The Step-by-Step Guide to Repair Your Credit
Damaging marks or inaccurate data on credit reports can happen to anyone. Missing bill payments, identity theft, market crashes, sudden changes in real estate or job market affect millions of hardworking and honest people like you. Sometimes, the consequences of these unfortunate events in your life show up in your credit reports. That impacts how creditors and lenders see your creditworthiness.
Credit repair is fixing bad credit, regardless of what caused it to happen. Sometimes, the fix can be as simple as catching and correcting inaccurate information held by the credit bureaus. Did you know that you have the right to dispute anything that is on your credit file? Many people think they are stuck with the erroneous information for 7-10 years, but you have options. You may not be aware of some of these mistakes and discrepancies unless you examine your report carefully. It is important to check your credit report at least twice a year. You can get a copy of a free credit report, annually, from all three bureaus. Knowledge is power, and this is one of those times when what you don’t know can hurt you.
Why Is Credit Repair So important?
Creditors are more hesitant to give loans to people who have blemishes on their report. If you have a good record on repaying your financial obligations, then more creditors will be willing to lend you money. With a great FICO score and credit report, you will have better leverage on buying and making investments. Each year, six million people are turned down for credit, which means one in eight will be denied for a credit card, car loan, mortgage, or other major purchases. Are you one of those people who has faced the disappointment of a denial?
There are some companies that cater to people with bad credit. Yes, you can get a loan, in some instances. However, bad credit will give you smaller credit lines, higher interest rates, and a much higher payment than someone who has good credit. Lenders who take a chance on bad credit often use higher interest to protect themselves. Higher payments will increase the risk of missed payments. Missed payments can damage your credit even more.
When you have missed payments on your credit report, you are marked as a “slow pay”. That starts a vicious cycle that makes a bad credit worse. Bad credit can hurt your chances of securing a loan for a home or car. It can increase your interest rates. It may even make it harder to rent an apartment or get car insurance. So, you should take the job of repairing your credit very seriously, because it has a huge impact on your entire financial life.
Know Your Legal Rights
When it comes to accessing, disputing, and correcting negative or incorrect information on your credit report, you have legal rights. Your financial history is important, and when you know your rights and stand up for yourself, you can drop late fees, settle debts on better terms, and get negative marks removed easier.
You are entitled to receive one free credit report from the nationwide credit bureaus every year, under the 2003 Fair and Accurate Credit Transaction Act (FACTA). If creditors deny you credit or give you credit with less favorable terms, they are required to show you the exact credit scores that they used. That is a requirement set by 2010 Dodd-Frank Act. If your report has inaccurate information, lenders could be basing their decisions on data that isn't accurate or even relevant to you.
You can also get a free report if a company denies your application for credit, employment, or insurance based on your credit report. You must request the report within 60 days of the notice of denial or adverse action.
Credit Hash Tips:
- No one can check your credit report without your permission. Employers or potential employers must have you sign a form granting permission. Without written consent, the credit bureau will not share your report with anyone.
- You have the right to see the people who have viewed your credit report in the past 12 months. They stay on your credit report as an inquiry. Employment related inquiries can be seen for up to 2 years.
- You can purchase your credit report from a credit monitoring company for under $12. This is in addition to the free credit report you have already received. Some people may check their report at least twice a year to ensure accuracy.
- Request Your Credit Reports Online
- FTC: Your Equal Opportunity Rights
- Federal Reserve: Credit Reports and Credit Scores
What To Expect From Do-It-Yourself Credit Repair?
Keep in mind, the credit repair process is not quick or easy. You must be patient and persistent to be successful. The end result will be worth the time and effort, though. You will need to ask for reports, file disputes, and wait for responses. You must maintain a cool and firm mentality throughout the process. If you'd like to have one of the reputable credit repair companies handle the process for you, skip this section and scroll down to the next.
Step 1: Get All 3 Credit Reports
First, you must get a copy of your credit report from the three bureaus, which are, Experian, Equifax, and TransUnion. The Fair Credit Reporting Act (FCRA) allows you to get a copy of these reports for free. To do so, go to www.annualcreditreport.com. The Annual Credit Report Service will allow you to get the reports by going online or calling them directly.
If you'd rather get your reports online, you will be asked to enter your personal information such as your full name, date of birth, social security, and your current and previous addresses for last 2 years. Some find it easier to call or send your request through the mail.
Credit Hash Tips:
- After you have received your free copies of your credit reports, you must contact the credit bureaus directly, if you'd like to get additional reports.
- Request Your Credit Reports Online
- Fill out and mail the request
- Know The Facts Regarding Free Credit Reports
Step 2: Check All The Details
Once you get all 3 reports, you should study them carefully. Each report contains your personal data, addresses, employers, inquiries, delinquencies, and negative records. While you are looking through all of that information, you want to pay special attention to anything that is not correct.
It is quite possible that there is erroneous information on your reports. The credit agencies gather this information from reporting companies, like credit card companies, when you apply for a credit. Look for incorrect or incomplete names, addresses, phone numbers, or missing or outdated employment information. Verify that your marital status is correct and up to date, and an ex is not listed as your current spouse. You will be surprised by things that are in your report. Chances are, you will find several things that are inaccurate. Here are some issues to specifically look for that are commonly found on reports:
- Check the credit account sections to ensure your account is not mixed up with someone else's with a similar name as this happens all the time. Review the history of your joint accounts with your spouse. Make sure your spouse's history before your marriage is not showing on your report.
- Inquiries are a part of credit reports that show which credit or utility companies, or landlords looked at your records. Delinquencies or negative marks are the records that you must carefully study and make a note of.
- Check the ages of the accounts on the report to make sure they are reported accurately. Older accounts help your credit score because they show that you have a long history of managing your financials. Take a close look at your credit limits to ensure they are accurate. Make a list of all inaccuracies in your credit reports.
There are 2 types of inquiries, soft and hard. Soft inquiries don't hurt your credit score. Soft hits occur when, for example, a company looks at data for promotional reasons, such as pre-approved credit card offers or when you pull your own credit. Hard inquiries can affect your credit score. Hard hits happen when a company checks your credit history for a loan or credit approval, for instance.
Credit Hash Tips:
- Never close inactive accounts. Closing an account removes the history for that account. So even if you have inactive accounts, don't close them. Sometimes, credit companies close an account due to inactivity. That action, however, doesn't impact your credit score.
- If you suspect that you are a victim of fraud or identity theft, ask the credit bureaus to add a "fraud alert" to your file. You can also request a free credit report from each bureau, once they place a "fraud alert" on your file. You should also file a police report if you are the victim of these crimes. The report will be used by the credit bureaus to validate your claim.
Step 3: Dispute Incomplete or Inaccurate Information
After listing the inaccurate or incomplete information, you must prepare a letter that shows each item that you would like to remove or correct. You should also mention the reasons and include any document that supports your dispute. Do not handwrite a letter. You can type in a letter like a sample in the resources section below.
Filing a dispute with credit agencies is free of charge, and agencies have up to 45 days to investigate each item in the dispute. Please keep in mind that you don't have to contact every information provider who reported incorrect information as the bureaus will do that for you.
Credit Hash Tips:
- Only include the copies of the supporting documents along with the letter. Hold on to the originals for your future reference.
- Send the letter by certified mail and request a return receipt. That way you can confirm the date of receipt by each bureau if needed.
- If you are trying to get a car loan or mortgage, you can ask for a "rush" investigation.
- Sample Dispute Letter
- File a dispute online with TransUnion
- File a dispute online with Experian
- File a dispute online with Equifax
Step 4: Wait For The Response
Once the reporting bureaus receive your dispute, they either must delete the incorrect information from your report within three days, or start a reinvestigation.
If they delete the information, they should notify you and send you a new credit report within five days of deletion. If the agency does not remove the information, they will have to complete their investigation and get back to you within 45 days.
If you don't receive a response from them after 45 days, send a follow-up letter as an escalated complaint. You may address the letter to someone who is a high authority at the agency, such as CEO, president, or chairman. You can also file a complaint with Consumer Financial Protection Board (CFPB). CFPB has oversight authority over credit bureaus.
If the credit bureaus correct the inaccurate information, ask them to notify all creditors who looked up your report in last 6 months. You may also ask them to inform all employers who requested your information within last 2 years.
If they don't correct your report, you should contact the creditor who provided the information. You may even escalate the complaint with the creditor's chain of command. If you get a letter from the creditor agreeing that the information was incorrect, you can send a copy of it to the credit bureaus.
Credit Hash Tips:
- If your efforts don't resolve the inaccuracies, you can request the credit agencies to include a brief explanation in the report. Anyone who requests your file can see this explanation. Keep the explanation short, so creditors can view it in an unedited format.
- The steps above can help you improve your FICO score. This process takes a dedication. You must remain patient and focused during the process. Pay a close attention to the details of the paperwork and follow up with each step.
- If you don't want to deal with the headaches of writing letters, tons of paperwork, and persistence follow-ups, you can ask trusted professionals to help you out. We have put together a list of trusted experts that you can consult with. They will take care of the entire process for you.
Consult a Credit Repair Expert
The process of repairing your credit can be very long and tedious. If you don't want to bother about reviewing your credit reports, drafting letters, following-up, and filing possible complaints, you can pass on all the work to trusted professionals who have a better knowledge of the law.
We have created a list of reputable experts who are the best credit repair companies in the market. You must be very careful which company you pick for this service because there are many scammers out there. There are a lot of companies that hardly deliver what they promise. Stay away from scammers and stick with the reputable companies that we have narrowed down in our rankings.
Trusted experts can save you a lot of time and headache. They take the responsibility to analyze your credit reports, create a plan, file disputes with the credit bureaus, and even renegotiate and reduce your payments to lenders. If the thought of going through this process makes you anxious, just pass on the whole process to trusted professionals. Let them handle the paperwork and headaches.
Keep On Improving Your Credit
Once you have fixed your credit report, you must try to establish habits that improve your credit score. Realize what mistakes you made in the past so you can prevent them in the future. Check your credit report every few months, so you can catch the errors right away. The sooner you catch these errors, the easier they are to fix. Did you know that many collection agencies can sell your account multiple times? The new company can report to the bureaus too. You can have multiple bad marks for the same debt. This is why you must stay on top of your report.
Request a report from one of the nationwide credit bureaus every four months, so you get your free annual reports from three credit agencies spread throughout the year. Be quick to address any issues immediately. Keep in mind, some companies report to one bureau but not the others. You may have three reports with different information. A lender doesn't have to report to anyone. Here are some other tips to consider:
- Never use more than 30 percent of available credit on credit card
- Keep your open credit diversified
- Rely on cash-not credit
- Keep your debt-to-ratio in balance
- Don't over apply for credit
Adopting good financial habits takes dedication and constant vigilance for the sake of your credit score. Budgeting and responsible spending can go a long way in bringing up your FICO score. Credit scores range between 350-850. You want to strive to be above 700 for preferred lending choices. Seek professional help to spot and fix your credit report errors. Before you know you it, you will be back on track and enjoy the benefits of a great credit score. It makes all the difference in the world.