Fast Credit Repair
A bad credit score can upset the financial health of a person and ruin his/her dreams. Since a person’s financial health rides on the credit score, it is important to fix a poor credit score. A bad credit score can leave someone without a home, car, a job or any source of income. That is not appealing!
A bad credit score in the US is a score of fewer than 619 points. Considering the repercussions of having a poor credit score, a person has to repair it for things to turn for the better.
Why should a bad credit score be fixed?
Some of the reasons why a bad credit score should be fixed are:
Good credit scores mean lesser interest rate on mortgages and lesser finance charges on credit card balances. This can help people save money on interest and other fees in the long run.
Avoid/reduce paying security deposits on services
If the credit score of a person is low, service providers will charge them a Security Deposit, to offset the risk that arises from non-payment, or late payment. Having a good credit score means that the security deposit might be lesser. Sometimes, a good score might mean that there might be no need to pay the deposit at all.
Pay Lower Premiums on Insurance
Insurance premiums for cars, home, and life are based on credit scores. A bad credit score means that people will have to pay higher premiums for availing insurance on these things.
Get a Credit Card
Having a bad credit score may mean that people may not be issued credit cards by banks, owing to the risk associated with payments. If all transactions must be done in cash, it is bound to create a hassle at some point.
Get a Higher Credit Limit
A good credit score means that a person pays his/her bills on time. This allows the creditors and service providers to increase the credit limit on cards and services, as it shows them that the person can be trusted to pay the money back.
Stop Harassment by Debt Collectors
Unless payments are made and debt accounts closed, harassment from debt collectors through mail or phone calls cannot be stopped. Even if a person stops these calls by writing letters, debt collections move from one collector company to another. This will only put a temporary stop in the harassment, but not a permanent one.
Several companies are now looking at credit scores to decide if they want to hire a person or not. So, a credit report is becoming as important as a criminal report.
Companies want to ensure that the people they are choosing are responsible, trustworthy, and will not be tempted to commit fraud, due to their bad financial health (poor credit score).
Eases purchasing a car or house, or, renting them
A solid credit score is a testimony of a person’s responsibility of paying on time and paying back. This allows for ease in purchasing homes, cars, or renting them.
Not erode your child’s credit
Having a bad credit score can tempt people to erode their child’s credit, sometimes out of desperation. This can be avoided when a person’s credit score is good.
Sometimes, when people must fulfill necessities, and their credit score is not sufficient for the same, the urge to use the child’s credit is difficult to resist. If people can be responsible about their credit score they can teach their children on how to handle their finances and anything related to their credit score.
How can a bad credit score be fixed?
There are two ways of fixing bad credit. An individual can do it on their own or can hire the services of a credit repair company.
Both the options involve the following things in common:
- Identifying mistakes and inaccuracies in a person’s credit report
- Verifying or disputing the inaccuracies
- Getting the negative items removed
- Then work on fixing other negative comments like foreclosures, default, bankruptcy,
Since fixing a bad credit score can make a huge difference in a person’s life, it has become the need of the hour, after the 2008 recession. This has led to some quick fixes or “Fast Credit Repair” solutions springing up.
What is fast credit repair?
The term “Fast Credit Repair” sounds like an oxymoron. Logic dictates that a credit score that can take months or years to get bad, cannot be fixed in a matter of few days, as some companies tend to promise.
Several people fall prey to the words “Fast Credit Repair”, and end up buying kits online to repair their credit, which might turn out to be useless.
Many “Do It Yourself” Enthusiasts who bought such kits wished that they have never fallen prey to the “great credit in a minute” catch phrase. Not only were they not able to repair their credit, their credit file got affected further, plummeting their scores deeper.
Several companies also tried to use the “Fast Credit Repair” gimmick, and roped in customers, who paid huge amounts of money to repair their bad score, only to be left disappointed.
This has led several people to deduce that the word ‘fast” cannot be put in the same sentence as reliable and good credit restoration.
What is the best way to repair credit?
Effective credit Repair takes time, effort and expertise. It is important to get a good credit repair company to handle your credit repair. Though deciding on the right company takes a while, it is better than making a hasty “fast credit repair” decision.
The hasty decision might not only disappoint you, but might also affect your credit score negatively. So, caution must be the keyword when we talk about credit repair.
Some of the ways to repair credit are:
Paying the outstanding balances on credit cards
Too much debt on credit cards can be one of the reasons for poor/dipping credit scores. Paying the outstanding balances on time, and keeping the ratio between the amount owed to the bank vs. the credit limit, to between 25-30% is sensible.
Increasing the credit limit on cards
Credit repair requires skill and planning. If paying back a debt can be difficult, increasing the credit limit on a card could be an option.
But, this request is subject to the creditor agreeing to increasing the credit limit on the card. This may take long, or may get rejected, if the credit score of the person requesting for the increase in the credit limit, is too poor.
Verify or dispute inaccuracies
Anything reported by the credit reporting agencies must be verified, substantiated and 100% accurate, as per law. One of the ways to repair credit is to order a free credit report and look for inaccuracies and mistakes.
Some of the information on the report that can be questioned are:
- Late payments, charge-offs or collections that cannot be verified
- Identity theft
- Incorrect entries like “paid-derogatory” for accounts fully paid
- Accounts charged as “unpaid”, even after bankruptcy
- Credit limits listed incorrectly
- Older negative items over 7 to 10 years old, which should have fallen off the report on their own, still featuring in new credit reports
Stop Unwanted Inquiries
Creditors are required to obtain a person’s permission before accessing their personal credit information, as per law. But, sometimes companies do not follow protocol. This can lead to a fair number of inquiries on a report.
Sometimes, just too many inquiries by creditors could also lead to a dip in the score.
Verify the inquiries on the credit report, and make sure permission from you was sought by the respective creditor. If prior permission was not sought, credit reporting companies can be contacted to remove the negative remarks.
What is Instant Credit Repair?
Since credit scores are the deciding factors in getting loans, and the interest rates that get fixed, instant credit repair can help people get their dream loan or the rate they want.
These services are also called “Rapid Rescoring Services” or RRS. The RRS is usually used by mortgage lenders or brokers, to get better rates for their borrowers.
The mortgage lender submits proof to the credit reporting agency about any recent change in the borrower’s account, which might lead to a change in the credit score. This information is then updated within a certain time frame in the credit report after the lender has been charged a fee.
Removing the errors and rescoring/repairing the credit within 72 hours can help the borrower get a good lending rate.
However, the catch here is that this service is available only with mortgage lenders, or brokers. It cannot be offered on a direct-to-consumer basis.
If the Instant Credit Repair is offered directly to the consumer, by anyone other than the mortgage lender, or the broker, it might be a scam and could be risky.
Should people consider Rapid Rescore?
When the credit score of a borrower falls just a few points short of qualifying for a better loan, or rate of interest, the lender may suggest a rapid rescore.
If the borrower has the option of clearing a few debts to bump up the credit score by a few points, it makes sense to use this option.
Once the debts are closed, the credit score can be evaluated and updated, which will allow the borrower to save money on interest rates and fees in the long run.
Tips for Fast Credit Repair
Avoid applying for credit again and again, after rejection once
If a credit application has been denied for whatever reason, refrain from applying repeatedly for some time. Repeated rejections can be a red flag for other prospective lenders. It is a sign of someone who is desperate and emotional.
Find out the reason behind the rejection, and try and fix the issue before reapplying.
Know your credit history
Merely ordering a credit report is not sufficient. A credit report has your entire financial history listed as applications, accounts, approvals, rejections, reasons, etc.
Go through it in detail to identify mistakes, inaccuracies, and unfamiliar entries. Getting rid of these can lead to a significant improvement in credit scores.
Remove negative items from the report
Most of the credit reports might have some inaccurate information in them. Verifying them, or seeking clarification itself from the creditors can lead to many of the negative items vanishing, as there might not be 100% accuracy in them.
Certain other negative items can also be disputed, and it will be better to get the assistance of a credit repair company, as they bring in knowledge and expertise.
Sometimes people can request for the services of the State Financial Ombudsman. The Ombudsman can achieve the same result as a credit repair company, but the services of the Ombudsman are free.
A credit repair service or ombudsman can be of assistance, if the creditor and the borrower cannot agree to fulfill financial obligations in a way that works for both parties.
If the negative item on the credit report is genuine and has resulted because of late, or non-payment of debt, it must be fixed.
Even after the debt is paid off, the negative listing could be there on file for around 5 to 7 years, based on the seriousness of the infringement.
Repaying existing debts is the best way to procure credit in future, else the chances may be slim.
Mistakes to avoid during the credit repair process
- Do not allow unpaid debts to linger around. These can lead to bankruptcy, which might decrease the chances of loan approval in future.
- Do not try to repair your credit on your own. Though there are several websites that provide guidelines, it is better to rope in an expert. Credit repair companies can help you save time and can also effectively help you repair your credit.
- Credit repair takes time. Credit repair companies can remove inaccuracies and mistakes quickly. But, if there is a genuine listing, unless a deal is made between the creditor and the borrower on payment terms, the negative item may remain for a long time.
- Beware of companies that offer Instant Credit Repair (RRS) on a Direct-to-consumer basis. It might be a scam or a rip-off.
Credit repair cannot be a stop-gap arrangement. Since a credit score is an indicator of financial health, repairing your credit score can have some poignant positive repercussions for your future.