If you have bumps or bruises on your credit, like millions of Americans, you might be wondering how to improve your credit so you can make larger purchases, or even necessary ones. Credit repair describes the process of cleaning up your credit report to accurately reflect your financial affairs.
Sometimes credit reporting agencies don’t remove items that should be removed from your credit and sometimes other people – say with a similar name to yours – might end up having their accounts reporting to yours.
There are numerous reasons why you’d want to review your credit report and clean it up as best you can, but the main reason is, most lenders use the three main credit reporting agencies to determine whether they lend to a consumer, and what rate that consumer will get.
How does credit repair work?
A good place to start a credit repair journey is with getting a copy of your credit report from a credit reporting agency. You’ll do this for all three of the agencies, Equifax, Experian and TransUnion, but the first step is getting your report.
You can get one free credit report each year, but once you have it, you should review it to make sure all the accounts listed – they’re called trade lines – are yours. If you dispute a trade line, you’ll often be asked for documentation related to your request, so make sure you keep up with your documents! The following points might help you determine what you need to do if you choose to repair your credit on your own.
- Dispute errors – Once you have your credit report, you just need to review it for anything that seems out of the ordinary, or that aren’t yours. In addition, if you find any errors on accounts you have, for example paid off accounts that are still reporting as open, you can dispute those as well.
- Payment reminders – Another way to repair your credit on your own is to set payment reminders. These can help you to make your payments on time, which could be rewarded on your credit report.
- Credit counseling – Credit counselors are usually low- to no-cost organizations that can help you understand your credit and how to manage your money and debts.
Credit repair agencies – Do they work?
Another way to repair your credit is to work with a credit repair agency. These companies might have come across your social media feed promising a “quick fix” for your credit score. The Consumer Financial Protection Bureau (CFPB) recommends doing your due diligence when working with a credit repair company, as these are for-profit companies that provide a service you can do for free on your own.
What do credit repair services include?
The services they provide generally include disputing items on your credit report, which can cause them to get removed by the credit reporting agency while the account in question is investigated. When the accounts in question are removed, albeit temporarily, your credit score will fluctuate.
Once the credit reporting agency receives a request to dispute an account, they contact the creditor on your behalf. If the creditor fails to respond, the item will be removed from your credit on a more permanent basis.
The CFPB recommends considering several points prior to working with a credit repair company, including understanding that the options a credit repair service provides you can be done by yourself, for free.
They also recommend watching out for monthly subscription fees, as some of the credit repair companies will charge a monthly fee to keep disputing accounts, but the CFPB warns they often dispute the same items multiple times, even though the account(s) in question might already have been removed from your credit report. The CFPB additionally points out that there is no quick and easy substitute for building your credit by making payments on time.
Whether you’re in the market for a new car, or you’re trying to get your credit fixed up, Drive® can help! You can get pre-approved for a car loan in under two minutes, and it won’t impact your credit report.
