When people think about “getting their credit together” they usually call on the assistance of a credit repair specialist without fully understanding what services they actually need.
A low credit score can be the result of several different factors, and while credit repair may help you achieve your goals, it’s important to understand that credit repair and credit building are not one in the same! With that being said, there will be certain things that a credit repair specialist just can’t do for you!
What is Credit Repair?
Credit Repair is simply the process of improving a poor credit rating by getting inaccurate, unfair, and or unverified information removed from your credit reports.
Credit repair services can assist in removing these items from your credit report for a fee. You can also do this yourself by disputing your negative and inaccurate items directly with the credit bureaus. Credit Repair Made Simple is a great step by step manual to assist you with repairing your credit yourself. Whichever option you choose it’s important to know what credit repair won’t do for you!
It won’t Work Miracles!
- If you have few or no negative items on your credit, credit repair might not be the best option for you. Instead focus on building positive accounts. A credit repair specialist can give you guidance but the real work of building credit will be on you.
- Removing collections doesn’t always increase your score! If the balance owed on the collection is low or the debt very old, it’s likely that it isn’t affecting your overall score like you think it is.
- It is not a cure-all option that will produce miracle results. Credit repair and the results will vary depending on your personal credit situation. Be wary of anyone that guarantees unrealistic results. It’s a process that takes times!
The key to working on your credit is understanding credit and what factors are currently affecting you. Most of the people I encountered who needed assistance with their credit actually needed assistance with credit building rather than credit repair.
Understanding Credit Building!
Unlike credit repair, which focuses on removing negative remarks and items, credit building is the process of adding and maining positive accounts to your credit report. When working on your credit it is important to understand the most important factors affecting your credit!
- Payment History. Your payment history accounts for 35% of how your credit score is calculated. To build good credit history be sure never to be over 30 days late on any of your credit accounts.
- Credit Utilization. Credit utilization is how much credit you have available to you versus how much you are actually using. It can impact up to 30% of your credit score. To keep your credit score climbing you want to always use under 30% of your total available revolving credit line.
- Credit History Length. The length of your credit history accounts for about 15% of your credit score. This means that if you don’t currently have credit or if you are trying to rebuild positive accounts, you have to practice extreme patience! Just continue to maintain your accounts, pay on time, and keep you balances low and you’ll see progress.
- New Credit & Types of Credit Used. Both of these account for 10% of your credit. You want to make sure you have a variety of credit accounts but be cautious with opening too many new accounts. An installment account and a couple of credit cards are honestly enough to get you started. Another myth about credit is that you have to get in debt in order to build good credit history! This is far from true! When building your credit you should always think strategically! Don’t get a car loan with a high interest rate that will put you over budget. Instead opt for credit building loans from your bank or credit union. Self lender is also a great option to use when trying to build positive accounts.
Whether you need credit repair, credit building, or both, it is important to understand that there are no quick fixes! It can take time and extreme patience to remove items from your credit report. It will take even more patience to wait while you build positive accounts and payment history. Just keep in mind it isn’t a race! The ultimate goal is overall good financial health!