A good credit score is important to many parts of modern life, from buying a car to renting an apartment or even landing a job. Unfortunately, it’s a lot easier to hurt your credit score than it is to build a good one.
Having a low credit score can hold you back. Luckily there are steps you can take to restore your credit. But how does credit restoration work? And can it actually help you?
How Does Credit Restoration Work?
Credit restoration is the process of going through your credit report and removing inaccurate or out-dated information. Making sure all of the information on the report is correct and current can help your score, especially if your current credit habits are good.
The point of credit restoration is to eliminate mistakes that might be pulling your score down. What credit restoration can’t do legally is to remove accurate information that negatively impacts your score.
While you’ll probably be able to tell what information in the report is true, you might not know what information is helping you and what is hurting you. The first step to understanding how credit restoration can help you is to understand how credit works.
How Credit Works
Three companies track your credit: Equifax, Experian, and TransUnion. Everyone is entitled by federal law to a free credit report from each company once every 12 months.
These companies get information from creditors, like banks or retailers or lenders, on your financial activities. They look at what loans you have taken out, whether or not you make on-time payments, how much of your credit you use, and how long you’ve had a line of credit.
Each of these activities gets factored into your credit score. That score is used to judge your credit-worthiness and can impact the interest rates you get and whether you’re approved for loans. Negative items such as late payments or defaulted loans will eventually fall off your reports, but it can take up to a decade.
Your credit score can also differ between the three agencies because not every creditor will report to all three agencies. False information can also appear on your score due to misspellings, identify theft cases, or clerical mistakes.
What Is Credit Restoration?
If your credit score is a summary of your financial history, what is credit restoration?
Credit restoration is the process of removing any of the false information or mistakes on your reports. The goal is to get rid of the negative items and leave the positive ones, restoring your credit to a higher score.
It isn’t legal to remove negative items on your score if they are accurate and timely, so beware of any credit restoration company that claims it will do this for you. Reputable credit restoration is cleaning up your credit score, not fabricating it or lying.
To start the restoration process, you should order your credit reports and go through them to verify the information. When you find things that aren’t accurate, you can open a dispute.
Each of the three credit report agencies allows you to dispute items on your credit report. They are required by law to investigate these disputes unless they deem the dispute “frivolous.”
If they aren’t going to investigate your dispute, they have to notify you in writing within five business days. In cases where they investigate, they must finish the investigation within 30 days and notify you of the outcome within five days after the investigation closes.
How to Manage Your Own Credit Repair
It is possible to undertake credit repair on your own. All three agencies have a process on their website for disputes that is accessible to anyone. However, you should be ready to spend a lot of time on these disputes.
For each item you dispute, you have to send a separate notice to each of the three credit reporting agencies. With that notice, you need to include photocopies of any documentation you have that supports your claim.
If there are multiple mistakes and errors on your report, and each mistake is found on all three credit reports, you could spend a significant amount of time filing disputes.
While it is free to file disputes, you have to decide if it is worth your time to do it and if you’re willing to try to navigate the system on your own.
The Benefits of a Credit Consultant
You don’t have to file your disputes yourself. There are companies that specialize in credit restoration that can help you through the process. These companies use credit consultants to file disputes on your behalf and make sure the credit agencies follow through on investigations.
Reputable credit restoration companies will follow the guidelines laid out by the Federal Trade Commission’s Credit Repair Organizations Act. This law protects consumers from companies that try to scam them.
Credit repair organizations charge fees either monthly or on a per-deletion basis. The Credit Repair Organization Act states that organizations cannot collect these fees until they deliver on the services they promise. Avoid companies that charge you before they do the work.
The reputable companies will follow the rules and take on the burden of handling your disputes. But a good credit repair organization won’t just handle disputes for you. They’ll also work with you to fix the issues that lowered your score in the first place.
Since filing your own disputes is free, you might be wondering, is credit restoration worth it?
What makes a credit repair company valuable is the credit counseling they provide. As they help you clean up errors in your credit report, they can also offer advice and guidance on other ways to improve your score. They are experts in how credit scores work and can offer you insight into how to make the most of your circumstances.
Find a Credit Hero
So how does credit restoration work? It clears up mistakes and opens up the way for better credit habits. You can do it on your own, but using a credit repair service will make it easier and help you build your credit faster.
Start your journey to a better credit score today! We will look at your credit with you, and help guide you towards a better credit future.