Credit Repair - Facts and
Fallacies
Much of the information available about credit repair is confusing and/or conflicting. The credit bureaus themselves would like consumers to believe that there is nothing they can do to improve their credit ratings. There are many unscrupulous credit repair companies which guarantee miraculous, instant jumps in credit scores. Some Better Business Bureaus won't even consider membership for a new credit repair company due to the poor reputation of the industry.
To help clear up some of the confusion, here are five facts and
fallacies about credit repair and credit restoration:
Since the purpose of the law was to give consumers the right to
challenge information in their credit reports, Congress left
room for reporting agencies to remove even accurate information
under certain circumstances. TRUE. There is no one number or report that defines your credit history. There are three nationwide consumer reporting companies, Experian, Equifax and TransUnion. Each of these companies has its own sources of credit information as well as its own method for calculating a consumer's credit score. The Fair Isaac Company developed a scoring system some years ago that attempts to reduce peoples' credit profile and risk to a single number. The number became known as the "FICO score". FICO scores range from 300 to 850. The higher the score, the better credit a consumer has. Anyone with a score of 720 or lower might benefit from credit repair services. The way that FICO scores are calculated is a carefully-guarded secret. However, it is generally accepted that FICO scores are based on several factors, which are given varying degrees of importance. These factors include delinquencies, the number of new accounts, length of the credit history, the amount of unused credit available, and inquiries requesting the credit report.
Since each credit bureau uses its own formula to arrive at a
credit score, you will generally have three different scores
from the three different bureaus. While some banks rely on only
one score, others look at all three and average them together,
while others simply take the middle score (or the lower if
there are only two scores showing in your records). By
the way, there are many other arbitrary rules we'd be happy to
share with you if you are interested... FALSE. There are no instant fixes when it comes to credit repair. Even if you were to pay off all of your current debts, it would take at least a month for that action to be reflected on your credit reports. So how long before a consumer can expect to see an improvement in his or her credit rating? Of course, it depends on the situation, and the consumer has to keep his credit in good standing going forward. Getting a new late payment reported will send credit repair efforts back to square one. A consumer's goal is to convince the credit bureaus that the bad history is old information, and the new information accurately represents his current financial picture. Since credit bureaus tend to weigh most heavily the events of the last 12 or 18 months, depending on a consumer's specific history, it is reasonable to expect that it may take 3 to 12 months to significantly impact a consumer score.
There is also an unpredictable aspect to credit repair. Of
course, the skill of the person repairing the credit is one
variable. But part of credit restoration depends on what each
of the individual creditors and credit bureaus do, and what the
individuals and supervisors within the companies do. For this
reason, the same type of request regarding the same kind of
derogatory credit information can have very different results
from one creditor to the next. FALSE. Running a credit check has become a common practice among many businesses that deal with the public, not just lenders. More and more, insurance companies are pulling their applicants' credit reports before making a decision to issue or not issue coverage. The insurance industry justifies the practice by pointing to its finding that the likelihood a customer will file a fraudulent claim rises if that customer has had a bad credit history. Of course, even if a consumer convinces an insurance company to issue a policy in spite of his or her bad credit rating, that customer is very likely to pay a higher premium than someone with a good credit. Employers frequently check on their prospective employees' histories. It's very disturbing to think that a couple of derogatory reports on your credit report could keep you from landing a job, but it's true. It's not much comfort that any employer who rejects a job candidate because of his or her credit history has to notify that candidate in writing and provide him or her with a copy of their credit report. There is now a law that requires insurance companies and employers to get written consent of the consumer before running his or her credit history. But this isn't much protection. A potential employer can claim that a job candidate hasn't completed his application until signing the consent to have his or her credit report checked. A bad credit report can negatively affect many aspects of your financial life. With something this important, it makes sense to get help. Our Credit Secrets Bible will teach you everything you need to know to develop a much-improved credit score.
CreditRepairForBadCredit.com is a project of Wealth Instead, LLC. The company was founded as a vehicle to market an Internet-based debt reduction system, although over time we have started to see it in broader terms around the idea of credit, debt, and wealth in general.
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