The Ultimate Guide to Bad Credit Repair

bad credit

Credit is a topic that can strike fear in the hearts of many — particularly if you are among the 30 percent of Americans with bad credit. Beginning the process of repairing credit can cause a lot of anxiety, but learning some of the basic rules of credit and gaining a better understanding of the factors that go into determining your score can help alleviate some of that anxiety. Educating yourself on matters of credit can also help you avoid common credit repair mistakes that lead to unresolved credit issues and therefore, lower credit scores.

If you have a low credit score, it’s important to first understand why. Using a credit score calculator will give you a clearer picture of the specific factors that are negatively impacting your credit score so that you can begin to address them.

Making late payments or missing payments altogether, carrying high balances, and failing to address errors on your credit report can each play a significant role in bringing your score down.

When you begin to dive into your finances and credit report, it can be overwhelming and seem like everyone is speaking a language you don’t understand. But there are a number of online resources available to help you. You will also benefit significantly by partnering with a reliable and reputable credit repair company, which can make the entire process far less overwhelming.

What is Credit Repair?

It’s important to understand what credit repair is and what it isn’t. Credit repair will not enable you to magically wipe away items on your credit report for which you are responsible. It will, however, allow you attain a fair and accurate credit report by addressing and removing any items that are in error, and expediting the prompt removal of items for which you are responsible when the required amount of time has passed.

The first step in repairing credit, is to thoroughly review your credit report from all three credit bureaus. You are entitled to a free copy of your credit report from Experian, Equifax, and TransUnion once per year. You are also entitled to request your FICO score. FICO scores — originally developed in the 1960s by the Fair Isaac Co. — are extremely important to consumers because they are the credit measure used by 90 percent of the top lenders. FICO scores can range from 300 to 850.

Once you’ve received a copy of your credit report and your credit score, it’s helpful to understand what constitutes a good score and what constitutes a bad score. For example, a FICO score range between 720 and 850 is considered “excellent,” with good, fair and poor credit ratings going down from there.

How Credit Scores are Calculated

When reviewing your credit report and credit score, it’s also important to understand the criteria that go into determining your score. There are five factors that comprise your overall credit score, and each is weighted differently.

  1. Payment history carries the most weight, accounting for 35 percent of your score. This is because lenders view it as the most accurate measure of risk when extending credit. Therefore, the timeliness with which you make payments on your debts will have the largest positive or negative impact on your credit score. Even missing a single loan payment can potentially cause a negative ripple effect in your credit score.
  2. Debt and credit utilization also comprise a significant part of your credit score — 30 percent. This category can be positively or negatively impacted by the amount of debt you carry on revolving credit accounts — such as credit cards — compared to the total credit limits on these accounts. In order for it to factor positively into your credit score, your utilization rate should never exceed 25-30 percent.
  3. Length of credit history accounts for 15 percent of your credit score. If you have no established credit accounts, or all of your credit is relatively new, this can reflect negatively on your credit score. Accounts older than seven years typically boost a credit score the most, provided they’re in good standing.
  4. Inquiries and new accounts make up 10 percent of your credit score. Any time you apply for credit someone is checking your credit score through either a “soft” or “hard” inquiry. Too many hard inquiries can have a negative impact on your score. Similar inquiries within a short amount of time, on the other hand, are generally less harmful because credit bureaus understand that they may reflect a certain event such as shopping for a car loan, or a mortgage refinance.
  5. Finally, the types of credit accounts you hold make up the final 10 percent of your score. This means that the more diversified your credit report, the better when it comes to your credit score. That’s because a number of different accounts help to demonstrate your ability to successfully hold and manage varying credit types. A federal student loan will illustrate your experience with installment debt, for example, while a consumer credit card will prove your skills surrounding revolving debt.

So, if as mentioned above, 720 is the magic number to attain an “excellent” credit score ranking, what number is associated with a “bad” credit score? Typically bad credit is considered anything lower than 620. That’s when it becomes very difficult to acquire credit, although there are a number of loans available for people with bad credit. There can be benefits and risks to these loans, depending on the situation and need.

In many cases, these loans can be beneficial for people whose credit score is low based on the fact that they haven’t established a credit history, or for those trying to re-establish credit after an event such as a divorce or job loss, which may have resulted in missed payments, or necessitated a bankruptcy filing.

Still, the implications of bad credit can be more far-reaching than you might realize, even impacting things you don’t associate with your credit score, such as the ability to rent an apartment or get a job.

How Can You Fix Bad Credit?

This is the question that leaves so many of the 30 percent of Americans with bad credit feeling overwhelmed and hopeless about their credit situations. Ultimately, fixing bad credit comes down to knowing where to begin, and getting the help and resources you need to do so.

As mentioned at the beginning of this article, the first step in credit repair is to obtain a copy of your credit report and score. Once you’ve reviewed that information, your next question will likely be: How long will it take to repair my credit? Unfortunately, there is no concrete answer to this common question. The amount of time it takes to fix credit varies depending on your specific situation and the severity of the factors that are negatively affecting your score.

Depending on that information, it can take anywhere from a few months to several years to significantly repair your credit. There are some general guidelines, however. A history of late payments and collection accounts can stay on your credit report for up to seven years, while more complicated matters such as unpaid tax liens, Chapter 7 bankruptcy filings, and other matters of public record can stay on your report for up to 10 years. Less serious negative items on your credit report will affect your score less over time.

While the amount of time it takes to see a bump in your credit score can be discouraging it’s important to remember that repairing the damage to your credit really begins the minute you start the process. And the good news is, when negative items are challenged and removed, credit scores almost always improve.

Approaches to Credit Repair

When it comes time to begin the process of credit repair, many people consider taking the do-it-yourself approach. This isn’t generally advisable, however, because the majority of consumers don’t understand the extensive list of potential inaccuracies that can impact credit scores, including accounts that don’t belong to them, name misspellings, duplicate accounts, old accounts that should have been removed, and incorrect judgments or bankruptcies being reported. Any one of these items can take significant time and diligence to remove, and if you’re dealing with several inaccurate negative items, the process of restoring your credit on your own can easily take a year or more.

The biggest perceived benefit of DIY credit repair is cost savings. But credit repair can be a long and tedious process, and by going it alone you will likely end up paying more in the long run due to high interest and fees as a result of a prolonged poor credit score.

Consumers are often turned off from credit repair agencies because they have heard one too many horror stories about credit repair scams. However, the Credit Repair Organization Act (CROA) was established in 1996 to protect consumers working with credit repair agencies. And by doing a little research to ensure you’re partnering with a reputable credit repair company, you can easily avoid potential scammers.

Benefits of Working with a Credit Repair Expert

The Fair Credit Reporting Act promotes accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. Although this act was put in place to protect consumers, attempting to work directly with credit reporting agencies as a consumer can be complex. Despite the fact that credit reporting agencies are required by law to remove or correct inaccurate information, it can take months or more for them to do so. Credit repair agencies can leverage their knowledge and expertise to ensure that you get quick action when it comes to removing items from your credit that are inaccurate or those that should be removed based on timeframe.

Working with a reputable, reliable credit repair agency that is dedicated to helping you attain the fair and accurate credit report you deserve is the fastest and most efficient way to improve your credit score.

A reputable credit repair specialist will help you by:

  • Performing a credit report audit on all of your accounts.
  • Explaining different credit scores and how they are used to obtain credit.
  • Diligently interacting with creditors to correct inaccuracies on your credit report.
  • Monitoring your present credit situation and preparing you to maintain a good credit score in the future.

What sets Apart

It is possible to achieve a good credit score, but taking the first step to begin the credit repair process is key. Ultimately, you’ll achieve better — and faster — results by partnering with a professional.

If you’re in need of reliable and effective credit repair solutions, we urge you to contact today. As the only credit repair agency that has direct relationships with all three of the major credit bureaus, we know the ins and outs of credit and the most efficient ways to fix the things that are dragging your score down. We also provide the additional services and education you need to ensure that your credit report and score remain fair and accurate for the long term.

While there is no miracle “credit fix,” we understand that you’re looking for a quick solution to credit repair. The average client sees 7 percent of their questionable negative credit report items removed per month.

With our expertise and your active participation, we can work together to fix your credit. And the sooner you get started, the sooner you’ll see the results that will have you on your way to reaching your financial goals.

So, what are you waiting for? Contact today!

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