Credit Repair (definition)
Credit Repair
If an individual encounters difficulty in making payments of his or her indebtedness, causing their credit score to suffer, there can be unfavorable consequences. Lenders will be less likely to approve credit, if they do it will be at a higher rate of interest, and you'll find that other institutions, such as auto insurance companies, will charge you higher rates to protect themselves. Sometimes you won't even know that you're paying higher rates because of your credit score, but it's a fact.
Credit repair is the practice of improving or rehabilitating one's financial reputation (credit score) or creditworthiness. Although sometimes considered controversial, as long as ethical measures (such as eliminating mistakes on the report, paying off debt, consolidating debt from many accounts into one, and other sound financial techniques) are used, credit repair is a positive step in improving financial standing and qualifying for lower interest rates.
There are companies that specialize in repairing credit for consumers, but you would be well advised to think carefully before signing on with one of them. If you are inclined, you can repair your own credit, to an extent. For example, you can request copies of your credit reports from the three major credit bureaus, and make sure there is no incorrect information contained. Perhaps surprisingly, approximately 30% of the credit reports held by the credit bureaus do have erroneous negative information in them.
If there is incorrect information in your credit report, you are entitled to file a dispute to get the information wiped off your records, and the credit bureau is obligated to take action to do so if their investigation comes to the conclusion that you are correct.
Other credit repair campaigns take longer to accomplish. Paying down debt, establishing a history of paying on time if you haven't in the past, and improving the ratio of assets to debts, all take time, but can all be done personally without paying an outsider to do them for you.
There are many articles available on this site, many written by outside authors or consultants, that address the subject of credit repair. If you are at all inclined to begin a credit repair program, you should read them all before making any decisions. Someone who guarantees that they can repair your credit before analyzing your particular situation should be avoided. No one can quickly repair negative information unless the information is incorrect, so don't pay someone who makes that claim.