Can a Credit Repair Firm Fix Bad Credit?
You can get help from a credit repair firm to fix your bad credit if you’re tired of getting rejected for loans or always ending up with financing that has high-interest rates and unfriendly terms. But is it really worth it?
What is a Credit Repair Company?
A credit repair firm claims to remove negative and inaccurate information from your credit report for a fee, which can cost over $1,000 of up-front money. By removing records of late payments and other unfavourable listings from your credit profile, your credit score eventually improves.
The agency does this by reviewing your credit report, listing all negative factors that affect your credit score and filing formal dispute letters against the inaccurate and unverified information to the credit reporting agencies that listed them. They can also dispute procedurally incorrect information—those that have been listed on your credit report without giving you the correct notices required by law.
By handling the credit disputes and escalations on your behalf, the credit repair company takes away the inconvenience and hassle of dispute resolution from you.
Aside from credit disputes, a credit repairer also offers advice and counselling to help you effectively manage your debts and improve your creditworthiness.
Is Hiring a Credit Repairer Worth It?
While a credit repair company can assist you on credit disputes and provide assistance and counselling to improve your credit score and fortify your borrowing power, it does nothing more than you can do to fix your bad credit record without having to pay for anything. It simply reviews your credit reports and disputes any items that are not true or obsolete. It cannot also remove any negative information that is accurate and legitimate.
All these services are done for several fees, including an ongoing monthly fee or each time a piece of negative information is removed from one of your credit reports. This can cost you hundreds or thousands of dollars in the long run.
There are also many credit repair scams that target borrowers with bad credit who are desperate to get a loan. These fraudsters extort money by giving you false promises. They also connive you into making lies to remove a negative listing. Unfortunately, lying only ends up worse.
If you decide to go with one, make sure that you’re dealing with a legally operating company that:
- Presents you with a contract that specifies the services it will provide
- Provides you with a three-day cooling period to withdraw from the contract
- Refrains from advising you to commit credit fraud by making false claims or altering your identity
- Works hard to repair your bad credit but does not guarantee the removal of accurate information from your credit report in exchange for payment
- Does not take any payment until it fulfils all of the terms of the contract
A Credit Repairer Is Simply Doing What You Can Do, For a Fee
Remember that a credit repairer can only challenge items on your credit report to improve your credit score and protect your rights, but they cannot remove negative pieces of information unless they are successfully disputed. Thus, if the negative information in your credit report is factual, accurate and timely, there is nothing that the credit repair company can do to change or remove this information.
Fixing Bad Credit On Your Own
The limited capacity of any credit repair company to fix bad credit in exchange for a hefty pay is why credit experts, including credit reporting agencies, do not recommend using one.
Instead of paying an organization to fix and improve your credit score, it is best to do the credit repair on your own.
Step 1: Check your credit report.
While lenders and credit repair companies pay to access your credit report, you are entitled to a free copy of it:
- Once every year
- Within 90 days from the date of your latest declined loan application
- After a successful credit dispute or a correction request
It is smart to secure a separate copy of your credit report from each credit reporting agency. This is because your previous lenders may only report to one agency, resulting in discrepancies on your credit records and the resulting credit score.
Step 2: Dispute Errors and Inaccurate Information
Review all the questionable items that are listed in your credit report. Then, file a formal dispute letter to the responsible credit reporting agency that created the report. The agency has a maximum of 30 days to answer to your complaint.
The credit reporting agency will reach out to the lender that have reported the items(s) you are disputing to get their side of the issue. After, they will come back to you with a decision. Sometimes, the agency may need to see supporting documents to verify the accuracy of your complaints. Depending on the nature of your dispute, this process can take a while. On average, dispute resolution takes around 1 to 6 months.
Be aware that the credit reporting agency can only remove or update items on your credit report if they are:
- Inaccurate, like payments wrongfully tagged as “late” when they are actually paid on time
- Untimely, which includes old credit information that should have been removed, as mandated by law. A bankruptcy record, for instance, can only stay on your credit report for 7 years.
Step 3: Build and Maintain Positive Credit Information
Expect to see a boost in your credit score once the inaccurate and untimely information in your credit reports is removed. Some factors like late debt repayments greatly affect your score. If you’ve successfully disputed a record of delinquency, you’re likely to get a significant improvement in your credit score.
A successful credit dispute plays a very important role in credit score improvement. However, it may not be enough to fix bad credit. The other half of the equation is building good credit habits.
If you don’t know where to start, you can take out a bad credit consolidation loan. This type of personal financing grants you the money to pay out all other debts. By focusing your repayments on only one debt, you can manage your debt more effectively. You can also save on interest if you’re able to get one with a low-interest rate than your previous loans.
Good Credit Habits
Other habits that help you improve your credit score include:
- Making timely repayments on your active loan. You can set up automatic payments to avoid missing out on your due dates
- Using your credit card to only 30% or less of its credit limit to lower your credit utilization ratio
- Paying your utility bills, including your phone and internet subscriptions on time
- Maintaining positive cash flow in your bank account
- Applying for credit when you can afford to repay it
There is no shortcut to credit repair, contrary to the false promises of some credit repair firms. Removing or altering negative pieces of information in your credit report can only be done through credit dispute. If there is nothing to dispute, you simply need to settle past-due accounts. You should also start practising good credit habits and wait for your credit score to improve. This may take time but it’s worth all the trouble. Turning a bad credit into a good one can help you reach your financial goals.
Loans For People With Bad Credit help Australians with bad credit get loans. We find the right financing at reasonable interest rates and terms for your unique situation. To request a quote or inquire about our services, call 1300 769 384 or complete our Pre-Approval form.
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