With the financial pressures in today's society, it is easy to lose a good credit rating. In fact, FICO®Score.com reports that 15.5% of the U.S. population has a subprime (below 600) credit score.
The good news, though, is that you can repair a low credit score. If you have a low credit rating, you may wonder whether it’s worth the expense to hire a credit repair service to help heal your credit score or do it yourself.
This article will help answer your questions so you can make a more informed decision on how to repair your credit.
Reasons to Fix Credit Score
To lenders and other institutions, your credit score indicates your potential to repay a loan or honor a financial obligation. This is why it is a dominant factor in your quality of life.
For example, a good credit score can give you access to more desirable loan amounts, mortgage rates, rentals, and insurance policies. On the other hand, a low credit score can block or hinder your access to these advantages in life. So, not fixing a low credit score has consequences.
How Do Third-Parties Fix Credit
When you hire a credit repair company, it acts on your behalf. The credit-fix company negotiates with the credit bureaus and the companies reporting credit activity — usually debt collectors, credit card issuers, and banks.
Credit repair companies attempt to remove inaccurate information and errors from your credit reports by filing disputes for each item with the credit bureaus or reporting companies. Although some credit repair companies send disputes by email or phone, most prefer U.S. mail.
The Fair Credit Report Act (FCRA) requires credit bureaus and reporting parties to process disputes within 30 days. If the credit bureau rules in your favor, all three major credit bureaus will delete or correct the erroneous information. Or if the reporting parties fail to process the disputes in the given period, that means the negative credit is removed from your profile.
Keep in mind, though, that no one can remove negative credit information from your credit report if it is accurate. And counting on companies missing the 30-day deadline is often an inefficient and risky approach.
So Is It Worth It to Pay for a Fix?
Credit repair companies generally charge between $50 and $100 per month to do the following tasks:
- Draw credit reports from the three major credit bureaus — Experian, Equifax, and TransUnion — and scan them for inaccuracies
- File a dispute with the credit bureau over errors they find
- Track the status of the disputes
- Report the results to you
- Monitor your credit reports for any new erroneous reports
Some shady credit repair companies promise to delete all negative items from your credit report. They can also engage in fraudulent acts like disputing accurate information or never delivering their promises after collecting your money.
Despite claims by many bad credit fix companies, no statistics are available to verify the effectiveness of credit repair services. So, you may be better off doing these simple credit management tasks alone. Along with saving money, you can avoid falling for a credit fix scam.
Alternatives
Fortunately, you can do several reactive and proactive things to improve your finances and credit score.
Reactive Credit Management
The primary task you can do to raise your credit score is to dispute any errors on your credit report in the same way a credit repair service does. You can contact the credit bureau through the Internet, phone, or mail to correct or delete the information. It usually takes around a month to resolve each issue.
Since you can’t remove accurate negative information, your only option is to let it expire naturally. It takes seven years for the most negative marks to expire, and Chapter 7 bankruptcies take ten years. However, defaulted student loans and outstanding child support stay on your credit report until you settle them.
Payment history is the most significant influence on your FICO®Score, the credit score referenced by 90% of the leading lenders. So, you can work toward offsetting negative credit information by taking out a bad credit loan from a lender like Jora Credit and paying it back in full and timely payments.
Proactive Credit Management
One of the best proactive measures for improving your credit is to continue to educate yourself about financial management. You can learn about creating a budget, saving for emergencies, credit card pay-off techniques, and cash flow management. Also, there are financial management apps that help you monitor your cash flow and avoid late credit payments.
You can also change your approach to credit card spending by saving up for big-ticket items instead of paying with a credit card. Also, you may consider using a secured credit card. This credit card type requires you to pre-load with a collateral cash deposit. As a result, you can reestablish your creditworthiness without risking late payments.
Another useful tool is taking out an installment loan through Jora Credit. The terms of an installment loan require you to make a fixed number of monthly payments until you settle the debt. Since it differs from credit card debt, an installment loan improves your credit mix, accounting for 10% of your FICO®Score. And your on-time installment payments can also positively affect 35% of your FICO®Score by improving your payment history. Also, Jora Credit is specifically open to accepting borrowers with poor credit.
Starting the Credit Repair Process
By devoting some time and thought to your financial well-being, you can use straightforward methods to heal your credit score without the help of credit repair services. And it’s good to know that lenders like Jora Credit can help restore your good credit rating. Apply now for one of a variety of Jora Credit loan options.