While credit repair can be a means to improve your credit, working with a credit repair company isn’t right for everyone, nor is it your only option. Explore your other options to see if there’s a company that’s best suited to help repair your credit and expand your access to financial products.
Do it yourself
A DIY approach to credit repair requires you to do the hard work yourself to restore your credit health. Sure, credit repair companies are likely to have experience handling cases like yours, but they still can’t do anything you can’t do yourself.
Even better, repairing your credit will cost very little — maybe nothing at all — but it will take some work: Obtain a copy of your credit report, examine it, dispute any errors you find, and wait for the results.
While it may seem intimidating, repairing your credit yourself can help you avoid additional monthly costs and ideally give you a better understanding of your credit standing.
Strong Points
- This will help you avoid extra charges.
- Step-by-step guidance is available.
- You can empower yourself to deal with it.
Cons
- It takes longer than hiring someone.
- Communicating with credit reporting agencies can be difficult.
- Removing conflicts must be done in a very specific way.
Best for
DIY credit repair is perfect for patient consumers who are already on a tight budget and can’t afford the extra expenses.
Improve your payment history
Your payment history makes up 35% of your overall credit score, making it the largest contributing factor, so if you have a low credit score, improving your payment history could significantly improve it.
Payment history includes credit-related products such as credit cards, lines of credit, mortgages, auto loans, and personal loans.
To achieve this, you need to pay your bills on time, keep any past due accounts current, and communicate with your lender if you think a payment will be late. The latter will allow you to work out payment arrangements with your lender and prevent a negative record on your credit file. It’s also wise to enroll in autopay to avoid potential late fees.
Strong Points
- You can create a better monthly payment routine so you don’t fall behind.
- Reduce or waive late fees.
- There are no costs to the outside company other than repaying outstanding invoices.
Cons
- It may be a long process.
- It will take time to see improvements in your score.
- There is no additional expert support.
Best for
Improving your payment history is great for people who want to take control of their finances, as late payments are the main cause of bad credit.
Consider debt consolidation
Debt consolidation is the process of combining multiple accounts into one to streamline your repayments, and one way to achieve this is with a debt consolidation loan.
Using this type of loan to consolidate revolving debt, like credit cards, can lower your credit utilization ratio, which makes up 30 percent of your FICO score.
This method works because new installment debt doesn’t count toward your revolving credit limit. Because credit age accounts for 15 percent of your FICO score, you’ll get the best results if you leave old, paid-off credit accounts open. Closing older accounts that are in good standing can lower your average account age and lower your credit score.
Consolidating your debts can make it easier to keep track of your repayments, as you only have one payment due date to worry about.
These loans tend to have lower interest rates than most credit cards, so they can also save you money in the long run. You’ll need a credit score of 670 or higher to secure a competitive rate. However, even if you have a lower score, you may be able to find a better rate than your existing rate. Be sure to get pre-qualified to be sure.
Strong Points
- It can streamline your repayments, making it easier to pay on time.
- Lowering your overall interest rate can make your debt more manageable.
- Setting a deadline can help you pay off your debt faster.
Cons
- To secure the lowest interest rates, you’ll need good to excellent credit.
- Some lenders may charge a financing fee.
- If you don’t address bad financial habits, they can lead to increased debt.
Best for
Debt consolidation is ideal for people who struggle to pay multiple debts and implement a repayment plan while modifying their spending behavior.
Work with a Credit Counselor
If a traditional credit repair company isn’t the right option for you, a credit counselor may be a viable alternative. Professional, attentive guidance can help. Nonprofit organizations may offer credit counseling for free or at a minimal cost.
Our trained professionals will take a detailed look at your current spending habits, debt levels, and credit report. Based on the analysis of your financial situation, you will receive a customized action plan to address your financial concerns.
One approach is a debt management plan (DMP), which focuses on making your unsecured debt balance more manageable so you can pay it off faster.
Strong Points
- Advice tailored to your financial situation.
- the ability to address and correct ongoing financial failures;
- Counsellors may also help you negotiate with creditors.
Cons
- Some companies require a monthly fee for their services.
- If your debt is more or less under control, it may not be of any use.
Best for
Ideal candidates for credit counseling are people who are willing to learn and adapt their spending habits.
When should you consider a credit repair company?
Credit repair companies work to improve your credit for a fee. They look for inaccuracies on your credit report and dispute them with the credit bureaus.
These issues include accounts that appear to be open but are closed, incorrect account balances, accounts that aren’t yours, etc. You can do this yourself for free, but it may take some time.
Hiring a credit repair company may be a good idea if:
- Even though I’ve been making my payments on time, my credit hasn’t improved.
- It is better to have it handled by a professional and be able to afford the fees.
Also, keep in mind that credit repair companies can only fix actual mistakes. For example, if a history of late payments is dragging down your score, if you have evidence that the payments were actually late, the credit repair company cannot dispute that.
Before signing up for this service, make sure you understand what a credit repair company can and can’t fix.
Conclusion
You’re not alone in need of credit repair. But if you’re not comfortable working with a credit repair company or it doesn’t suit your needs, there are other options.
Consider a DIY approach and focus on improving your payment history and consolidating your debts or work with a credit counselor to improve your credit profile and overall financial situation to reach your credit score goals.
