Credit repair is a process that entails improving the credit report od an individual or organization by eliminating wrong credit details, therefore, lowering the accumulated debt at a fast rate over a given time. Having a poor credit score can be a great hindrance to obtaining certain products and services. For instance, with a low credit score, banks will not approve loans, and rental owners will not allow you to rent their property.
Clients who have an adverse credit history require expert assistance from a professional who will help repair their credit. There are usually several factors to be considered when fixing your credit score. Planning is an important aspect when negotiating with a creditor for a particular transaction or business engagement.
Causes of low credit score
Late payments that are 30 days past the due date
If you delay in paying your loans and credit card deductions, then your credit score drops. Late payments of bills and other payments play a significant roll in maintaining your creditworthiness. Being unable to clear debts on the agreed time means that you cannot be trusted to take up a loan or rent an apartment.
Large purchases on products and services
The utilization ratio on your credit card could be a determining factor on your score. If you continuously acquire expensive items on your credit card, then you affect your credit performance. This could happen even if you manage to clear your debt on the agreed time. The credit card issuing agencies frequently generate account balance reports upon completion of the billing cycle. The balance appearing on your credit card statement is the one used to create your credit report.
New credit applications
Every time you apply for credit services, an inquiry is usually listed on your report. 10 percent of your overall score is based on queries; hence, new applications can reflect negatively on your statement. Inquiries typically reflect on your credit score for 12 months after which further requests will be affected within that given time frame.
When you declare bankruptcy, then it means that you are unable to pay off your debts. Being bankrupt poorly affects your credit performance as lenders will be unable to receive their payments.
Selecting an unsuitable type of credit card
Staying on top of your payments will require that you choose a credit card that has limits, friendly fees, and interest rates. Going for a credit card with high limits can be very difficult to maintain payments on time, especially if the limits are too high for your income.
When your bank details and confidential information fall into the wrong hands, then the effects can be damaging. The culprit might accumulate huge bills on your account which may overwhelm your account. And eventually your credit score.
Charge off status
This situation usually happens when a particular creditor assumes that you are not in a position to pay off your debts. When your credit account is listed as charge off, then your score is significantly lowered.
What does credit repair entail?
Regardless of whether you are personally repairing your credit performance or through the help of experienced attorneys, building good credit usually requires patience and time. What most people seem to overlook is that improving a credit score does not happen overnight as it is an ongoing process.
The following steps are usually taken into consideration when conducting credit repair.
- Analyzing your scores and reports
The credit repair agency will first go through your credit reports which are typically made available to you annually from the top credit bureaus. The credit score is usually checked by obtaining your FICO score on their website. This first process is vital as it helps the repair organization to gather the scope of what they will be dealing with in terms of your score performance. It is, therefore, essential to provide as much details as possible.
- Submitting disputes
If there are any errors exhibited in your report, then the best thing to do is to dispute the errors with the credit bureau. The sooner you file for disputes then, the easier it will be for you in the repair process. The information provided by the bureau should be accurate and be up to date. Removal of such mistakes can go a long way in improving your credit score.
- Prompt payment of bills
You will be advised by your attorney to start clearing your bills before the due date. Payment history is a critical factor in your credit report and accommodates up to 35 percent of the FICO score. You can come up with a payment schedule that allows you to tackle one bill at a time to avoid feeling overwhelmed as the payment deadline approaches.
- Take note of your credit card balance
Always strive to maintain a balance that is below an average of 30 percent. You should avoid debt accumulation as much as possible. Clear outstanding balances on time to increase your score performance.
What do credit repair organizations do?
Credit repair organizations will request for your credit report file from the main credit bureaus. They will then analyze the reports for identification of derogatory marks. Such information includes;
Charge-offs occur when you delay paying several debts to a point where the creditor prevents you from accumulating more costs. Such obligations include huge balances from mortgage or the credit card company. Even though an account is charged off, it usually means that you are still liable for the debt. The credit repair organization or your attorney will review the information regarding your charge-off details to ensure that everything is in order.
Important information that the credit repair agency will look out for
i) Since your account might go through several collection agencies over a given period, it is vital to ensure that all the sold accounts are appropriately recorded and contain a balance of zero. The current accounts are the only ones that should include an open listing.
ii) Noting the outstanding balance to determine if it is exaggerated or within the absolute limits. Your attorney will be able to consult the creditor for explanations of the extra costs and corrections after that.
ii) Verification of the date that the charge-off was made. The original account should contain accurate information as well as the subsequent statements. The charge off period should be the same across all accounts and should match the original account.
Clearing charged off debts
One might sometimes be tempted not to pay the outstanding debts since the creditor has ceased collection from the given account. You are however legally obliged to take responsibility of the debt until the debt is settled, paid for or dismissed through a bankruptcy declaration.
Clearing charged off account
- Working with the original creditor. This option is most suitable in cases where the debt has not yet been transferred to a collection organization. Working directly with the lender to clear outstanding balances will have a positive effect on your account.
- Settling the outstanding balance. This option allows you to agree with the collections agency or original creditor. The amount to be cleared might be less compared to the original balance.
- Paying the collection organization. The credit repair agency or attorney should be able to contact the collection firm to confirm ownership of the account before making payments. The ‘paid collection’ status on your report will be better placed to improve your credit performance.
This refers to the legal claim that the government has on your property as a result of failing to pay your tax fees. A tax lien does require you to sell off your property to clear your tax charges. However, when you make a sale on your property, the government receives a portion of your proceeds to cater for the amount owed.
Your property can be affected by a tax lien including vehicle, financial assets, home and even real estate. The tax lien does not usually proclaim the type of asset to be affected, but rather all your property is liable even the ones which you plan to obtain in the future.
Credit report agencies usually include tax liens on the generated reports which could lower your credit scores. A tax lien can be limiting as it can affect your ability to make transactions in regards to selling the property and managing your business. It is usually challenging to dismiss a tax lien by declaring bankruptcy, making it quite hard to avoid.
Clearing your tax lien involves;
- Clearing your tax bills immediately. The IRS will then be able to dismiss the tax lien within 30 days after receiving your full balance. It is important to note that a cleared tax lien can be reflected on your credit report for about 7 years after repayment.
- You can request for the tax lien to be exempted from a specific property. The IRS usually accepts such requests under exceptional situations. For instance, you are not allowed to sell your home if a tax lien is placed on it. However, the IRS might allow you to sell it if you lack other alternatives for clearing your debt.
- It is important to note that even though a tax lien has been withdrawn from a given property, you are still required to clear the amount owed.
Declaring bankruptcy in a court of law is another way of doing away with bad debt. If you are in no position to clear your debts due to your financial situation, then bankruptcy can relieve you of the burden. Bankruptcy becomes public record that is listed on your credit report hence lowering your credit performance. Working to rebuild your credit score after filing for bankruptcy takes time and plenty of effort.
Bankruptcy will be reflected on your report for a period of up to 10 years hence limiting your ability to receive loans and higher credit limits. You can work to improve your situation by lessening the effects on your credit through prompt payments of debts and living within your means.
What is the cost of credit repair?
The total fees charged by credit repair organizations depend on the type of organization. An agency with a long term experience in the industry will charge higher costs compared to junior firms not well established.
An important rule that legitimate credit repair companies adhere to is not requesting payments from their clients until they produce the agreed upon results. You might be required to pay a one- time fee or instalments depending on each derogatory mark that the organization handles from your credit report. This type of billing ultimately depends on the given repair agency.
The charges might range from $35 per derogatory removal to $750 and above. Other organizations request payments every month from $50 up to $130 and above. You should also include set up fees for obtaining your credit reports.
How long does it take to complete a credit repair process?
When you submit your credit report disputes to the credit bureau, they will have about 30 days to investigate verification of the disputes. The credit bureau will first contact the agency that provided the balance information to identify any disparities. You will be able to receive the results of the investigation within 5 working days after completion of the verification process.
Relevant laws regarding credit repair
When you seek the professional guidance of a credit repair lawyer, then one of the main topics that you will talk about is your consumer rights under the FCRA, meaning the Fair Credit Reporting Act. This Act is responsible for regulating the information acquired by credit bureaus. The Act ensures that you have the rights to dispute incorrect information that is damaging to your credit report. Different states may also provide their protection laws that put into consideration the welfare of the consumer.
Conduct extensive research online to identify good credit repair agencies so as not to fall to scams. You can seek the help of an experienced credit repair attorney who will ensure that all your rights are protected and that your credit repair process is fair and successful.
Credit Repair Free Consultation
When you need help to fix 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