Bad credit spells tough
life, period. And that is probably why you want to know how to regain a good
credit standing. Whether you are already in bad credit, or you see yourself
heading there, or even if you have no credit history at all, the information I’m
just about to share will give you much insight on how credit repair works.
Before delving into the
core of the matter, allow me to first show you how life gets tough with bad
credit.
Negative
effects of bad credit
Bad credit has far
reaching consequences. It is just too bad that people find themselves in bad
credit. If it were avoidable, well and good, nobody would be in such a mess.
But life at times gets to a point you have to default a loan. Life pushes you
to the corner and you have to skip that mortgage payment, not just for a month,
but for 2 or even 10.
So you finally end up
with this unimaginable credit score. You ask, what are the consequences of a
bad credit score?
Let us look at the 5
most alarming ones.
1. You will find it very difficult
to start your own business
Setting up your own
business requires some form of credit, unless you are overly financially
endowed. Access to credit facilities also helps when you run into cash flow
difficulties in the course of running the business. Bad credit denies you the
much needed access to such credit facilities
2. Limited access to utilities
The firms that deal
with provision of utilities such as cable internet, electricity and phone
network normally check your credit standing when you declare an intent to sign
up for their services. Bad credit will force them to require you to pay huge
deposits.
3. High interest rates on credits
The financial society
has already lost some trust in you. If financiers and suppliers decide to give
you any credit, they will do so at higher interest rates than they offer to
others. Sounds discriminatory, but that is the truth of the matter.
4. Difficulties in securing rental houses
What Landlord would
rent his apartment to you if he knows for sure you are a defaulter? Your guess
is true – few. The real estate sector involves humongous investments and no
home owner is ready to lose even a cent.
5. No employment
Many employers will shy
away from bringing on board a marked defaulter. They argue that your bad credit
standing may negatively affect your job performance.
This said, the aim of
every individual in such a financial state should be to get out of the
predicament and return to normal life. You may employ a variety of strategies.
These include:
- Seeking the services of a credit
repair company - Do-It yourself credit repair
- Changing your spending habits
- Long Term strategy
Let me elaborate these
strategies one by one:
Seeking
services of a credit repair company
When in bad credit, you
can contact credit repair companies to help you gey out of the mess. With a
good search, you can find reputable companies that have mastered the art of
improving people’s credit scores. How is this possible?
They do this in 3 simple
steps:
- They first request for your credit report from the relevant credit
bureaus, including Equifax, Experian and TransUnion - They then identify negative items on your credit report which they
can request to be removed. Your credit standing improves when these items
are kicked out of the report - The credit repair companies finally employ a
number of strategies to see to it that the negative items on the report
are removed. If negotiations fail, they move on to file a dispute against
the creditors on the negative items in the report
Such companies have
helped many individuals get out of their debts. The advice they give is also
worth the try. Of course they require some monthly payment for you to enjoy
their services. As an individual, you may not have the know how or the
confidence to dispute certain items. Time may also be a constraint on your
side. Think of moving from office to office to get all these issues dealt
with.
So go ahead and hire
their services if you are such kind of a person. I am saying so because in the
next strategy, I will disclose how you can personally do what these credit
repair companies do.
When hiring the credit
repair companies, make sure to closely examine the list of services they claim
to offer. You will come across terms such as:
- Bureau challenges
- Creditor interventions
- TransUnion alerts
- InquiryAssist
- Report watch
- Cease & Desist Letters
- Score Analysis
- Credit rebuilding
- Score assistance
- Personal dispute managers
- Personal finance and budgeting
tools - Etc.
We will not get into the
finer details of these services. We now move to the do-it-yourself strategy:
Do-it-yourself
credit repair
The good news with bad
credit is that you can handle it all on your own. Just depends on how handy and
aggressive you are.
To do this, follow the 2
steps outlined below.
1. Obtain your credit reports
This is the first thing
you ought to do in your journey to recovery bad credit. You will need the full
credit reports from the three credit bureaus – TransUnion, Experian and
Equifax.
The AnnualCreditReport
website offers the reports for free, but just once a year.
If you so wish, you may
call the Telephone line 1-877-322-8228 to make inquiries.
There are also some
apps on Google Playstore which are able to track your credit score. Such
include the Credit Karma, CreditWise, myFICO, Experian, and Credit Sesame,
among many others.
A credit score of 800
is very good. Anything above 700 is considered good. In case you fall below the
700 mark, your chances of qualifying for loans decreases. A score of below 600
is definitely bad. The worst score you can have is 300.
2. Identify the errors in the credit report and dispute them
Take time to scrutinize
your credit reports for errors. The reports are certainly not error proof – it
humans who compile them, and human is to err.
Start with your
identity information, including your name, address and social security number.
Move on to your list of
credit cards and ensure that all items recorded therein are captured correctly.
Highlight all errors as you come across them. Remember you need to have solid
proof that the such and such entries are a mistake. This will require the
support of bank statements or other utility bills.
You can now use the
above evidence to file a dispute with the credit bureaus.
Change your
spending habits
This is a long journey
you should embark on after the negative items on your credit report are
resolved. The three sure ways of improving your credit scores are:
- Pay all your bills on time
- Pay all credit card debts
- Keep away from credit
To achieve the above
three, you need to purposefully change your spending habits. It all starts with
a budget! Yes!
Get to know your monthly
income after after tax deductions. You may wish to refer to this as the net
pay. Now make all deductions made on your income on items such rent, mortgage,
car loans, health insurance, life assurance, etc.
What do you remain with?
How much can you spare for groceries? How much are you willing and able to
dedicate to entertainment? What of gym membership, trips, investment?
Write out all this stuff
on paper and purpose to follow it to the letter. Always resist impulse buying
whenever you are out in full display of hundreds of attractive merchandise.
In addition to
disciplined spending, make sure you pay all bills on time. Every bill on your
table definitely has a deadline. Whether it means setting reminders or
physically displaying the pending bills on notices, do all you can to meet the
deadlines.
This requires some bit
of planning on your end, so that you have the funds available every time you
need to pay out some bill.
Another thing to look at
is the credit card balances. What is your outstanding debt? How much can you
pay off every month? Focus on clearing all debts, even if it is after 1 year.
In this change-of-life
moment, restrain yourself from applying for new credit. I understand how
tempting it is especially when the offer comes with discounts n purchases. Such
may be beneficial, but in times of debt, they are a trap to drive you further
into credit worthlessness.
As you work on the
above, keep checking your credit score on any of the apps I suggested above. I
guess you will notice the figure rising bit by bit. Be patient in this process
– it is never an overnight thing.
At this juncture, let us
look at the cost implications of credit repair.
How much does
credit repair cost?
If you choose to go the
credit repair company way, be ready to spend between and 0, or even
higher, every month as service fees. Most companies offer packages in which you
pay a specified monthly figure until your credit standing improves to the level
you wished.
As usual, the more
costly the package, the more the services you will be offered. Always compare
and contrast different packages and companies to get the best bargain for your
money. It is funny how you have to spend more money to get out of debts.
And this leads us to the
scam question: Are credit repair companies a scam?
No and Yes.
Of course, as in any
other industry, we have the genuine ones, and the scammers. The genuine credit
repair companies will diligently walk you through the steps of improving your
credit. I cannot deny that scammers have infiltrated this market.
Such are the companies
that will jog your mind with technical lies just so to ensure you pay the monthly
fee for the longest time possible.
Others will guarantee
you positive results, whereas we clearly know that credit repair is a trial and
error undertaking, especially on the section of removing bad items from the
credit report. Yes you venture into it but you are never sure of the outcome.
Do your homework well.
Search diligently for the best company whose rates you can afford. Read tons of
reviews on the shortlisted companies and have the general feeling of the
customer experiences with those companies.
If you choose to go the
do-it-yourself way, you have no professional fees to pay. Just remember that
you may have to travel and pitch camp from office to office as you seek to sort
things out.
Let us now wind up this
discussion with a look at some of the misconceptions of credit repair.
Misconceptions
of credit repair
1. Only open accounts are included in a person’s credit report
This rumour has found
place in many a people’s hearts. So they take to closing their credit accounts
with the hope that the bad elements in that account will be stripped from the
overall report.
In many cases, closing
such a stubborn account ends up further hurting your crdit score. What more,
the bad details will remain on your report, and it may be hard to follow up on
them because you no longer have access to the account.
If you have behaved
well with a given account for some good amount of time, closing it in the wake
of bad credit is not sensible enough. Think of how you can improve your credit
score through working on the accounts
2. Opening many lines of credit will improve your credit score
Let us get this right.
Your ability to operate multiple accounts and handle multiple bills does not
translate to a higher credit score. This may in fact turn out risky and lower
your credit score.
3. Paying off loans earlier than the deadline will improve your credit
standing
This is not entirely
true. The credit reporting system has no reward for prepayment of loans. They
just consider the payment deadline. Quite interesting!
Endeavor to have an
excellent credit standing for your own good.
Credit Repair Attorney Free Consultation
When you need legal help to repair your credit, please call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Source: https://www.ascentlawfirm.com/how-does-credit-repair-work/
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