Credit restoration, also known as credit repair, is the process of disputing inaccurate information on your credit report. This is done to improve your credit score and help you obtain financing in the future.
The best way to fix your credit is to work with a legitimate professional company that offers credit restoration services. However, you can also make positive changes on your own!
Inquiries
When lenders check your credit report, they do so in order to see what kind of risk you pose when it comes to taking on new debt. If you have a lot of hard inquiries on your report, it can reflect poorly on your creditworthiness. However, if some of these inquiries are unauthorized and shouldn’t be on your report, you can dispute them with the credit bureaus and have them removed.
To do so, review your credit report and locate the section that says “Hard Inquiries.” While you should scan over the entire report to ensure it’s accurate, pay special attention to this section. You should notice that the company listed doesn’t match up exactly with whom you did business with (as often happens when retailers partner with banks to manage their credit card programs). Dispute any questionable inquiries with Equifax, Experian, and TransUnion by mail, phone, or online. They will investigate and either correct the inquiry or remove it from your report.
Collection Accounts
If you’re working to improve your credit, it’s important to understand how collection accounts and charge-offs can impact your score. These derogatory marks can linger on your credit report for years, which can be hard to overcome in the long run.
When a debt goes to collections, it’s usually because the original lender has tried to collect on it unsuccessfully. At that point, they will typically sell it to a debt collector for pennies on the dollar in hopes of recouping some of their losses. The resulting mark on your credit can be devastating.
However, the impact of a collection account usually lessens over time. You can also try to get the debt collector to remove it from your credit report by sending a goodwill letter that explains the extenuating circumstances that led to the default. While this approach isn’t guaranteed to work, it’s worth a shot. If it does succeed, the debt will be removed from your report, which can help you regain your credit scores.
Errors on Your Credit Report
The information gathered by credit reporting agencies and sold to lenders is often inaccurate. Inaccuracies can hurt your credit score, harm your ability to get a job or mortgage or even cause you to pay more than you should for insurance, utilities, or a credit card.
A common error is a mix-up of your file with someone else’s, possibly caused by a similar Social Security number or name, or because of data entry errors. Another issue is an account that you closed but which the agency incorrectly shows as still open (called a lingering debt).
Check your credit reports and look for errors. You’ll find instructions for disputing erroneous information on your report and sample letters on the Consumer Financial Protection Bureau website. Be sure to provide detailed information about the disputed item and copies of any documents you have. The bureau should investigate the dispute and send you a corrected report. Be sure to ask that it communicate the correction to anyone who has viewed your report in the past six months.
Payment History
Payment history is one of the most important factors in determining your credit scores. It makes up 35% of your score and documents your ability to pay back debt on time. It takes into account all of your payments over 7 years with more recent late payments impacting your credit score more than older ones.
Almost anyone can improve their credit score with consistent on-time payments over two years. It can take a long time to recover from missed payments but it is possible with determination. The National Foundation for Credit Counseling (NFCC) offers free financial counseling and credit report reviews for consumers. They can also help consumers with debt management plans and homeownership counseling.
It’s best to monitor your credit report regularly so you can spot errors early on. You are entitled to one free report annually from each of the three credit bureaus. If you find incorrect information, try to get it removed quickly so your credit score does not further decline.
