How Credit Repair Works
by: John Mussi
With personal debt at an all-time high, a number of individuals have
found that they have overextended themselves and have become immersed in
debt. As their debt grows, they can't help but get more and more behind…
and their credit score pays the price. If you are one of the many who have
had problems with your credit in the past (or still have problems with
it), you may be considering credit repair as a way to get back on track.
Before you sign up for a credit repair plan, you should make sure that
you understand exactly what is involved in repairing your credit score…
while there are a lot of credit repair agencies that are legitimate, there
are also some that seek to prey on those who need help and perform
services that are both immoral and illegal.
What Credit Repair Is
Obviously, the goal of credit repair is to improve your credit score
and get you back on track financially after past credit problems. A
variety of credit repair services exist, providing everything from credit
counselling and debt negotiation to debt consolidation loans and budgeting
advice.
When used properly, credit repair services can not only help you to get
caught up with your bills and on the path to a better credit score but
they can help you to avoid bankruptcy and set you up to avoid credit
problems in the future.
Credit repair takes time, however, and should never be viewed as a
“quick fix” for your credit.
If an offer claims that they can instantly grant you new credit, then
it's likely not only bogus but can also get you into legal trouble if you
accept it.
Common Types of Credit Repair
As mentioned above, credit repair can take several different forms.
Credit counselling services provide assistance with the budgeting and
repayment of your debts, and offer advice on simple ways to improve your
credit without additional loans. They also often provide debt negotiation,
which is the working out of a settlement with your creditors so that you
only have to repay a portion of your original debt within a certain
timeframe.
Debt consolidation loans are also used for the purposes of credit
repair, allowing you to take out a loan in order to pay off outstanding
debts and leaving you with a single monthly loan payment instead of
several different payments.
Budgeting assistance services are also available to help you get
control of your spending and personal finances.
Avoiding Credit Repair Scams
Unfortunately, there will always be unsavory individuals who seek to
make money off of those who are in need of assistance.
Any credit repair service that promises instant results or that offers
to simply create a new credit report for you should be avoided… what
they're really creating is a business tax identification number, and any
individual who uses one is in danger of being charged with fraud and
possibly other charges.
Credit repair takes time; if an offer sounds too good to be true, then
it likely is.
Repairing Your Own Credit
Of course, by paying off old debts and establishing and maintaining new
lines of credit you can begin the process of credit repair yourself.
Request a copy of your credit report and check it for errors, and then
focus on clearing the debts that appear as negative reports.
It may take years for all of the negative reports to expire, but by
preventing new ones while increasing your positive reports your credit
score will slowly rise on its own.
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