If you recently have had late payments, collection activity, judgments or a bankruptcy, you may be looking into ways of repairing the damage that was done to your credit. Although many people turn to credit counseling agencies or debt settlement companies for help in repairing their credit, this approach is not always best. You may be surprised to learn that do-it-yourself credit repair is not as complicated or difficult as it may seem.
Significance
Repairing your credit is important because it can allow you to qualify for more favorable loans, get lower interest rates on credit cards and even may increase your employability. Although there are a number of credit counseling agencies and debt settlement companies that help repair your credit, many of these organizations are trying to make a profit off you and may not always work in your best interest. However, doing credit repair on your own is not as difficult as you think, and doing so can help you feel more in control of your financial destiny.
Function
The main goal in credit repair is to boost your credit rating to a desirable level. This can be done in several ways. The first approach is to get as many negative or inaccurate listings removed from your credit report as possible. To do so, fill out the online dispute form at each of the credit bureau's websites. The second approach requires you to build up positive credit. You can do this by always paying your current bills on time, but also by getting new credit and keeping a low balance. New credit with a low balance typically will help with your overall debt-to-limit ratio, which is a main factor in determining your credit score, according to MyFico.com. BankRate.com recommends a debt-to-limit ratio lower than 50 percent.
Benefits
Repairing your credit yourself will have many positive effects. You will save money by not having to pay a commission to a third party, but you'll also become educated about credit through the process, which may make you more financially savvy in the future. After your credit is repaired, you will not only benefit from increased credit scores that will allow you more favorable loans and interest rates, but you'll also be free from the relentless collection phone calls and stress that comes from having bad credit.
Considerations
To be the most successful at credit report repair, it is important that you educate yourself and know your rights as a consumer. Learn everything you can about the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practice Act (FDCPA) to ensure your consumer rights are not violated through the credit repairing process.
Warning
Be careful about disputing everything, because doing so may cause the credit bureaus to deem your disputes as "frivolous" and they will not be required to follow up on them. Also, never sacrifice your morals to repair your credit. Although some people dispute accurate information to remove it from their credit reports, you should consider if this approach is morally right for you.
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