credit. They do this in exchange for a fee.
When you hire a legitimate credit repair company, they will do the legwork on your behalf to improve your situation. They might also be able to provide guidance and coaching on how to maintain your existing credit accounts. Once they have completed their work, you will have the tools to help prevent the situation from happening again.
It’s important to understand that a credit repair company is different from a credit counseling agency. These are typically nonprofit organizations that provide free resources to review your finances, credit reports, and debt. The goal of their service is solely to teach you to manage and improve your own financial situation.
How do Credit Repair Companies help Fix your Credit?
Credit repair companies will do all the legwork for you when it comes to helping to fix your credit. The main way that they do is by disputing information on your credit report that is inaccurate. Here is how credit repair companies typically work:
Obtain a Copy of your Credit Report
The first step for many credit repair companies is to request a copy of your credit report. They will have you request one from each of the major consumer credit bureaus – Equifax, Experian, and TransUnion.
Analyze Your Credit Report
Once they have received your credit report from all three credit bureaus, the company will review it. Specifically, they are looking for derogatory marks, which is negative information that can stay on your credit report for several years. These derogatory marks include:
Bankruptcies – a public record that occurs when you use a special legal proceeding to reorganize or get rid of your debt.
Tax liens – a legal claim made by the federal government against your property
Charge-offs – a creditor has written off your account as a loss. (This does not mean you no longer owe the balance). At this point, the account may be assigned or sold to a debt collection agency.
Collections- a continuation of debt owed to the original creditor
They are also looking for errors that might exist in your credit report that need to be addressed. Common errors include:
Debts that aren’t verified or validated
Old negative marks that should no longer be included
Misspellings that might mix negative entries into your credit report that belong to someone else
Derogatory marks like bankruptcies or other legal actions that aren’t yours
Listing accounts that aren’t yours
Set and Implement a Plan to Fix your Credit
Using the information including derogatory marks found on your credit reports, the company will create a plan to dispute any errors found.
They may take actions such as requesting that information is validated that’s found on your report or sending letters to audit and/or dispute erroneous negative mark.
What are the Costs to getting Professional Credit Repair Help?
The cost of getting professional credit repair will vary by the company. You might pay a one-time flat fee or be charged for every derogatory mark that’s removed from each of your reports. This could cost about $35 and up for each deletion.
Another cost structure that professional credit repair companies use is a monthly charge. This could be from $50 to $130 or more. Set up fees or fees for accessing your credit report might also be charged.
How can you Improve your Credit?
You can work on improving your credit on your first. You can request a free copy of your credit report from each of the three credit bureaus for free by going to the official website. If you find any errors, you can dispute them with each of the credit bureaus. The process of making a dispute varies by the credit bureau the error is on. Credit bureaus typically have up to 30 days to follow-up on a dispute.
It’s also important to take actions that will build your credit on a long-term basis. Payment history is the biggest influencer on your credit. Therefore you should strive to pay at least the minimum balance before the due. Ideally, you will pay your entire balance off each month to avoid the interest charges.
A low balance is also important because the second most important factor is your credit utilization. This is the percentage between your balance and your credit limit. It’s generally recommended that you keep this amount at 30 percent or less. For example, if you have a credit card with a $3000 credit limit, your balance should be no more than $900.
Lastly, don’t apply for multiple credit cards or other forms of credit when you don’t need them. Every time you apply for new credit, it causes a hard credit inquiry which can lower your credit score.
How much Time does it take to Repair your Credit?
Since it takes the credit bureaus about 30 days to investigate and verify a dispute, you should expect credit repair to take at least that long. There are a few exceptions that may extend this time to 45 days. But the amount of time that it actually will take to repair your credit will vary by your situation. Expect credit repair to take time and patience to happen.
How to choose a Credit Repair Company
Navigating through the credit industry by yourself can be complex and difficult. That’s why many people choose to work with professionals who understand it and can do the work on your behalf. Look for a reputable credit repair company that:
Gives you a three-day right to cancel without charge
Provides a written contract, explaining your legal rights and services provided by them
Will not tell you a price or if they can help you without reviewing your credit report first
Working with a trustworthy professional credit repair company will help you rebuild your credit when you don’t have the time or want to understand the complexities. Remember that no matter what option you choose, credit repair is not an overnight process. The best way to ensure that you don’t fall into bad credit after seeking help is to change the habits that led to it.
This article does not necessarily reflect the opinions of the editors or management of EconoTimes