Being in the information age means that companies and people know so much about us. This also applies to our credit activity. So much depends on our credit scores. Getting a credit card, renting an apartment, a job, or finding a decent rate on car insurance are all heavily influenced by our credit scores.
Credit scores are our reputation to those who don’t know us
But what if some of the negative credit activity isn’t yours or is inaccurate? What can you do? One in four consumers has an error on their credit report that could affect their credit scores, according to the Federal Trade Commission. When it comes to repairing your credit, there are 3 options. 1) Do nothing, 2) fix it yourself, 3) pay a company to fix it.
The older the credit activity, the less impact it has on one’s credit score. Doing nothing may be an option for a person whose inaccuracies are old and there are no plans on making any major purchases in the near future. This is not the recommended course of action, but it is an option.
The Fair Credit Reporting Act gives you the right to an accurate credit report, allowing you to dispute credit report information that’s inaccurate, incomplete, or cannot be verified. Credit repair is the process of removing this type of information from your credit report with the goal of improving your credit score.
Credit repair means removing:
- Accounts that aren’t yours
- Late payments that were really on time
- Wrongly reported balances
- Information that can’t be verified
Removing inaccurate information from your credit file will result in a boost to your credit scores. For example, a 90-day late payment reported in error could decrease your score by as much as 100 points.
DIY
You have the right to dispute credit report information with the credit bureaus on your own. The keys are patience, persistence, and good note-taking. If you choose this option, keep detailed notes of who you spoke to, the date, phone # extension, and what was discussed. I also recommend sending an email to the person recapping the conversation. You want to have a paper trail. You also want to stay on top of this to ensure that errors are actually coming off your credit reports.
Using a credit repair company
The credit repair industry has a very checkered history. There are many examples of clients paying a lot of money and getting very little in return. Legally, credit repair companies can’t charge fees until after they’ve performed services for you. You’ll find that many credit repair companies charge a monthly subscription fee to cover the costs of work done for you in the previous month. Fees can range from $50 to over $100 per month.
If you go this route, do your homework. Don’t evaluate credit repair companies by cost alone. Consider the services you receive for the price, money-back guarantee, and results of other clients.
Check for signs that the company is legitimate. Credit repair companies must follow the Credit Repair Organizations Act which requires them to inform you of your right to repair your own credit, prohibits upfront payments, and gives you the ability to cancel your contract within three business days. Avoid any company not following this protocol. Before choosing a company, compare plan details, online reviews, and Better Business Bureau complaints against other credit repair companies.
Working with a non-profit consumer credit counseling agency is another worthwhile and cost-effective option. The agency can help review your finances, create a budget, and negotiate a debt management plan with your creditors to help you get caught up on any past due bills. You can find a reputable agency through the National Foundation for Credit Counseling.
Be aware
Regardless of the route you take, know that activity that is accurate, complete, and verified will not be removed. Keeping expectations realistic is important so that time and money are not wasted.
Rick is a financial coach with a passion for teaching people how to manage their money so they are making better decisions and have less stress in their lives. He can be
reached at rick@rightpath-fc.com.
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