Understanding the Basics
of Credit Repair
What is Credit?
Credit means that you
are using someone else's
money to pay for things.
It also means that you
are making a promise to
repay the money to the
person or company that
loaned you the money.
Whenever a person
applies for a loan,
mortgage, a credit card
or for any other purpose
for which he needs to
borrow funds from a
lending agency, the
agency will check the
financial
credit-worthiness of the
person and based upon
its assessment of the
financial risk involved
in the deal, the agency
will decide upon the
terms and conditions of
granting credit. A
positive assessment
necessitates a sound
financial background and
a credit history with no
bad remarks.
What is Credit Repair?
'Credit repair' is a
process in which
consumers with
unfavorable credit
histories attempt to
re-establish their
credit-worthiness. The
process usually involves
procuring a credit
report from the rating
agencies and then taking
appropriate steps to
address any apparent
issues such as errors,
omissions,
misinformation,
misreporting or
misinterpretation. A
consumer can then
formally dispute those
errors or issues which
unjustly distort their
financial healthiness
and credit-worthiness.
Various laws and
regulations designed to
ensure legal and fair
undertaking of the
credit repair process
can then be utilized to
formally and legally
start the credit repair
process.
Consumers are entitled
to a copy of their
credit report legally,
if they have been denied
a credit card or loan
and if the information
provided on the report
is inaccurate, an
investigation relating
to true facts is
necessary for a credit
repair.
Why Repair Credit?
A consumer's credit
record significantly
influences his future
purchasing power and his
eligibility of availing
any credit facilities in
the future. A good
rating, or score, can
insure a low interest
rate and loans for
longer term for various
purposes like credit
card balances, car or
home loans. A poor
rating makes a consumer
vulnerable to finance
companies charging
exorbitant interest
rates and imposing
various unnecessary
repayment and loan
terms. Considering the
stakes and the
consequences involved,
it is absolutely
imperative for consumers
to understand the
importance of repairing
their bad or low credit
ratings.
The Safe and Legitimate
Way to Repair Credit
Credit repair can only
be achieved through
financial discipline and
hard work. Any easy way
out of a poor credit
history is undoubtedly
tempting, but it may
lead to further
financial difficulties
in the future.
If a poor credit history
is due to circumstances
beyond a consumer's
control, and they are
able to somewhat make
amends to their credit
records after that time,
then a creditor can be
requested to upgrade
credit rating because of
a sense of customer
loyalty.
Most creditors don't
trust the customers
defaulting on their
debts, so it may be very
difficult to obtain new
credit. But once a
person is able to
demonstrate continuing
income stability and
prompt payment patterns,
his situation can
improve in a period of
two to three years. This
way, even in the case of
bankruptcy, a consumer
is likely to be offered
charge and credit cards
within a year or two if
maintaining a steady
income.
What is most important
is evaluating the
financial situation. If
one finds that they are
unable to make at least
the minimum payment on
outstanding accounts, a
contact should be made
with the creditors. Many
creditors will
appreciate the
willingness to pay and
are most likely to help
set up plans for
repayment. Avoid making
promises which cannot be
kept as a small payment
is preferable to a large
payment that never
arrives. Sometimes a
small contact can be
enough to reduce
payments and forestall
more severe measures.
The next step is
consulting a credit
counseling agency. These
organizations are
staffed with trained
individuals experienced
in the credit field. A
distinction needs to be
made between these and
the commercial "credit
repair" companies who
claim that, for a fee,
they will undertake
credit repair.
No one can legally
remove accurate and
timely negative
information from a
credit report. But the
law does allow one to
request a
reinvestigation of
information in their
file that may be
inaccurate or
incomplete. There is no
charge for this.
Everything a credit
repair clinic will do
can be done by a
consumer themselves at
little or no cost.
The most important
factor in credit repair
is recognizing the
legitimate and viable
options available,
recognizing what the
scams are, and
differentiating between
the two. A poor credit
history can make it
difficult to obtain
additional lines of
credit making consumers
fall prey to many
unethical programs that
target consumers with
less- than-perfect
credit. There are no
quick fixes in credit
repair. Common sense
tells you that a third
party doesn't know your
credit history better
than you. Through
contacting credit
bureaus, making your own
corrections,
consolidating your debts
and budgeting, you can
improve your own score.
You don't need to pay
someone to fix it for
you. It's better to
apply that money towards
discharging your debt.
|
