With personal debt at an all-time high, many people have found that they have overreached and plunged into debt. As their debt grows, they can’t help but fall further and further behind, and their credit score pays the price. If you’re one of the many who have had credit problems in the past (or still have credit problems), you may be considering credit repair as a way to get back on track.
Before signing up for a credit repair plan, you should make sure you understand exactly what is involved in repairing your credit score… while there are many repair agencies that are legitimate, there are also some that seek to take advantage of those who need help and perform services that are both immoral and illegal.
What is it?
Obviously, the goal of credit repair is to improve your credit score and get you back on track financially after previous credit problems. There are a variety of services that provide everything from credit counseling and debt negotiation to debt consolidation loans and budgeting advice. When used correctly, they can not only help you catch up on your bills and get you on your way to a better credit score, but they can also help you avoid bankruptcy and prepare you for future credit problems.
However, credit repair takes time and should never be seen as a “quick fix” for your credit. If an offer claims that they can give you new credit instantly, then it is likely not only false but could also get you into legal trouble if you accept it.
common types
As mentioned above, credit repair can take a number of different forms. Credit counseling services help with budgeting and paying off debt, and offer advice on simple ways to improve your credit without additional borrowing. They often also provide debt negotiation, which is working out an agreement with your creditors so that you only have to pay off a portion of your original debt within a set period of time.
Debt consolidation loans are also used for credit repair purposes, allowing you to get a loan to pay off outstanding debts, leaving you with just one monthly loan payment instead of several different payments. Budget assistance services are also available to help you control your personal finances and spending.
Avoid scams
Unfortunately, there will always be unpleasant people looking to make money off of those who need help.
Any credit repair service that promises instant results or offers to simply create a new credit report for you should be avoided… what they are really creating is a business tax identification number, and anyone who uses one is at risk of being charged with fraud and possibly other charges. If an offer seems too good to be true, it probably is.
Repair your own credit
Of course, by paying off old debt 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, then focus on paying off the debts that show up as negative reports.
It can take years for all negative reports to expire, but by avoiding new reports while increasing your positive reports, your credit score will slowly rise on its own.