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It always comes as a surprise when you request a credit check and you find that your scores are far from what you expected — and not in a good way. Sure, a few times you forgot to pay the electric bill on time or missed your monthly minimum due on your credit card. As you read your credit reports, you might catch errors of your own, discrepancies between different reports, and — occasionally — glaring inaccuracies. It’s not always your fault if your reported score is lower than you thought!
Repairing your credit is the process of restoring the information held by the various credit bureaus to its rightful and honest state. You are legally protected from bearing the burden of these mistakes or malicious misprints. The process is not simple or quick, but with patience and attention to detail, you can have these problems corrected. Combine this approach with better financial habits moving forward, and you’ll restore your credit to the high levels you’ve earned and enjoy all of the benefits that come along with it.
When Credit Repair is Needed
People tend to forget about their FICO score until it’s too late. It’s not until they are applying for a new credit card or attempting to secure a mortgage or car loan that they realize something is amiss.
Your unfortunately low score can result in one of two situations:
- You’ll pay absurdly high-interest rates.
- You’ll flat out be denied the loan or line of credit.
Let’s use simple numbers here for the sake of the example. Receiving a 9% interest rate instead of a 6% rate over the 30-year lifetime of a fixed mortgage can cost you as much as $800 extra per month depending on the size of the loan. Multiply that out and you’d have paid $288,000 more in interest than you would have otherwise.
This is why you need to repair your credit now, especially if you anticipate any larger purchases in the near future. For most of us, there is simply no realistic way to purchase an entire home with cash. We must have access to lines of credit at reasonable interest rates. Don’t wait to get started.
Your Legal Rights
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Forget about all of the complex legal languages out there. When it comes to your credit score, your rights are very simple to understand. If someone tries to confuse you with details, question their motives. It’s as plain as this:
Any time a bank, employer, or company denies your application for a loan, credit, or employment, you can receive a free credit report if you report this “negative action” against you within 60 days. Everyone is entitled to a free copy of their credit report from each of the credit bureaus once every 12 months, but you have to ask for it.
You can obtain an additional free report if you’re:
- a welfare recipient,
- a victim of identity theft; or
- a victim of other types of fraud that affect your score.
Most importantly, nobody can charge you to investigate or correct your credit report. Disputing misrepresentations, mistakes, fraud, or outdated details on your report is within your rights. The responsibility falls upon the credit reporting company and the company supplying the faulty information to research and correct these inaccuracies. Never hesitate to contact both the bureau and the information provider and ask that your rights be fulfilled.
Credit Marvel Tip: Create a staggered schedule of requesting your credit report from each of the three main nationwide bureaus. Ask for one every four months, rotating bureaus, and you’ll be able to check your score that often over the years to stay on top of any potential issues.
- FTC’s Your Equal Credit Opportunity Rights
- The Federal Reserve Consumer’s Guide to Credit Reports & Scores
- Credit Repair Organizations Act | 15 U.S. Code § 1679
The DIY Credit Repair Process
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Before you get started, prepare yourself mentally. Understand that you may encounter gross misrepresentations of your payment history. You may find that information and events that would reflect positively on you are missing. Self-auditing your reports is possible but very time-consuming and can be additionally frustrating due to elements being out of your control.
Even when you finish your part, you’ll wait weeks for a response. If you feel up to the task, keep reading along and get to work, or if you’d rather have one of the reputable credit repair companies take care of it for you, skip this section and move on to the next.
1: Receive All Three Free Credit Reports
As mentioned above, you are within your rights as established by the Fair and Accurate Credit Transactions Act (FACTA) to receive your credit report free of charge once per year from each of the three main credit bureaus. Use the resources below to obtain copies of each.
- FACTA in full
- Request your reports online
- Print and mail the request form
- Phone: 1-877-322-8228 – Request your report by phone
- View your reports via Credit Karma or Mint.com
2: Review All Details and Items
Now that you have all three reports, plan out a solid portion of your day to cross-reference and audit each of them. You have two main goals during this step.
- First, make sure all of your information is correct with the reporting agency and the company providing the information.
- Second, meticulously go through every item to find any mistakes, miscalculations, or absence of information. Remember, each report will list out potential problems apart from other items. You will want to resolve these but don’t assume that these are the only issues.
Finally, double-check everything to find what the bureaus did not.
You will find information regarding your identity, including your:
- Past addresses
- Employment history
- Names and aliases
- Social Security number
- All types of accounts you have with various companies (including any bank accounts or loans)
- Any account ever sent to a collection agency
- The number of times you’ve requested a new line of credit or loan
- Every time you or a company or another organization requested to see your report
As you navigate through these items, your goal is to analyze certain areas to find incorrect or missing data. Foremost, look at the potentially negative items listed in their own section, which are typically missed payments. If any appear that shouldn’t make note of these as they are the most damaging to your score. Look at all of your open accounts and ensure the ages of the accounts and the standings are accurate. Older accounts in good standing are very beneficial to your score, so in the future don’t be eager to close any old accounts, or you’ll be deleting the proof that you’re capable of responsibly managing your credit lines. Make sure all of your accounts appear on the report because having a variety of account and associated payment structures will boost your score as well. Finally, ensure all of your credit limits are reported accurately.
Credit Marvel Tip:
If you find evidence of fraudulent use of your credit, immediately contact the credit bureaus to set up a fraud alert. This forces lenders to contact you to confirm your identity before allowing you to open a credit account with them. And, if someone has stolen your identity, this could hinder the continuing problem. You can also freeze your credit reports until you’ve managed the credit restoration process and repaired your report to full correctness.
3: File Your Disputes
At no cost to you, you can file your disputes with each agency. In turn, they must investigate each item within 30 days.
Take advantage of how the law functions by not contacting each agency about each problem or reaching out to each information provider. The agency’s investigation will include the information provider, and if a correction is to be made, the information provider must contact each agency themselves to provide the correct data.
Use the sample letter in the resources below as a template for your dispute. Please remember to never include the original copies of any documents that contain your proof of inaccuracies. Keep these for your records and supply only copies of these documents.
You can also send a copy of your credit report with each problematic area highlighted and numbered in accordance with your dispute letter. Also, consider sending your letter by certified mail with a return receipt requested. This will provide proof that the dispute letter and accompanying documents were delivered.
- Sample letter for disputing credit report errors
- File a dispute with Experian
- File a dispute with Equifax
- File a dispute with TransUnion
Step 4: Wait for a Response
The credit bureaus and lenders must investigate and respond within 30 days. This means you should wait at least 45 days for any mail documents to arrive. A response will contain one of two replies for each disputed item: the inaccuracies were removed or they disagree with your claim. If they disagree, do not give up. Attempt to find more documentation supporting your position and contact the reporting agency again.
For any items that are successfully removed, you will be provided another copy of your updated credit report. Legally, any items changed or removed cannot be restored to the original version without proof from the information provider. The provider must also contact you first about this proof. You may also request that the credit bureaus send notices of these corrections to any potential lender that requested your report in the last six months.
Another Credit Marvel Tip:
If the dispute is denied because the lender believes the information they provided is accurate, you can place a statement of dispute on your credit report. This won’t change your score, but it will give you the opportunity to let future lenders know that inaccuracies exist and to consider these when determining whether to offer you credit. These statements of dispute remain on your credit report for two years.
Follow all of the steps above with patience and diligence and you’ll have done all that can be done in the credit repair side of increasing your FICO score. It’s a lot of work and takes quite a large amount of time. If you don’t want to be bothered with it, we’ve provided a list of trusted credit repair professionals below that you can consult. They can manage the entire credit repair process for you, so you don’t have to get lost in this mess of paperwork and potential headaches.
Consult a Credit Repair Expert
While a guide such as this one can make the process of credit repair easier, there’s no such thing as easy or quick credit restoration. The ordeal requires patience and focus to do well. Many people decide they don’t have it in them or would rather just not spend the time. And that’s perfectly fine because there are professionals who can help you out and take the burden off of your shoulders.
We at Credit Marvel have narrowed down the list of professionals to include only the best credit repair companies. Please be aware that there are a lot of scams out there. You run the risk of encountering cheats who offer convenience while promising the world and give nothing in return. Protect yourself from further fraud by not straying from the professionals listed here on our site.
Let the pros analyze your credit report, outline a personalized roadmap to achieving your goals, go through the dispute process with the credit bureaus, and even negotiate with your creditors to help reduce your payments and get you back on track. If the thought of working through this process gives you the slightest anxiety or makes you want to procrastinate, just hand it over to a specialist and be done with it.
Credit Repair Company Reviews:
Create Good Credit Habits
Fixing problematic items on your credit report is only the first step to maintaining and increasing your credit score. First and foremost, make sure you’re paying your bills and any loans on time so that your score will not only stay as high as it is but will also increase over time. If you encounter any future problems with debt or have debt now, immediately contact your lender to explain the issue and negotiate better terms. Many lenders will be happy to help you since it helps them as well. As you continue to use credit, try not to float a balance of more than 30% of your overall credit limit. Anything above this ratio can begin to lower your score again.
Here are a few more tips for creating good credit habits.
- Spread out larger retail payments with a tool like Bread.
- Create and stick to a personal budget to minimize expenses.
- Set aside a portion of your paycheck every month for emergency savings.
- Negotiate a raise or consider taking on an extra paying project to give yourself an added financial cushion.
- If you’re paying down multiple debts, make sure you’re paying down the ones with the highest interest rates first.
- Consider negotiating more favorable rates if your credit score improves or if interest rates shift.
- Make a point to educate yourself on financial topics you might be fuzzy on like interest rates, mortgages, and retirement savings.
- If your personal finances are complex, consider asking a trusted financial advisor or wealth manager for support.
With diligence, practice, and dedication to the task, you can fix your credit score up for the long-term. Enlist the help of your spouse and friends in budgeting your finances, and ask professionals to help you audit and correct errors on your credit report. You’ll be back to the top in no time, enjoying lower interest rates and higher credit limits and loans. Good luck!