Credit scores have a huge impact on a person's ability to receive a personal loan of any kind as well as his ability to receive mortgage loans, to open home equity lines of credit or to qualify for new car financing or home improvements. Even getting approved to move into an apartment complex can be affected by credit scores. Attempting to improve credit scores brings its own list of pros and cons.
Con: Know-How
Many people attempt to repair their credit reports and improve scores, but they don't know what they're doing, or they abandon the sometimes-involved process because they find it too complicated. Consumers must be aware of laws designed to protect them, such as the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act 2003, but many are not. Additionally, documents need to be gathered and carefully organized, reviewed thoroughly and noted for any type of action that is desired.
Con: Time
Fixing a credit report takes time and patience. The process of ordering credit reports, carefully examining them, searching for errors and addressing any found, gathering evidence to dispute the errors and then writing letters to each of the three major credit bureaus (Equifax, TransUnion and Experian) is extremely laborious. Negative items should be ranked according to the severity of damage they do to your credit report. For example, a bankruptcy ranks higher in the damage department than a credit inquiry. In addition, understanding what can be challenged and what items can be removed from a credit report also involves some research, all of which takes time.
Con: Delayed Resolution
Many individuals don't achieve the results they're looking for the first time around and assume they cannot improve their reports further. Consumers can make additional attempts to have negative items removed from their reports by providing and gathering more evidence and writing more letters, but most don't put forth the effort. Credit bureaus are required by law to address and resolve disputes within 45 days. In some cases, a person may find that some but not all of the disputes were resolved. Depending on the situation, items that were disputed but not addressed by the credit bureau can be challenged again after supplying any additional information requested by the bureau or by clarifying an explanation of the issue.
Con: Scams
Many people attempting to fix their credit scores or reports end up dealing with disreputable organizations or websites that offer promising results for a certain amount of money. Scams are common, and consumers need to be very careful about the companies they approach to help them with credit repair issues. According to the National Association of Bunco Investigators, accurate information remains on a credit report for five to 10 years. Only verifiable errors or mistakes can be removed.
Pro: Reduced Debt
Many improve their credit scores by paying off debt over time, which reduces the amount of total debt that person owes. Lower balances on credit cards also offer lower interest rates and a lower debt-to-income ratio.
Pro: Improved Credit Scores
Removing negative items from an individual's credit report may increase a credit score substantially, making it possible for her to enjoy lower interest rates on credit cards, auto financing and home loans. Improved credit scores also appeal to lenders, which makes them much more likely to approve loan requests.
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