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How Credit Repair Works
Here are a few of the basics steps your credit repair company will take to help you with your credit.
Step 1 - Your Credit Report
You will need to get a copy of your credit report. There are dozens of options online to help you get a copy in minutes. We've described the most common way consumers get their reports.
Do It Yourself vs Credit Repair Company - Tip #1
You can get a copy of your credit report on your own. For some it will be quick and easy. For others it will be confusing and intimidating. Working with a credit repair firm will simply save you time and potential aggrevation.
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So Called "Free Credit Report"
Be careful, there are dozens of sites trying to sign you up to get a so called, "Free Credit Report" or "Free Credit Scores." The reality is there is almost always a catch. In most cases you are being asked to sign up for a free trial. Of course that free trial starts with you providing credit/debit card information. However, "IF" you cancel (we do not believe many people remember to cancel even if that is what they originally intended) it is actually free. Most will try to upsell you other services while they have your attention, so getting the report can be a little confusing and often intimidating for some.
The good news is they do provide great information about your credit. It may be well worth it for you to shell out the money for the useful information. However, you will really need to consider if all of the bells and whistles fit your budget and if you will use the additional services provided for a monthly fee, normally in the $14.95 per month range.
Purchase from Equifax, Experian, Transunion
The three major credit bureaus will sell you a copy of your report and offer a list of valuable tools to help. There prices are good and the information is coming directly from the source. This is a good option. Although there is one more that you should really consider.
Free Credit Reports (Really. They are FREE)
The federal government requires the three major credit reporting agencies (Equifax, Experian, Transunion) to provide you with a free copy of all three credit reports once every 12 months. One downside is that you will not be provided with your credit score. You may purchase the additional information.
To get a copy of your free credit report the FTC recommends the following:
Request your report online at www.AnnualCreditReport.com, by phone 877.322.8228 or mail using the Annual Report Request form and mail it to Annual Credit REport Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You can request one, two or all three reports at once. You can also request one at a time. By requesting reports separately you can monitor your credit throughout the year.
Step 2 - Review Your Credit Profile
Once you have your report you have to begin the sometimes challenging process of reviewing it. You will find lots of useful information that potential lenders and creditors can use to determine whether or not they would like to extend credit to you. You can also learn "Why Credit Matters" for more than buying or refinancing a home.
Although the three major credit bureaus format your information differently, most credit reports contain the same type of information.
Identifying/Personal Information
This information is not used by the three major credit reporting agencies in their scoring models, but is important because of identity theft. Review the identification information on your report. It could be the first place you find identity theft.
- Name(s)
- Alias(es)
- Past/Present Addresses
- Social Security Number
- Date of Birth
- Employment Information
The personal, identifying information on your credit report is typically provided by you to potential lenders who then report your information to the major credit bureaus as credit inquiries.
Do It Yourself vs Credit Repair Company - Tip #2
You can review your credit report on your own. Some reports come with useful analysis which is designed to help you understand what you are looking for. The advantage of working with credit professionals is that they can explain in detail what you are looking at, how it affects your scores and what can be done to improve them.
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Trade Lines
Trade lines, also known as accounts are reported by the lenders you established each account with. The lender reports which type of account (mortgage, revolving and installment), the date the account was opened, your balance and your credit limit or loan amount and your payment history. You can find both positive and negative accounts listed in this area. When a creditor reports derogatory information like missed or late payments, charge-offs, collection accounts, repossessions, items included in a bankruptcy, etc. You will also see account statuses such as account closed by credit grantor and account closed by consumer.
Public Records
Your credit reports can also show information provided by courts like judgments from a lawsuit, bankruptcies, foreclosures, liens and wage garnishments.
Credit Inquiries
Each time you apply for a loan or credit account you authorize the creditor to request a copy of your creditr report. Each time a creditor receives copy a credit inquiry is listed on your report(s). The list of all creditors who have requested your report is found in this area. Information is kept on your report for up to two years.
Once you have reviewed your report you will be prepared to take the next steps. However, if you do not already know what to look for, consider a credit repair company that can help.
Step 3 - Create a Plan
You've seen your credit report. What now? This is often where consumers run into a roadblock. They are often confused about aliases, account balances, account statuses, dates, creditors and other unknowns. So it can be difficult to take the first step in the credit improvement process. We recommend you start by asking one questions. What do you want to get out of this? A higher credit score, correcting errors, a better understanding of what you are looking at? You can accomplish many things when you know what you are try to accomplish.
Do It Yourself vs Credit Repair Company - Tip #3
If you are not completely clear on what to do next, now is a great time to consider a reputable credit repair company. They will know what can be done to improve your credit. They can help you with tips like your credit usage vs. credit availability ratio. They can help you prioritize what can and should be done. If you don't have all the answers you can certainly spend the time and effort learning the ins and outs of credit, or you could get help.
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Step 4 - Begin the Credit Repair Process
For many people credit repair is associated with dispute letters. The team at OnlineCreditGuide.net is here to tell you there is much more to credit repair then generic dispute letters.
What is a Dispute Letter?
A dispute letter is a communication from you to the credit reporting agencies or the original creditor which challenges the information appearing on your credit report. Under the Fair Credit Reporting Act (FCRA) you have the right to dispute information that appears on your report that you believe is either inaccurate or unverified. When the credit reporting agencies receive your communication (which should always be sent via certified mail) they have 30 days to investigate and verify with the reporting party. If the reporting party fails to verify or correct the information, the credit bureaus will remove the information from your credit report.
In study by the U.S. Public Interest Research Group found that 79% of credit reports contained a mistake. Disputing those items is one way to remove those mistakes from your credit report. Removal of inaccurate or unverified derogatory trade lines is a critical step in the credit repair process.
Do It Yourself vs Credit Repair Company - Tip #4
Generic dispute letters can work. But there is much more to credit repair than disputes. Some companies believe that if you repeatedly sent letters, in some cases for over a year, you might catch someone sleeping behind the wheel who does not respond to your request in time. When that happens the inaccurate or unverified item will come off your report. However, there is so much more to it. What do you do when inaccurate information comes back verified? What do you do when the credit bureaus report believe your request is frivoloous? What happens when you do not receive any response at all? These are things you will need to know to successfully dispute inaccurate or unverified items on your credit report. If you don't know the process, consider getting help from a reputable credit repair company that does.
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Expect More Than Just Dispute Letters
Generic dispute letters designed to inundate and overwhelm the three major credit bureaus do not work. Choose a company that will take the time to understand your credit profile and offer you practical step-by-step instructions explaining what you can do to improve your credit. Inorder for a company to do that, they have to get to know your credit. Once they have conducted a credit analysis or review, they should be able to offer you specific advise. You will also want them to explain your credit report, as the information found on your report can be overwhelming and cryptic. You will want to learn more about your credit score.
Re-Aging
Does your credit report company ask the right questions to determine if accounts appearing on your credit report have been re-aged? Illegal re-aging is when a item on your credit report is reporting as newer than your actual FCRA compliance date. Re-again an account allows the negative trade line to remain on your credit for a longer period of time. The date opended, date of last activity and default dates on your credit report all matter. You must choose a credit repair company that is familiar with all of it.
Duplicates
All too often an item appearing on your report will have a duplicate listing. Normally this will occur when one collection agency has sold your collection account to another collection agency. Often, the seller does not remove their trade line before the buyer or new collection company reports their collection item on your report. The credit repair company you choose must be familiar with this and no how to find and remove duplicate listings.
Validations
Make sure the company you choose isn't just sending dispute letters to the three major credit bureaus. You want a credit repair company that will work directly with your creditors, validating your debt with is a process outlines in the Fair Debt Collection Practices Act (FDCPA) to insure the companies appearing on your credit reports and sending you collection letters actually has the right to do so.
Statutes
Does your credit report company review your states statute of limitations regarding both your credit report and debt collection. Both are very important when you are working to improve your credit and reduce your debt. Information on your credit report may appear for as much as 7 to 10 years depending on the type of information. It is not uncommon for tradelines to appear on your credit report long after, as there is little incentive for information providers to remove your trade lines past the statute of limitations without being prompted. Make sure your credit report company reviews your report and is prepared to do just that.
Did you know that each state has a defined period of time in which a debt collector has a legal right to sue you for uncollected debt. After that defined period of time an item may appear on your credit reports, but you can not be taken to court over the debt. This is important, particularly when debt settlement is an option. It changes your negotiating leverage if a company can no longer take legal action. Make sure your credit repair company is familiar with the statutes in your state to help protect your rights.
Certified Mail
In order to insure your rights are protected, it is important to have your communications with the three major credit bureaus and original creditors documented. Certified mail is a great way to
Other Things You Should Expect from the Credit Repair Process
Stated simply, help. Both the Fair Credit Reporting Act (FCRA) and Fair and Accurate Credit Transactions Act (FACTA) are long and detailed documents outlining your rights. While you could read them both, there are companies with trained representatives ready to help. However, before you choose one, make sure they are doing the following:
Talking to You
While that may sound obvious, there are companies that have perfected the automated dispute process. That means interaction with an assigned specialist is less likely, as most of the work done on your behalf will be done on your computer.
One-on-One Help
Another obvious, but not always a reality. You want to develop a relationship with someone you trust. Someone familiar with your situation. You do not want to re-explain your scenario over and over again each time you call into some of the larger customer service centers. Find a company that has someone working for you.
Credit Advice
Companies that focus purely on disputes are leaving out many things. Things that have a tremendous impact on your credit score. Basics like payment history, credit-usage ratio, length of history, mix of accounts, new credit applications and much more. If your credit repair company doesn't review these things with you they are doing a disservice.
Assitance Rebuilding Your Credit
New credit and proper credit usage can be the start of a better credit future. You can find secured cards that will help you start. Your credit repair company should be able to narrow down your search and give you cards with moderate interest rates and lower fees considering your credit history.
Tracking Your Progress
Make sure you can see what is happening on your behalf. Many companies will provide what is known as a Customer Center or back-end, which will allow you to log in and see what is happening 24/7.
Review Results & Determine Next Steps
As you go through the credit repair process you could receive correspondence from the three major credit bureaus, original creditors and collection companies. How you decipher the information you receive and what steps you take to follow up are critical. Both the Fair Credit Reporiting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA) outline specific rules regarding your credit report and debt. Knowing your rights can make all of the difference.
Step 5 - Other Issues
Credit issues are normally associated with debt. Unpaid debt has a detrimental affect on your credit and leaves you open to lawsuits, judgments and wage garnishment. To work on your credit while ignoring your debt can be counterproductive. Consider ways to retire your debt. A good credit repair company will have a solution for you.