Does Credit Repair Really Work? The higher your credit score, the easier you can get a loan.
Your credit rating doesn’t run your life, although it can ruin it. Normally, you don’t experience any day-to-day consequences of your financial health, so it’s hard to even believe that it matters at all. But your credit score does matter. Some of the reasons you might need a decent credit score include:
- Getting a car loan for a new or used vehicle
- Buying a house or condominium
- Renting an apartment, sometimes
- Applying for home or car insurance
- Trying to land a better job
In each of these cases, someone may run your credit report to see if you’re a good risk to do business with. Fair or not, they can ask you for access to your credit history, which tells more about you than you may ordinarily like to share. So, having a decent credit score can help you as you pursue your life’s goals. Having bad credit can create obstacles that interfere with your goals.
Beware of Credit Repair Predators
If you have credit problems, such as too much credit card debt or trouble paying your bills every month, the claims of a credit repair company can sound too good to be true. After all, everyone wants a better credit score and more money to spend every month. Unfortunately, those claims often are too good to be true.
Unscrupulous companies prey on consumers, charging fees for doing nothing while promising the moon. When you really need to repair your credit, you first need to know what credit repair can do for you… and what it can’t do. One thing it can’t do is make all your credit problems go away.
If you find yourself in over your head and you can’t see any way out, one solution may be bankruptcy. While bankruptcy is the answer for some people, it will hurt your credit rating for up to 10 years. When all you need is help improving your credit rating, bankruptcy is not the answer.
Improving Your Credit Rating
The services that a reputable credit repair company can provide are two-fold:
- Help you clean up any mistakes on your credit report
- Teach you financially sound methods to get your debt under control
You don’t technically need a credit repair service to fix your credit rating. Everything a credit repair service does for you is something you actually can do for yourself, given the time and research. However, not everyone has the time or the knowledge, so a credit repair company may be the best resource for you.
While there’s no easy fix — depending on your particular credit problems and the severity of those problems — you can take steps today to mitigate your credit problems. You can do things today that move you toward a higher credit score tomorrow. But the longer you wait, the more difficult it becomes.
Checking Your Credit Reports
According to the Federal Trade Commission, 95 percent of all credit reports are factually correct and contain no errors. You can’t know if you’re in that five percent or not until you check. You are entitled to a free annual credit report (without the credit scores) from each of the three credit bureaus:
You can get all three from one website: Annual Credit Report. Once you’ve requested and received your copies, check each one thoroughly to make sure it contains no errors, nothing that looks wrong or odd to you. Make sure you check thoroughly. Do not miss anything that can come back to hurt you.
If you do find something, don’t panic. Just contact the creditor, like a credit card company or bank, and explain the situation to them. Tell them you found a charge or loan or amount that doesn’t look right or looks fraudulent or may be a mistake. The creditor is obligated under law to investigate at no cost to you. So if you find a mistake, you have everything to gain and nothing to lose by reporting it.
How Credit Repair Works
If your credit rating is lower than you would like, you can repair the damage of past financial mistakes, even bankruptcy, but it does take time. The month before you’re going to buy a car or a house is not the time to think about repairing your credit. Begin as soon as you realize you have a problem.
If you don’t find errors in your credit reports or if that alone doesn’t bring your credit rating up close to 700, you may pay higher interest rates. If you fall below 600, you may not even be able to get a home or car loan. So you need to take other actions.
Try negotiating with your creditors. Ask if they’ll voluntarily remove negative marks against you, such as late payments, missed payments or similar dings in your credit. Another option is asking for a settlement, to erase the debt you have, either through a partial payment or a payment plan that involves cutting up your credit card so you can’t accrue more debt.
Two Important Credit Factors
A bad credit score usually means you have too much debt. Why should a creditor let you borrow more money if you’ve already borrowed too much from other companies? Too much debt makes you a bad risk to a creditor. You might not pay it back. So the way to bring up your credit rating is to reduce your debt before you acquire any new debt. Easier said than done, but it’s the best way to improve your credit score.
You also can increase your income to raise your credit score. One of the main factors is your debt-to-income ratio. If you have almost as much debt as income, you can’t take on any more. But by increasing your income, you buy yourself a little wiggle room. Obviously, for many people, increasing income is almost as difficult as paying down debt, but if you can earn more money, you can pay off your debt faster. It’s simple math.
So yes: credit repair really works, but it’s not an overnight solution. Fix your credit rating before you apply for a new loan or mortgage, whether from a bank or an independent mortgage lender like Prime Mortgage Landing of West Asheville. If you need more advice about repairing your credit, contact Zack Adam. He’ll answer your questions.