Credit repair is the process of restoring and improving your credit score after it has been harmed due to poor credit habits, financial setbacks, identity theft, or credit reporting errors. While scammers frequently use fraudulent credit repair promises, the practice itself is lawful. There are reputable credit repair companies that can assist you, as well as methods you may do yourself to repair your credit. This page describes how.
In recent years, the importance of maintaining a good credit score has become increasingly evident. A strong credit score can open doors to better financial opportunities, such as lower interest rates on loans, improved chances of rental approvals, and even better job prospects in certain industries. As a result, more individuals are seeking ways to repair and improve their credit, leading to a surge in both legitimate credit repair services and, unfortunately, fraudulent schemes targeting vulnerable consumers.
How Credit Repair Works
The first step in repairing your credit is determining what caused the harm and how severe it is. Request copies of your credit reports from the three major national credit bureaus, Equifax, Experian, and TransUnion. You are entitled to one free credit report from each bureau every 12 months. You are also entitled to a free credit report if a company takes "adverse action" against you, such as denying you credit, insurance, or a job, as long as you request it within 60 days. You may get your free credit reports from the official website, AnnualCreditReport.com.
Once you've obtained your credit reports (which may differ from bureau to bureau), review them for any material that works against you. Late payments, overdue accounts, accounts sent to collection, bankruptcies, and foreclosures may all be considered negative information.
It's worth noting that the impact of negative information on your credit score can vary depending on its severity and recency. For instance, a single late payment from several years ago may have less impact than a recent bankruptcy or foreclosure. Understanding the weight of different factors in your credit report can help you prioritize your credit repair efforts and set realistic expectations for improvement.
The following step relies on whether the negative information is correct.
When Negative Information is Correct
If the negative information on your credit reports is correct, all you—or anyone else—can do is wait for it to age and fall off.
According to the Federal Trade Commission (FTC), most negative information can remain on your credit report for seven years, with the exception of bankruptcy, which can stay for ten years. The FTC also clarifies that no time limit applies to information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you've applied for more than $150,000 worth of credit or life insurance.
If you see negative but factual information on your credit reports, the greatest thing you can do is maintain solid credit habits in the future. That includes, for example, paying your bills on time and keeping a low credit use ratio. You should also monitor your credit reports in the future to verify that your positive practices are appropriately recorded. One approach to accomplish this is to stagger your free credit report requests so that you get a new one from one of the three bureaus every few months.
When you find errors in your credit report
If you see negative material on your credit report that you believe is erroneous, you can dispute it. The FTC recommends writing to the credit agency, stating the information you dispute, and including photocopies of any relevant documents.
The credit agency is legally compelled to investigate your allegation within 30 days, unless it is frivolous. The bureau must also send your letter and papers to the creditor (such as a credit card issuer) who provided the information you are contesting. The employer is also required by law to examine the situation and report back to the credit agency.
If the inquiry finds that you are correct, the original creditor must tell all of the credit bureaus to which it had reported the incorrect information so that they can repair your credit reports.
In either case, once the investigation is concluded, the credit bureau must provide you with the results in writing, as well as a free copy of your credit report if the dispute resulted in a correction.
If the dispute is not resolved in your favor, you have the opportunity to have a statement summarizing your side of the story added to your future credit report. You can also contact individual creditors to press your claim.
For more information, all three main credit agencies define their dispute resolution processes on their websites, which contain online forms that can be used to initiate the process.
While the dispute process can be straightforward, it's essential to approach it systematically and persistently. Keep detailed records of all communications with credit bureaus and creditors, including dates, names of representatives you speak with, and summaries of conversations. If you're disputing multiple items, consider addressing them one at a time to avoid overwhelming the process. Remember that credit repair is often an ongoing process, and it may take several rounds of disputes and follow-ups to achieve the desired results.
How to Identify a Credit Repair Scam
If you determine that the do-it-yourself procedure described above is not for you, you may want to explore contacting a professional credit repair organization.
However, be wary of scammers, who will take your money, do little or nothing to help you, and may leave your credit in much worse shape than before. The federal Consumer Financial Protection Bureau (CFPB) has compiled a list of warning indicators to look out for. They include:
Pressure to pay up front. That is not only a warning flag; it is illegal under the federal Telemarketing Sales Rule and the federal Credit Repair Organizations Act, according to the CFPB.
Claims that they can remove bad information from your credit record, even if it is accurate. As previously discussed, this is impossible.
According to the CFPB, "you have the right to cancel your contract with any credit repair organization for any reason within three business days at no charge to you."
It's important to note that while legitimate credit repair companies can provide valuable services, they cannot guarantee specific results or timeframes for improvement. Be cautious of any company that promises to increase your credit score by a certain number of points or within a set period. Instead, look for organizations that offer education, guidance, and support throughout the credit repair process, empowering you to take control of your financial future.
Is Credit Repair Illegal?
No. Credit restoration is a legal approach to fix a bad credit history and increase your credit score. You can engage a professional firm to assist you restore your credit, but it will not be able to do anything that you cannot accomplish on your own.
Is It Possible To Cheat Your Credit Score?
No. Inserting incorrect information into your credit report, as well as erasing accurate information, constitutes fraud. Legally, you can enhance your credit score by eliminating false information.
How Long Does It Take To Repair Credit?
There are no quick fixes for your credit. Negative but factual information (such as missing payments, charge-offs, or collection accounts) will be kept on your credit report for seven to ten years.
Your credit is essential, therefore it's worth taking the time to verify your credit reports on a regular basis to ensure that the information they contain is accurate. If you discover false information that paints you in a negative light, you have the legal right to protest it, and credit bureaus must investigate. While you can employ a professional firm to assist you restore your credit, they will not be able to do anything you can't accomplish on your own.
