Credit Repair – What Exactly Is It?

Your credit score is the lifeblood to a lot of financial opportunities, like buying a car, financing a home or taking out some other sort of loan. But when you’re credit isn’t exactly up to snuff, taking the proper steps to improve it in order to make yourself a more attractive customer and allow you to qualify for low interest rates, is essential.

And that’s exactly what credit repair is – anything that will either improve or increase your credit score to make you a more attractive customer. This post will take a look at some of the common things you can do to repair poor credit.

“The Three Ups”

So now that we’ve identified the process as anything you can do to either improve or increase your credit score, it’s time to take a look at some of those practices that you can put in to action today. These strategies are often referred to as “the three ups”:

  • Clean Up: This involves working to remove any – or as many as possible – of the negative items that are on your credit report. Some of these items may be there by error (after all, it is estimated that as many as 42 million Americans have some sort of error on their credit report), others may be past blunders. While you may not be able to clean up every negative mark, it is likely that you can get some removed.
  • Build Up: This “up” involves having good, healthy accounts that you pay on time. These accounts are reported to the credit agencies each month and can help bring up the credit score. After all, paying bills on time is one of the biggest factors in determining a credit score.
  • Pay Up: Finally, there’s the aspect of paying up. This involves not running away from debts and collections, but meeting them head on and coming up with a way to settle them. Think about it. If you never pay up and settle your debts, they’re going to be hurting your credit score – and prolonging any credit repair efforts – for a long while.

In a nutshell, credit repair is exactly what it sounds – it’s the act of fixing your credit and thereby improving your financial buying power. But it is not something that can be completed overnight, in most cases it can take months, perhaps even several years to see a noticeable difference. That’s why it’s important to commit to repairing your credit and coming up with a plan to do so. Fulfilling it can take your credit score from poor to good, or from good to excellent, and the real winner will be you.

Paying Off Debt – Is It Going to Fix Your Credit?

The short answer: you should pay all your debts. All those unpaid credit card debts, defaulted installment loans and other issues are pulling down your credit score; paying them off will improve it. But, just paying the debts can’t fix everything.

What paying the debts will do.

When you pay off an old debt, it will show up as “closed” or “paid in full.” This is considered a positive or at least neutral entry. But, any negative entries associated with that account will still show up. So, if you have 10 late or missed payments, they will continue to show up as negative entries and drag down your credit score for as long as the account remains. Depending on what kind of account it is, this can be seven to 10 years.

What really needs to happen to fix your credit score.

While paying the debts is a necessary part of credit repair, finessing the record is what is really needed to see significant jumps. Key Credit Repair can negotiate with creditors on your behalf to remove those debts. When a negative entry disappears, your credit score will make a jump. The exact score improvement is difficult to predict, but we have seen significant improvements in our clients’ scores after helping them get negative entries removed.

Building more good credit.

A credit history where all your mistakes are fixed is also not enough. Creditors want to see you continue to use credit in responsible ways. The way you can show this is by opening new accounts and using them wisely.

Creditors like to see both revolving credit like credit cards and installment loans like auto or personal loans. Open a new credit card account and put a single recurring expense on that account. For instance, you can make that card your autopay option on your gym membership or on Netflix. Then, set up that credit card account to automatically pay the balance each month out of your bank account. This way, you have an effort-free way to show responsible use of revolving credit.

For an installment loan, consider a loan for a new car. Even if you can’t get a good rate at first, these loans are easy to refinance. If you do not currently need a new car, you also have the option of a personal loan to pay off your credit cards. Often, you will find a much better rate than you are getting from your credit card company. Set the loan up to debit your checking account automatically right after you get paid.

By making all of these wise steps, you will see a credit report with more positive entries and a credit score on the rise. In time, you’ll have a score that will make mortgage lenders eager to work with you.