Whether you found yourself in too much credit card debt and had accounts go to collections, or you discovered errors on your credit reports, you know something is bringing your credit scores down and you want to fix it. After all, your credit scores determine what terms and conditions you are eligible for on loans and lines of credit, such as a mortgage or credit card.  

No matter the reasons you got here, if you find you need to improve your credit, you have a couple of options: You can seek the help of a credit professional or you can perform DIY credit repair. In this article, we’ll explain what you need to know.

What Is Credit Repair?

As we mentioned, credit repair helps improve your credit. Doing so depends on the problem that is bringing your credit down.

If you do not have a copy of your credit reports, you can order a free one on AnnualCreditReport.com from the three major credit reporting agencies — Equifax, TransUnion and Experian. Each of the three agencies may have different information affecting your credit score, so you will need to order one from each. (You can also view two of your credit scores, with helpful updates every 14 days, on our site.) If you find a mistake on your credit reports, filing a dispute and getting that error can help improve your scores. You can use this guide to find out how to dispute any errors on your credit reports.

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If something else is hurting your credit, it’s time to figure out what financial behaviors are bringing you down. Remember, there are five standard categories that make up your credit scores: Credit utilization, credit types, inquiries, history and length of credit history. Some aspects of credit can be fixed immediately; others may take a while. For instance, your length of credit history can only be solved with time. However, you can immediately affect the amount of credit that you utilize and the types of credit that you use. You can also reduce the number of credit inquiries that you invoke at any given time.

The magic formula for determining your credit score isn’t publicized, but there are some general guidelines. For instance, experts say your credit utilization (your debt in relation to your credit limit) should be below 30%, and ideally 10%, for the best effect on your scores. This means that closing credit accounts may actually be a bad move — it’s wise to do the numbers with a professional.

How Do I Pay Off My Debt in Collections?

The first step is to find out exactly what you need to pay off. There are three main ways to pay off your debt in collections. You can set up a payment plan, reposition the debt in order to reduce the principal, or earn the cash to pay it off in full. If you do not have the cash, you will need to set up a payment plan or restructuring.

It’s a good idea to set up a payment plan for an amount that is within your monthly budget. You should have a plan to submit to creditors before calling; do not call before you have a proposal. Assuming the agency agrees, you will soon receive paperwork finalizing the deal. Make sure that you pick an amount that you can pay each and every month, or the creditor may sue you or garnish wages.

If your ability to pay is severely limited, you may be able to benefit from proper positioning. Collection agencies would rather receive a portion of a debt than deal with a bankruptcy, which leaves it with nothing. Just remember it’s good practice not to sign any agreement that allows you to pay off a part of the debt while allowing the agency to sell the remaining part of the debt to another agency.

What Do Credit Repair Firms Do?

We get it — doing credit repair yourself can be exhausting. It’s time consuming and technical and can be downright frustrating. While it is nice to know that you can do it on your own, and without spending a dime, you do have another option: Credit repair firms.

Credit repair firms take you through the entire process of fixing your credit while helping you build your credit. A reputable firm will understand the nuances of credit, including how long items stay on your report, how long credit challenges take, and how much your credit can be improved within a certain time period.

Ideally, working with a credit repair firm can simplify the process of DIY credit repair. You’ll no longer have to deal with the paperwork and phone calls to contest erroneous items on your credit reports — they’ll do that for you. They’ll also help you set a goal and work toward it, directing you to resources that can help your cash flow while your credit is being cleaned up. Whether you are trying to clean up your credit for an immediate purchase or just shore up your finances, a reputable credit repair firm may be able to help you meet your goals.

How Much Does it Cost to Repair Your Credit?

As you’d expect, doing credit repair yourself typically won’t be as costly as hiring a credit repair professional. But the cost of credit repair also comes down to the problem: For example, if you’re seeing a dip in your scores because you applied for too much credit, holding off on any inquiries for a while won’t cost you a dime. But if your credit is in trouble because you’re behind on paying debts, it’ll cost you.

And don’t forget to factor in the price of your time. If you’re disputing mistakes on your reports, it can be time consuming, but less so if you hire a professional to do the heavy lifting for you. Either way, it’s important to do what you can to improve your credit scores. After all, better credit opens you up to more opportunities for improved terms and conditions and benefits in the future, potentially saving you thousands on interest over time.