8 Facts About Credit Repair You Need to Know

FT Contributor
A post it note that reads "fix your credit" is stuck on a pink wall.

Your credit report is an important factor in many aspects of your financial life. Your credit score and history may determine whether you’re eligible for a loan to make a big purchase or the terms you’re offered when you apply for a credit card.

Consumers who are concerned with their credit score may turn to credit repair companies to help them improve their odds of qualifying for a loan or other financial transactions in the future. There are many common misconceptions and myths surrounding credit repair that can lead consumers down the wrong path as they attempt to improve their credit score.

As a consumer, it’s important to understand how credit repair works and the strategies that the best credit repair companies use to help improve your score. Learning the facts about credit repair and being properly informed about how to improve your credit score ensures you won’t waste your time or money on inadequate solutions.

Table of Contents

1. You Can Do It Yourself

If you’re focused on increasing your credit score quickly, there are strategies you can implement without enlisting the help of a professional or credit repair company. You have the right to dispute errors on your report or negotiate with creditors without assistance.

Before you go it alone, consider the time and effort that may go into disputing negative items on your credit report. A credit repair company uses the same strategies you would, such as writing goodwill letters or sending communication to a creditor to dispute an item.

However, these companies have more experience dealing with creditors and credit bureaus so a legitimate credit repair company may have more success improving your credit report than you would without help.

2. There Are Trustworthy Credit Repair Companies

Since you can implement credit repair strategies on your own, many consumers assume all credit repair companies aren’t trustworthy. However, there are reputable credit repair companies that have your best interest in mind and put in the work to help increase your credit score.

It’s important to be aware that some credit repair companies are scammers and only want to take advantage of consumers. Take the time to research a credit repair company, its strategies, past customer reviews, and promises first to determine if it’s legitimate and will truly help you.

3. Credit Repair Is About Your Credit Report

While the ultimate goal of credit repair is to raise your credit score, it shouldn’t be the main focus. When you pull your report, don’t focus on the score; instead, look at your history and other information on your report.

Focusing on improving your credit report overall is the best way to improve your credit in general. Disputing inaccurate information and attempting to remove negative items from your credit history are helpful ways to improve your report and eventually increase your score.

4. Your Credit Score Is Still Useful

While your focus should be on your credit report as a whole, your credit score is obviously still important. This number represents an interpretation of the information currently on your credit report. It’s what most creditors or lenders look at when they’re examining your creditworthiness.

Reviewing every item on your report is confusing and may be difficult to understand. However, watching your credit score and checking the number monthly helps you learn more about what’s going on with your report without reading through every line. If you see a significant drop in your score for no reason, it’s a good idea to review your report for errors.

5. Doing Nothing Might Help

If you want to repair your credit, it may be tempting to take action right away. However, in some cases, it may be best to simply do nothing and wait it out to watch your score increase. If there aren’t any errors on your credit report, waiting until the negative items leave your credit history may be the only way to improve your score.

Most negative items on your report disappear after about seven years, unless you filed for Chapter 7 bankruptcy, have unpaid tax liens, or have unpaid judgments. In these cases, the items may stick around on your report for about 10 years. If your negative items are accurate and you’re getting close to the seven-year mark, it may be best not to waste your effort, time, or money trying to get them removed and simply wait until they expire.

6. Closing Credit Accounts Won’t Help

It may seem that the best way to improve your credit score is to close your credit card accounts so they no longer show on your credit report. If an account was opened erroneously in your name or you’ve implemented bad financial habits when using the credit card, closing it may help your history in the long run.

When you close an account, it isn’t automatically removed from your credit report. If you have an account that’s in good standing or you can easily get it back to good standing, it’s more beneficial to keep it open. It will add to your good credit history and show that you’re a responsible borrower who has developed good financial habits.

7. Credit Repair Takes Time

When it comes to improving your credit score and report, being patient is crucial. Your credit can’t be repaired overnight and if a company claims it’s a quick process, it’s more than likely a scam. By implementing healthy financial habits and making smart decisions over time, your credit score is bound to increase. Taking the time to repair your credit the right way is a good investment in yourself and your financial future.

8. You Have to Change Your Financial Habits

Putting the time and effort into repairing your credit may be all for nothing if you fall back into bad financial habits. Even if you repair your credit successfully now, if you make loan or debt payments late, rack up credit card bills, or engage in other irresponsible financial habits, you may find yourself in the same situation again over time. Embracing a new lifestyle that includes healthy financial habits is the only way for long-term success and a consistently good credit report and score.

By utilizing credit repair strategies, you can improve your report and score, proving your creditworthiness to lenders and financial institutions. Before you set unrealistic expectations or make assumptions about repairing your credit, it’s important to understand these facts so you can improve your report and score for a healthy financial future.

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