The SMART Way to Credit Repair – Definition, Steps, and How it Works

“Being an authorized user generates more of a risk than a reward. You are putting your credit in the hands of others. The previous statement implies their mistakes, now becomes yours!”

Cornelius J., (The Credit Repair Book: The Credit Repair Company’s Secret Weapon)

Your credit score is one of the most important numbers you need to keep track of in your life. This score determines the ability to get loans, interest rates, and in some cases, getting a job. If you don’t have a good score, here are some SMART ways to repair your credit!

What is credit repair all about?

It is a financial process where a financial advisor or professional tends to fix your poor credit standings, which may have deteriorated for different reasons. This often includes dealing with any fundamental financial problems.

The type of credit repair depends on the case and complexity type. Credit repair isn’t merely resolving errors on your credit report, but helping you take steps to increase your credit score.

Beware of companies that guarantee anything or demand money upfront. There are many companies that exist to scam others, so be careful in choosing who you want to help you repair your credit.

How does it work?

It starts with obtaining and understanding your credit score report. They will begin the process by checking for inaccuracies that may ruin the overall credit score. Note that the details mentioned in a credit report may vary depending on the bureau to bureau.

In case you find a loophole or error in your credit report, make sure to follow the guidelines mentioned by the Federal Trade Commission. The FTC outlines a thorough process to deal with such cases, making it easier for an individual to understand credit repair insights.

As per the FTC, one must begin with writing to the credit bureaus explaining the situation. This is important to seek basic information on proceeding. While submitting a credit repair request to the credit bureau, make sure to attach valid documents supporting your case.

The next step is to work on eliminating debt or large balances that impact your score. They may recommend that you open more accounts for example to increase your credit availability. While this may hurt your score in the short term, in the long run it can help increase your score even more.

The consumers’ credit scores are based on a number of factors: – timely bill payments, delay in payments, bank balance management, debt borrowed and paid in what time duration, type of debt, and credit history. Late payments have the biggest impact on your score.

When you fail to maintain a good credit score for your primary bank account, you may end up seeing the demand for higher insurance payments, making it difficult for you to manage your expenses. Moreover, it can act as a hurdle to get a new job or to rent an apartment.

How to fix the credit score by yourself?

Here are a few vital steps to help you improve your credit score.

  • Evaluate the credit report – Know what your lenders can see and what is your overall picture of the credit report in the marketplace. For this, you need to learn to read the credit reports. Consider working with a financial advisor to know about the risk factors leaving a negative impression on your credit report. Besides this, the best alternative is to file a dispute case with a credit reporting company or agency.
  • Work on the payment history – To remain in a good position in the scoring models, make sure to make your payments on time.
  • Start paying off the account balances as soon as possible. Keep your credit card usage 30% or lower from the max limit.
  • Increase the overall credit score by getting a new credit card account opened or requesting to expand the credit card limit. This doesn’t give you free rein to spend more. The goal here is to simply increase your spending limit, but not use it. This way if you have cards close to the limit, an increase will decrease your usage percentage.
  • Don’t close your oldest credit accounts. Your account history is important, so keep them open. Consider making a purchase and then paying it off so the credit company does not close it due to inactivity.
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