Credit repair may seem like a complex concept at first blush. But that’s often because several misconceptions cloud the reality of the process and the potential for results.
The truth about credit repair is that it isn’t as complicated as you might have been led to believe. And if you’ve read negative reviews about credit repair it’s important to note that the quality of your experience is often equal to the quality of the service provider you work with.
These myths can be damaging if they end up preventing someone from repairing their bad credit and improving their personal financial situation—especially if that person is you!
To help, let’s explore the real truth about credit repair and what some of the most common misconceptions are.
Truth: Credit repair is about your credit report, not score
This is a fundamental fact to credit repair: The process is concentrated on your credit report, not your credit score. Believe it or not, your report and your score are two separate things. Whatever happens with your score is an outcome of actions taken to repair your report.
The main thing to know here is that credit repair is focused on making sure your report is:
- 100% accurate.
- Entirely substantiated.
That means the credit repair process is more about going through your report with a fine-tooth comb to find inaccurate information and attempt to resolve the situation.
Myth: Your credit score will jump immediately
Credit repair is not a magic pill for your credit score. While it is a proven strategy for addressing bad credit, it won’t improve your credit right away. Typically, those who may be dissatisfied with the results or timeline of credit repair are looking at their scores every day and expecting it to increase.
A little patience is needed with credit repair; as with many other good things, results come in time.
When a mistake or error is found on your credit report, the next step is to dispute the inaccurate negative item with a credit reporting agency. Once a dispute is lodged with a credit bureau, the reporting agency has 30 days, and in some cases 45 days to respond. It may correct or remove the negative item at the end of that time, but the impact to your credit score will still take some time to show.
A general rule of thumb with credit repair is that you can expect results to appear in around six months. Sometimes it may be longer, especially if you are disputing several aspects of your credit report.
Additionally, there may be other elements to a poor credit score that may be holding you back, and which credit repair alone cannot fix. For awareness, the five factors of a credit score are:
- Payment history.
- Account mix.
- Hard inquiries.
- Age of accounts.
Truth: You can try to repair your credit yourself
DIY credit repair is possible without the help of an outside credit repair company. The process includes a few steps, which consumers can complete on their own if they choose:
- Auditing the credit report for mistakes.
- Disputing errors with a credit bureau.
- Taking next steps to further analyze or build credit.
While you can do this all yourself, the effort and time required are immense. The actual mechanics of credit repair—like writing a dispute letter—can be time-consuming and call for expertise. Some may have the time and resources to get the job done on their own, but others may not benefit from such advantages. Or, they may not have the experience in disputing major credit report errors.
Myth: Credit repair companies are a scam
This is a particularly damaging myth, as the services of a reputable credit repair company are invaluable to the process. The key word in that phrase is of course “reputable.” And there’s a simple way for sussing out the credit repair scams from the rest of the market, which largely consists of effective and trustworthy credit repair companies.
It’s essential that you do some research on the credit repair companies you’re considering working with and ensure it follows the guidelines of the Credit Repair Organizations Act (CROA). This consumer protection regulation “prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of credit repair services.”
There are a couple key consumer protections the CROA enshrines:
- You can’t be asked for upfront payment before the company provides a service.
- You are entitled to receive all contracts in writing.
- You have certain cancellation rights the company must notify you of.
While the CROA regulates what credit repair services can and can’t do, you still have a role to play in researching which firm is the best option.
Consider asking these questions:
- Does the company care about personal aspects of my story?
- Are they transparent about the process?
- Will they update me on progress and ask me to collaborate?
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Finally, be wary of any company that offers you a guarantee of results. This is a major credit repair red flag to be on the lookout for, as well as an unlawful practice.
Truth: Credit report mistakes are common
The reason why credit repair can be so intensive is that credit report mistakes are quite common. One study from the Federal Trade Commission found 5% of Americans had a credit report mistake that could negatively affect their score.
Most consumers want to trust that their credit report is fair and accurate, and sometimes assume so. But credit reporting agencies aren’t perfect and errors can slip through. Some mistakes are attributable to the creditor.
On a deeper level, inaccurate information from your credit report can be more difficult to see from a consumer’s perspective. For example, duplicate accounts, incorrect inquiries and inaccurate accounts can all be present on a credit report. Without addressing these errors, or even knowing they exist, consumers may be unable to build their credit regardless of what they do on their own.
The experience of a reputable credit repair company can help bring these inconsistencies to light, as they know what to look for. CreditRepair.com reported that in 2018, the average customer they worked with challenged 28 credit report items.
Myth: Credit repair can remove correct negative items
All that said, no amount of credit repair can lead to the removal of a correct negative item on your credit report. After all, the point of credit repair is to identify and dispute incorrect or inaccurate information from your credit report.
If a certain item is substantiated and verified by the responsible credit bureau, then credit repair is not the solution. Some may come into the credit repair process with this expectation that it can be a cure-all, even for negative items. If negative information is correct and affecting your score, supplementary strategies like debt validation may be needed.
Truth: You can do more to build credit
Credit repair is best leveraged when you take action on your own part to build credit. Remember those five factors that comprise a credit score? Each of those is partly within your control as a consumer, and it may take some new lifestyle choices or spending habits to make poor credit history. For example:
- Always make timely payments. If you need to, set alarms on your personal devices, circle dates on a kitchen calendar or just enroll in autopay. Many organizations grant a small discount for automatic bill pay, additionally.
- Don’t open too many new accounts at once or in a short span of time. This could act in a doubly negative way. Each account you open will come with a hard inquiry while also reducing the average age of your accounts.
- Keep your credit utilization around 30%. This refers to the amount of your credit balance that you use or owe on. Accessing too much of your credit can be damaging to your score and make it harder to pay off debts.
Visit Credit.com today for more information about credit repair
The most important truths to remember about credit repair are that it’s not a scam, it can improve your credit score in time and there are many services available to help you take control of your credit situation. In addition, these companies may be able to provide further credit analysis, next steps and credit monitoring to help you improve your situation.
Interested in learning more about the nuances of credit repair and which are the most reputable companies to work with? Visit our resource page for all things credit repair for more information about the process and how to get in touch with effective and trustworthy services.
[Disclosure: Credit.com and CreditRepair.com are both owned by the same company, Progrexion Holdings Inc. John C. Heath, Attorney at Law, PC, d/b/a Lexington Law Firm is an independent law firm that uses Progrexion as a provider of business and administrative services.]