Table of Contents

    Repairing Bad Credit 101

    Bad credit is bad news when it comes to applying for credit cards, loans, and mortgages.

    In fact, it can even lower your chances of getting a job or being able to rent a home or apartment.

    If your credit history contains a few negative marks you may be wondering what to do.

    Here’s the good news: bad credit can be fixed, it just takes a little time and effort.

    The best bad credit repair strategy isn’t the same for everyone.

    The route you take to improve your credit score will depend on your specific credit history and the type of debt you have outstanding.

    Read on to find out more about credit repair and how you’ll benefit from it.

    Reasons To Consider Credit Repair

    Credit repair is an effective way to resolve negative issues that are recorded in your credit history.

    This should help your credit score improve over time.

    Here are some reasons why credit repair could be an optimal strategy to follow:

    • It’s effective - Credit repair helps to improve your credit score by addressing real issues like negative marks and erroneous information.
    • You can do a lot of it yourself - Many of the steps in the credit repair process can be done without having to pay a professional.
    • No more harassment by debt collectors - The stress of being pursued by debt collectors can be intense. After you repair your credit, you’ll rest easy at night without harassing calls and emails from collectors.
    • Lower security deposits and APRs - Credit repair can help raise your credit score. This will make you more likely to qualify for lower interest rates when borrowing and potentially smaller down payments.

    What You Can Do Yourself For Free

    Repairing your credit yourself is definitely possible.

    Here are a few things you can do yourself to get started.

    • Get a copy of your free annual credit report at www.annualcreditreport.com. The credit repair process begins with reading your credit report and identifying negative marks.
    • Dispute incorrect information wherever possible. If there’s anything in your credit report that’s inaccurate - be it your name, social security number (SSN), credit balances, or accounts in arrears and collection - you can lodge a dispute with the credit bureaus to have it corrected.
    • Pay down overdue debts. If any of your accounts are overdue (between 30 and 180 days beyond the payment due date) you’ll want to pay them immediately and have your credit provider update the credit bureaus accordingly.

    There are further steps you can take to improve your score but some of them are lengthy, complicated and time consuming.

    You may want to consider using a repair service to assist you.

    What To Know About Credit Repair Services

    Credit repair services deal with the main credit bureaus (TransUnion, Experian and Equifax) on your behalf with the aim of improving your overall score.

    If you’re pressed for time or can’t see yourself going through records and contacting bureaus, you may find great value in these types of services.

    • Repair services may check your credit report, lodge disputes, negotiate with creditors on your behalf and advise you on strategies to improve your score.
    • With your prior approval, the service will obtain your report, analyze it, and design a repair strategy that meets your individual needs.
    • This is ideal for customers who don’t like the idea of negotiating with their creditors directly or simply don’t have the time or knowledge to deal with the bureaus.

    Credit repair services may charge anything in the region of $20-$200 for their services. Most of them charge an upfront fee and subsequent fees later in the process as your score improves.

    How To Choose A Legitimate Credit Repair Company

    There are many repair services in the industry - but choosing the right one is essential.

    You’ll want to choose a legitimate and transparent repair service to avoid disappointment and wasted money.

    Three qualities that you’ll find in any legitimate business are honesty, realistic expectations, and transparent pricing.

    These services are no exception.

    A good credit repair company will be upfront about the fact that it takes time and they won’t try to entice you with overblown promises.

    They’ll also have a clear schedule of fees with a timeline of when each one is payable.

    Red Flags To Look Out For

    Some repair services have your best interests at heart - and others are best avoided.

    Look out for these red flags which may indicate that you’re dealing with a less-reputable company.

    • Exaggerated claims and promises like a “FICO score of 750 in less than 30 days”, clearing your credit record of all negative marks, and other similar-sounding statements.
    • Hidden fees or “pay later” options that don’t specify how much the service costs or when exactly payment is due.
    • Any service that offers to create a new identity for you or provide you with a ready-made credit score. You should be especially cautious of offers like these because they could involve fraudulent activities.

    Do-It-Yourself Vs Paid Credit Repair: The Pros & Cons

    Should you do your credit repair or leave it to a specialist company? Here are the pros and cons of each approach.

    Handling Credit Repair Yourself

    Pros

    • It’s practically free - You can obtain a free credit report each year and your only costs relating to dealing with bureaus will be your time and the cost of phone calls if necessary.
    • You’ll know your credit history - Repairing your own score means taking a closer look at your history of borrowing and repayments and learning from your past mistakes.

    Cons

    • There’s a learning curve - If you’ve never dealt with these reports or negotiated with creditors before you may find it difficult at first.
    • It’s time consuming - There’s no denying that it takes time to analyze a credit report and lodge disputes. This makes the do-it-yourself method impractical for some people.

    Using a credit repair service

    Pros

    • You can leave it to the professionals - Good credit repair companies know all the ins and outs of dealing with the relevant companies.
    • They may negotiate on your behalf - Many will negotiate with creditors to settle outstanding debts or remove negative marks from your history. 

    Cons

    • You’ll have to pay for the privilege - These services come at a cost. You’ll need to weigh up the benefits of using the service and decide if it’s worthwhile.
    • Results aren’t guaranteed - Credit repair services may do their best to negotiate but there’s no guarantee that the provider will agree to their terms.

    Conclusion

    Credit repair takes time and effort, but the results are always worthwhile.

    Deciding whether to repair it yourself or enlist the help of a company is an important first step in the process.

    If you’re confident that you can analyze your report and lodge disputes with a bureau or provider, you may want to try it for yourself.

    Bear in mind that this can be a time-consuming activity.

    On the other hand, if you’re pressed for time or aren’t that interested in financial matters you may find great value in these services.

    Eventually, repairing your credit effectively could open up a world of benefits and opportunities - especially if your score is lower than you’d like it to be.