Getting by with bad credit is tough. It can make life more difficult and more expensive. Auto insurance companies will consider you a risk, so you’ll be required to pay more for high-risk auto insurance. If you need to set up new utilities, you’ll have to pay a security deposit. And even applying for a loan or credit card will be out of your reach.
Repairing bad credit is critical if you want to save money. However, this isn’t the only reason to repair your credit.
Why You Should Start Repairing Your Credit Today
A higher credit rating can open many doors, including new and higher paying employment opportunities. If you plan on someday starting your own business, it’s important to focus on repairing your credit as soon as possible. Depending on your amount of debt, this is a process that can take several months, or in serious cases, years.
The credit repair process can be time-consuming and challenging, but you don’t have to hire a pro to start fixing your credit today. In fact, you can do the exact same things a credit repair service can, the big difference is time. You must be devoted to fixing your credit, which means staying on top of credit disputes and working with creditors and bill collectors to resolve your accounts.
The Real Cost of Credit Repair
Repairing your bad credit isn’t as hard or as expensive as you might think. Many third-party credit repair companies have gotten a bad rap over the years because there are credit repair companies out there that will take advantage of people who are desperate to repair their credit quickly.
But the good news is that these days you can take advantage of free credit repair methods that are simple to follow and easy to do. Our guide will explain what you need to do to get started repairing your credit today.
Repairing credit involves the lengthy process of disputing errors and mistakes that can appear on your credit reports. If you think an account that appears on your report is a mistake or it’s inaccurate, you can speak with the credit bureau to verify information. The credit bureau will have one month to respond. If they’re unable to verify the information they’re required to remove it from your report.
The Fair Credit Reporting Act protects this process, and typically, this step in the credit repairing process is a necessary one that will help to ensure you have the best credit possible. Even a late payment can have a negative impact on credit scores, which makes it even more difficult to get credit approvals or loans at a decent interest rate. So, if you’re sure you paid your bill on time, but it’s showing up on your report as a late payment, you have to dispute it.
The Basics of Credit Repair
Your first step toward repairing your credit is getting a copy of your credit report from the three major credit bureaus: TransUnion, Experian, and Equifax. Each of the credit bureaus has their own copy of your credit report, so you’ll get a total of three credit reports.
In order to get copies of your reports, you’ll need to answer security questions to verify your identity. The entire process will only take about ten minutes.
Credit Repair Plan: Reviewing Your Credit Report
Reviewing your reports is the next step. First, you must check out each account on the report and make sure the information is accurate. At this point, you’ll focus on any errors that show up as negative accounts on your report. But there are other discrepancies that can show up as well.
Here is what to look for:
- Mistakes regarding personal information such as name variations and aliases that you don’t use. You should also verify any previous addresses and your SSN.
- Errors regarding payment history that indicate you made late payments.
- Outdated account statuses, and inaccurate balances that show you have more delinquent debt or more debt than what’s current.
- Major negative items that have expired including liens or judgments, foreclosures, or bankruptcies that should have been removed.
- Unauthorized credit inquiries. On your report, you’ll find a couple of inquiries listed. A hard inquiry must be authorized by you and it’s the type that can negatively impact your credit score.
- Multiple accounts in which your credit report lists major accounts such as foreclosures or mortgages more than once. Considering multiple listings for the same account can make it look like you have more debt than you really do, this looks really bad for your debt to income ratio.
As you’re reviewing your credit report for these issues make sure you write down the list of errors, so you can address each of these issues. Keep in mind that some negatives that you find on your credit report might be legitimate. If they’re found legitimate, then there’s nothing you can do to have them removed or changed. Fortunately, penalties will expire eventually.
After you’ve reviewed your credit reports, your next step is to use your handy list and dispute any errors you’ve found. This portion of the credit repairing process is definitely the most important, but it’s also the most time-consuming. In order to get these issues removed from your credit report, you must know how to correctly dispute them. If not done correctly the dispute can be rejected, so the negative item will remain on your credit report.
Each dispute must be written and submitted to the credit bureau. However, you can also contact the original creditor before you try making a formal dispute, in the event you want to resolve a dispute quickly.
If you decide to submit the dispute in writing to the credit bureau, once received the bureau will have one month to respond. The credit bureau will directly contact the original issuer or creditor and ask them to verify your account. If the account cannot be verified, then it has to be removed from your credit report. If this occurs, then the bureau will provide you with another copy of your credit report that will verify that the disputed account has been removed from your report.
At this time, you can also request that the bureau send an updated version of your report to anyone who has made an authorized hard inquiry regarding your credit rating.
If the dispute is resolved in the creditor’s favor, then you can add a consumer statement to your file, which explains the issue.
What to Do If You Have a Number of Mistakes on Your Credit Report
If you’ve found several mistakes on your credit report, then you may want to focus on a few disputes at a time, with a max of four per letter to the credit bureau. As we mentioned, this is a lengthy process and you may have to go through several rounds before your credit is repaired. Once you get into the habit of regularly checking your credit at least every six-months, you can complete this process with just a single round of inquiries.
Additionally, you must make credit disputes with each individual credit bureau. The bureaus don’t share corrections because an error may or may not occur in all three of the credit bureau reports. If the same mistake appears on all three credit bureau reports, then you will have to go through the process of disputing the same mistake with all three bureaus.
It’s important to keep track of all the disputes you make and their status. Save all of the correspondence you receive from each bureau, in the event you run into any issues in the future.
Taking Care of Any Past Due Accounts
More than any other factor, your payment history will impact your credit score. Payment history makes up thirty-five percent of your credit rating and since it makes up such a larger portion of your score, having a number of past due accounts on your report will severely lower your score. Taking care of these accounts can instantly boost your credit rating.
What is a Charge-Off?
Make sure you get current and stay current on all your accounts. Past due accounts are not yet charged off. Charge-offs occur once your payment is more than six months late and it’s one of the worst account statuses to have.
Accounts that are less than six months past due are considered delinquent. Paying off a delinquent account will prevent a charge-off.
Keep in mind, the more you fall behind the harder it will be to catch up because the late payment penalties can quickly cause your overdue amount to skyrocket.
Some creditors will be willing to waive any late fees if you show that you’re committed to making payments in order to get your account current.
Even if an account is charged off, you’re still responsible for paying it. As charge-offs age, they actually end up hurting your score less, but these outstanding balances can still make it very difficult for you to get approved for a new loan or credit card.
If a charge-off is paid in full, the credit report should be updated to reflect the new balance. Unfortunately, the charge-off status will still show up on your credit report for two to seven years, but the balance will be at zero.
How Loan Balances Affect Your Credit Score
Loan balances can also negatively affect your credit score. Credit score calculation will compare the original loan amount to your current loan balance. The closer you are to paying the loan off, the more it can negatively affect your credit.
When you’re deep in debt, you have a limited amount of money that you can use towards fixing your bad credit. Prioritizing on past due accounts is the best place to start since you want to avoid any charge-offs that can further damage your credit. You can work on bringing down your credit card balance once you’ve paid down any past due accounts.
Getting New Credit
Opening a new account can help you to reestablish credit. But any past due accounts can prevent you from getting approved, so you may want to avoid applying for a new line of credit until your score improves.
Another option is applying for a retail store credit card, in the event you get denied for a major credit card. Retail store creditors often approve applicants with a limited or bad credit history.
Know When You Need Help Repairing Your Credit
If you’re feeling overwhelmed during the process, or you aren’t sure you’re doing it correctly, you can hire an attorney or a credit repair service to make inquiries and disputes for you. However, be leery of credit repair scams. The credit repair industry is fraught with scams, which can make it difficult to determine if a credit repair service is legitimate.
A service that claims they can help you to repair your bad credit must have a licensed attorney on their staff. Additionally, said lawyer must be licensed in your specific state. Next, you must authorize the attorney to make disputes on your behalf.
A legitimate credit repair service should meet the following requirements:
- They must provide you with the total cost you must pay, which means no hidden fees or charges down the line.
- They must also give you the right to cancel their service within three days of signing up.
Signs of a Credit Repair Scam
Before you sign up, always do your research and vet a company before you make a commitment. These following tips can help to prevent you from getting scammed:
- Always be cautious of a company that guarantees they can improve your credit score by a set date. This simply isn’t something that’s in their power.
- Verify that a company has a state-licensed attorney on staff.
- Pay close attention to the type of advice they give you. If it sounds illegal, then end the relationship immediately. An example of illegal credit repair advice includes using an employer ID number to start a new profile or using a fake SSN.
- Avoid signing up with a company that doesn’t offer a money-back guarantee if they require upfront fees.
Credit Repair Plan
In most cases disputing items on your credit can do wonders to improve your credit rating. However, the goal here is to ensure that your credit report is accurate. Once you’ve determined that the items on your credit report are in fact accurate, then you’ll need to get started on paying down your debt. If you have a significant amount of debt, you’ll need to do some serious planning in terms of how much money you can set aside each month to pay down your debt.
If you’re already on a tight budget, then this process can take a long time, especially if you’re only able to make minimum payments to multiple creditors each month.
Negotiating with Debt Collectors and Creditors
If creditors and debt collectors are constantly calling you about your balance, it can make it difficult to work up the motivation to call them and negotiate a lower payment plan or balance. But it is possible.
And in many cases, you’ll find that a creditor is willing to negotiate. Many collectors purchase debt for pennies on the dollar and because of this, they have to recoup the full amount owed in order to make a profit. For many, a settlement can be the best way to clear the debt instead of writing it off as a loss.
When it comes to negotiating with creditors, one of the best practices includes explaining your current financial situation.
During this time, it’s also important to confirm any settlement you reach in writing.
Here are some important tips you can use during a debt negotiation with a creditor:
Explaining a Hardship Situation
A debtor doesn’t want to hear every detail as to why you’re not able to pay off your debt, however, they do need to know if you’re going through a hardship situation in which you’re making attempts to get your finances back on track. It can be helpful to write out a few sentences that explain your situation and use that consistently when you’re speaking with each creditor. Hardship explanations can include loss of employment, an illness, or a death in the family.
Remain Calm When Negotiating
Debt collectors can be very hard to deal with. They’re not exactly known for their friendly, helpful demeanor. So, when you’re trying to negotiate with them, it’s important to focus on remaining calm. If you feel like you’re about to lose your cool, let them know you’ll have to call them back. If they’re particularly difficult to work with, record the conversation, just let them know you’re recording before the negotiations begin.
Ask A Lot of Questions
If the debt collector tells you that you will be sued if you don’t pay your debt off in full immediately, ask for specific details, such as when you can expect to be served with the suit, or when can you expect to have your wages garnished. Because these types of threats can be illegal, it’s better to have as much information as possible.
Make sure you have a pen and paper ready, so you can take plenty of notes whenever you speak with a collector. Take down the date and time you spoke, their name, and what you discussed. This will help to remove some of the emotion from the conversation and it will also be beneficial in the event that the debt collector breaks the law.
Save Your Mail
It can be tempting to throw out any bills from creditors, but it’s actually really important that you read and keep all of them. Read each letter and save each one in a file.
Come Up with A Budget
Make a list of all of your monthly expenses and figure out what you can and can’t afford. Only agree to a realistic monthly payment. Usually, you can negotiate a good settlement on a debt if you’re able to come up with a lump sum, which will help the debt collector to resolve the debt quickly. If you both agree on a payment plan, over time, you’ll end up paying more. When it comes to payment plans set over a determined number of months, add up all of the payments before you agree to it. Often, a lump sum is the best option, but if you can’t afford to part with the money at that time then payments may be the only option.
Avoid Having Your Account Sent to Collections
If at all possible, try to work out some type of payment plan with a creditor before it gets sent to collections. Even though it’s true that making a late payment can negatively impact your credit, getting an account sent to collections can do much more damage to your credit. Unlike debt collectors, a creditor will be more likely to work out a reasonable payment plan.
Get Everything in Writing
If you do agree to a payment arrangement with a creditor or debt collector, make sure you get the agreement in writing before you begin paying. Without written proof, there’s no reason they have to stick to the payment plan.
Filing for Bankruptcy
If you’re having too much trouble coming up with a payment plan that will work for you, then it may be time to hire a credit counseling company. If you’re deep in debt and paying off multiple creditors and debt collectors seems almost impossible, then bankruptcy may be your only option.
Getting Resolved Debt Off Your Credit Report
Keep in mind, paying off a collection account or catching up on a delinquent account won’t help improve your credit, unless the creditor or debt collector has agreed to remove it from your record.
- A late payment can remain on your credit report for a period of two to seven years.
- A charge-off will stay on your report for up to seven years.
- An account in collections can stay on your credit report for seven years plus an additional six months.
While it isn’t possible to have all negative items removed from a credit report, all hope is not lost. Even during this trying period, you can still begin building good credit once your debt has been resolved. Additionally, assuming that there are no new negative issues in the future, your score will begin to slowly creep up the further you move away from the original dates of delinquency.
But in the meantime, make sure you check your credit score often and closely monitor it for any changes.
Top Credit Repair Software Programs
Potentially, credit repair software can help you on your journey to repair your bad credit.
You can purchase this type of software program from a reputable company, however, you can also find free programs available online.
Now, let’s take a look at the pros and cons of using this type of software program to repair your credit, so you can decide if this option will work best for you, or if you’re better off working on repairing your credit using the methods we discussed earlier.
Software programs used to help manage financial accounts can actually help to lighten your workload by automating certain tasks. It can also help you handle more accounts or projects in a shorter amount of time.
An Electronic Credit Repair Assistant
Unlike other types of online software programs that require you to pay a renewal fee every year, credit repair software often only charges you a single payment.
Each year, most of these programs offer free automatic updates, so you’ll have access to new and improved versions.
Owning your own credit repair software, complete with unlimited upgrades and updates will help to keep you current with the latest technology. It can also help you work on your financial management skills.
As you already know, managing your finances can be difficult, even during the best of times. But this software can help make each task much easier.
Monitoring your credit will feel less demanding because you’ll be able to basically jump from one account to the next by navigating the user interface.
Any automatic prompts can also help you to remain current with any movement in your accounts or updates, so you can handle any issues promptly.
Basically, these programs work as a type of electronic assistant.
Streamlining the Credit Repair Process
These programs will focus on making the credit repair process easier for you by reducing repetitive tasks, increasing your overall productivity in the process.
What’s the Downside to Credit Repair Software?
There are several software programs available designed to help you manage your financial situation. Some programs require a one-time subscription while others can charge you on a monthly basis. In the long run, monthly subscription software programs can be pretty expensive.
Another issue involves customizing your software, which can be difficult to do if you’re not very computer savvy.
Considering there are so many programs to choose from, finding just one program that can meet all your needs can prove difficult.
You won’t be able to completely rely on the software to handle specific tasks. Ultimately, it’s still up to you to figure out how to use the software to your advantage when focusing on meeting different goals in the lengthy process of repairing your credit.
What Credit Repair Software Can Do
Credit repair software can help in a few ways. These programs will help you to create dispute documents to have errors removed from your report, and they can also help you to closely monitor your report, keep track of unresolved disputes and help you to improve your credit rating.
These programs will guide you through the credit repairing process and ensure that you take the appropriate actions.
Some programs offer a wide range of helpful tools including:
- Score simulations
- Account tracking
- Letter generator for disputes
- Assistance with loan qualification
- Creditor negotiations
The amount of help these programs provide can be tailored to your individual situation. The automation of the credit repairing process can really help to cut down on the amount of time it takes to improve your credit score.
With the best credit repairing program, you won’t have to spend hundreds of dollars to pay a third-party or lawyer to do what you can do in the comfort of your own home.
Top Software Programs for Credit Repair
These days, there are a number of great credit repairing software programs to choose from for personal financial management. There are also some programs available that the pros use, but these programs can be difficult to navigate if you don’t have much experience in this field.
Here is a list of our top picks:
- Credit Aid
- Personal Credit Repair
- Credit Coach
- Credit CRM
- Dispute Suite Platinum
Best Credit Repair Companies
As you have seen, you can repair your credit for free or for a low fee if you do it alone or if you use a software program, but there’s a lot of work involved. You must be highly motivated, organized, and determined to work with creditors and debt collectors. But if you’re struggling to work out a deal with debt collectors and creditors, or you’re not making much progress using even the best credit repair software, then a reputable credit repair service may be the best option.
If you’ve decided to forego handling your financial situation alone and would instead prefer to hire a credit repair service, then our list of the leading companies in the industry will be invaluable to you, because let’s face, scammers are out there.
Remember, repairing your credit takes time, usually six months, so keep this in mind when you’re searching for a legit company. Steer clear of any company that promises to clean up your credit in just a matter of weeks. You should also avoid companies that require you to pay hundreds of dollars upfront.
However, these services can’t guarantee that they can remove all of the disputed items off your credit report, or even that they can significantly improve your credit rating.
Why? Because if a disputed account on your credit report turns out to be valid, there’s nothing they can do to have it removed. You must pay back that debt in order to get it off your credit report, and even then, it’ll stay on your credit report for about seven years.
There are some reputable services out there that will offer clients a reimbursement for monthly costs or setup fees if the client doesn’t see any positive results in their credit rating. But this is pretty rare.
Our list of the leading companies hit all the right marks in terms of customer support, pricing, results, and more.
Lexington Law is our top choice although for some, the cost of service may be too pricey. When we reviewed the services they offered and their company as a whole, we found that they offer clients a wide range of educational resources, which is a great way to help customers ensure that they never fall into this type of financial debt again. These resources will also help clients to understand more about their credit scores and what can affect their credit rating. The tools available come in the form of newsletters, eBooks, videos, financial articles, and short educational courses. Clients will learn different ways to improve and manage their score. This company also connects the client to a pro paralegal who provides ongoing support and weekly updates regarding progress. Clients can also call their paralegal at any time to discuss progress or to have their questions answered.
What’s even better, clients will also have access to an online portal that they can check to view the status of any disputes. Users can also view how their credit rating is affected when an item is removed from their report.
This is one of the few credit report companies that also have their own mobile app, so anywhere you go you can check on your account progress. A little on the pricey side, you can expect to pay around six hundred dollars for six months of service, but this particular credit repair company offers a lot of value for the price.
- Access to paralegal
- Weekly updates
- Mobile app for both iPhone and Android Smartphones
- A variety of educational tools to choose from
- One hundred dollars due upon sign up
This credit repair service is a more affordable choice compared to Lexington Law, with a monthly cost of sixty dollars. Unlike Lexington Law, they also don’t charge a sign-up fee, just pay the first month’s service fee. This company offers some great resources and tools designed to help their clients learn more about how to correctly manage their credit and what goes into a credit score. Educational tools include a blog that’s updated regularly, short educational courses, and articles. Clients will also get regular updates regarding disputes and a personalized analysis of items on their credit report.
We also found that this company has a high customer satisfaction rating, not to mention excellent customer service, which is exactly what you need from a company that’s working to dig you out of debt.
- Low monthly fees
- Educational resources
- Email progress updates
- No dedicated paralegal
- The company requires clients to sign up with a third-party credit monitoring service
In terms of tracking progress, this credit repair company excels. They provide clients with constant updates regarding credit disputes. They also offer one of the leading platforms around for progress tracking. Clients can also choose to sign up for email or text alerts.
This company is another one that offers a mobile app. The app will allow clients to check on their dispute progress, and it will also keep track of the number of disputes removed, how each removed dispute affects the credit score, and how many challenges are ongoing.
The educational resources available will help clients to better understand the many factors that contribute to their credit score and what can be done to influence the score. However, this company charges quite a bit at around one hundred dollars a month.
- Text and email updates
- Free mobile app
- Clients can view their credit report in real time.
- Fee of one hundred dollars in addition to first service payment.