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Repairing Bad Credit: Everything You Need to Know

Good credit is the en tryway to those big-ticket financial decisions that make a difference in your life. Renting an apartment, getting a loan, buying a car, and getting a good travel rewards credit card, are all determined by the good-ole credit score. 

If your credit score could use a pick-me-up but you’re not quite sure how to do it, it might be time to initiate the credit repair process. 

Keep reading to learn more about how it works and exactly how to get it done! 

What is credit repair?

Credit repair is the process of fixing, restoring, or improving your credit score by communicating with your lenders and the credit bureaus about inaccurate information in your credit report.  

You can take care of credit repair on your own or hire a third-party company. Some third parties are often called credit repair companies and they dispute information with the credit agencies, undoing damage from inaccurate information, identity theft, and harmful spending habits.

Does credit repair work?

Yes, credit repair can work. There are just a few things to keep in mind, including:

  • There are a lot of scams out there. Lots of illegitimate credit repair companies charge illegal fees and use shady business practices to promise positive results they might not deliver. Continue reading to learn about how to choose a legitimate company.
  • It takes time. And when it comes to dealing with credit bureaus and reports, it can feel overwhelming. But with the right resources, either with support from an outside organization or composure on your end, you can see results.
  • You can do this yourself! If you’re someone who believes a job is done better if you do it yourself, it’s totally possible to comb through your own reports to look for inaccurate information. And this option is also free. We like free stuff.

Can you fix bad credit quickly?

First off, let’s define bad credit: Bad credit is a credit history that includes negative remarks that are damaging to your credit score, like late payments or charge-off accounts. myFICO, the official consumer division of FICO — the company that invented the FICO credit score — states that a poor or bad credit score falls between 300 and 579 out of a possible 850. Believe it or not, a one-point difference in your score, like 579 vs a 580, can make the difference in whether you qualify for the loan you want.

While the timeline for credit improvement can vary based on your credit profile, there are often opportunities to make improvements within 30-60 days. There are actions you or a credit repair company can take to repair your credit more quickly.

How to repair credit scores

Repairing a poor credit score takes time and patience, so be sure to keep this in mind if (and when) things get frustrating! 

Start by reviewing your credit report and looking for any inaccurate information. You can then use a credit repair company to dispute these claims or do so yourself. You’ll also want to catch-up on any bills you haven’t paid and create a budget for all your expenses. We know budgeting isn’t the most fun thing to do, so rather than spending time to DIY, consider using a smart budgeting app or calling the pros.

You can often use a secured credit card and other types of credit cards (responsibly!) to start building or rebuilding a positive credit history. Once you begin, be sure to check your credit score regularly.

What do credit repair companies do?

Credit repair companies take the DIY out of credit repair. They offer to improve or fix your poor credit score for a fee. The process starts when you share a copy of your credit report, typically from each of the major consumer credit bureaus: Equifax, Experian, and TransUnion. 

The credit repair company will review your report for inaccurate information and negative marks like bankruptcies, tax liens, and charge-offs… bleh. Then, they will create a plan to dispute any identified errors and advocate on your behalf with the company that reports your credit information to the bureaus. 

The credit repair process may include validating information with creditors, disputing the negative marks altogether, and/or sending cease-and-desist letters to the debt collectors. Debt validation letters are important because if your creditors can’t prove you owe the debt, you aren’t responsible for it.

Learn more about C&D’s Credit Repair services >

Do it yourself credit repair – is it worth it?

To determine whether or not it’s worth working with a credit repair company, ask yourself: “How much time and effort do I have available to put into fixing my credit score?”. If you’re a major DIYer, credit repair might be right up your alley. If you’d rather stop thinking about your credit score until it looks a little better – trust us, we get it – then hire the pros.

If you’re willing to put the energy into going through your report for inaccurate information and remove it, it’s definitely possible. But a credit repair company could save you a lot of time by doing most of the heavy lifting. Plus, the best pros have access and direct connections to the credit bureaus that the average DIYer just doesn’t.

FAQs

How long does it take to fix bad credit?

It could take a just few weeks or several months to fix a bad credit score and it all depends on the severity of the negative history and quantity of errors bringing down your score. 

Here are other things to consider when figuring out your timeline:

  • The type of negative information on your credit report and how much of it there is
  • The age of your negative information
  • Your credit profile and history has a major impact on the way a credit issue affects your score

For example, a foreclosure or bankruptcy will most likely be more difficult to recover from than a one-time late payment.

How long does a repo stay on your credit?

“Repo” stands for repossessions, which are negative items listed on your credit report that can hurt your credit score. When someone comes to take your car because you aren’t making your loan payments, that damage goes a lot farther than you might think.

It takes seven years for a repossession to come off your credit report. That countdown begins from the date of your first missed payment that led to the repossession in the first place. 

Is credit repair legit?

There are legit credit repair companies out there that can help you improve a poor credit score, however, be aware of scams.

Any company that demands money up front is typically making promises they won’t be able to keep. Plus, charging fees for credit repair upfront is ILLEGAL.

Other warning signs for scams include:

  • They promise to remove all negative information from your credit report. Unfortunately, no company will be able to remove accurate information, good or bad. So anyone who claims they can is probably a fraud.
  • They suggest you dispute all information, even when it’s accurate. YIKES! This would just be fraudulent in the eyes of law. Don’t do it.
  • They want you to pay upfront. No legitimate credit repair company will ask for money before any work has been done. It’s actually illegal to do so under the federal Credit Repair Organizations Act.

Is credit repair legal?

Credit repair is legal at the federal level. The Credit Repair Organizations Act was enacted in 1996 and regulates how a credit repair company must operate under federal law. It protects consumers from receiving untrue or misleading information from credit repair companies and requires certain disclosures in regards to the sale of “credit repair” services. 

According to the Federal Trade Commission, the following practices are not allowed under the CROA:

  • Suggesting customers make false statements to credit reporting agencies
  • Advising credit repair customers to change their identify to dissociate with their credit information
  • Charging fees for any services that have not been fully rendered
  • Promising the removal of information from their customer’s credit reports

The CROA also protects credit repair customers by requiring companies to disclose the following information:

  • Customers have the right to dispute their own credit report information
  • Customers can sue the credit repair company if they violate the CROA
  • Credit repair companies cannot force you to sign anything that would waive any of the mentioned rights in this list
  • Credit repair companies cannot hide any of the following information listed above

Many states have their own laws about credit repair. A legitimate credit repair service should be diligent about the various laws at the federal level and those specific to your state but it doesn’t hurt to ask upfront.

What’s the best way to repair credit?

The best way to rebuild your credit score is to use your credit card responsibly (and by that, we mean only purchasing things you know you can afford and pay off in full every month). This ensures positive information is sent to your credit bureau every month.

If you’re not at this point quite yet, start by reviewing your credit reports for errors. You might even notice suspicious activity such as identity theft. Then, make an effort to make payments on time and pay all that is due. You’ll also want to avoid getting too close to your credit limit and applying for new credit cards if you don’t need them.

Pro Tip: Never use more than 30% of your credit card limit. For example, don’t allow your balance to go over $300 if your credit limit is $1,000.

How much does it cost for credit repair?

There are a couple ways a credit repair company could charge you for their services. And again, remember that a company:

  • Can’t charge up-front fees
  • Can’t charge for services until they’re delivered

A company could have you pay a one-time setup fee, which could range anywhere from $20-$90. Typically, that’s combined with a monthly service fee, which can run from $30-$130 a month depending on the services provided. Other companies may use “pay per delete,” which is when they only charge you after an item on your credit report is deleted.

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