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Credit repair: how did you end up here?

Credit Repair

Good credit comes with many perks. One of these is finding a lifetime partner. Most people would love to have a family someday. When that time comes, they want the person they choose as a spouse to have a solid financial reputation. With a good credit status, you stand a better chance of securing a mortgage and eventually owning a home. Also, you can get money to fund a dream vacation. Long before the children come, you will be in an excellent position to have a college fund ready. Your spouse enjoys peace of mind which also results in a happy union.

The marketing allures

These days, all news platforms are full of enticing advertisements. The press is awashed with ads promoting electronics, car loans, mortgages, and other deals. However, there is always a catch that you will not notice until you try to procure the item in question. As you later realize, only creditworthy consumers qualify for these deals. The society is such that you must have an above average status if you are to be eligible for loans. An alternative would be to pay for everything using cash, and this is nearly impossible. You either improve your credit appeal and thrive or pursue a cash-only way of life.

Unpacking the meaning of credit

Credit refers to that process which you borrow money and commit to paying it back over the period stipulated. Usually, the payment has some added costs. These include interest on loan and processing fees. While you can quickly pay for small expenses using cash, there are those that require a significant amount of money. Examples include buying a car, a house or paying for college.

Secured and unsecured borrowing

Some forms of lending require collateral, while others do not need any security at all. In the latter case, you obtain credit on the strength of your creditworthiness. A credit card is a perfect example where the lender allows you to pay for meals, clothing, groceries, and gas using plastic money. The arrangement involves a credit consultation that will enable you to use the funds you do not have. At the end of the month, you pay the creditor the sum utilized plus interest.

Impact of credit score

With a good credit score, you can get a car loan or mortgage with low interest rates. Besides, auto insurance service providers reduce your premiums. In all these instances, the monthly payments are affordable. However, a poor credit score denies you such opportunities. Even in the cases where your score is reasonable, you could still get credit but at a high cost. Credit scores also affect your applications for employment.

To demonstrate the sense in maintaining a good credit history, an illustration of a debt scenario would suffice. Assume that you have a credit card with an outstanding balance of $15,000, while the market has pegged the interest rate at 20 percent. For discussion’s sake, take it that your monthly payment is $200. For you to repay the debt in full, you would need 90 months or 7½ years.

Free credit repair vs. using a pro

Credit repair comes in to correct erroneous or inaccurate information. All valid entries remain as they are; no agency can change that. With a good plan and concerted effort, it would only be a matter of time before your score starts improving. Restrain from hiring a credit repair company that takes your money for nothing. Avoid companies that ask you to pay for credit repair in advance. Also, if the organization tells you not to contact a credit bureau, walk away from it. Another red flag is where a company recommends that you create a new identity.

Financial disclosure

The structure of the U.S. credit system supports both consumers and creditors. The system runs on the principles of integrity and trust. What this means is that any attempt to remove certain items on your credit report falsely undermines the system’s integrity.

Creditors are under tight legal obligation to give a precise account of your status with them. The repercussions are such that they must disclose everything whether it favors you or not. Despite the negative aspect, creditors cannot remove from your report any information which is correct.

Any successful attempt to fix your credit requires a deep understanding of what goes into your credit score. After that, you must take deliberate action at turning these parameters into your favor. As a starting point, ensure that credit bureaus used accurate information from creditors.

No, the government does not monitor

Many U.S. citizens think that it is the federal government carries out credit monitoring. Besides, there is also the notion that the state transmits data on financial transactions carried out by individuals. Purportedly, credit repair service providers use the same information for profit. On the contrary, the task is carried out by private companies. They create and update your consumer file. As you carry out your financial activities, the entities involved report on everything without your knowledge.

How errors find their way

Unfortunately, consumers do not have a chance to defend their or reject what goes into their financial history. Worse still is the fact that someone may have entered negative information. The chances are that perhaps the person posting the negative items mistook you for another consumer. Usually, such errors occur due to a similarity in social security numbers, addresses, and names. With these errors, credit reporting agencies proceed to create your credit score out of a profile. They end up with a financial description that creditors use later to decide whether to grant you credit or not.

Sneak-peek of credit laws

However, despite the precarious position you get into, the federal government provides a way out. The Fair Credit and Reporting Act (FCRA) is one of the enacted regulations. Under the FCRA, you can have access to your credit file and single out creditors to challenge entries that you know are inaccurate. Of course, there are procedures that you need to follow. An amendment to the FCRA is the FACT (Fair and Accurate Credit Transaction) Act.

Conclusion

Under the above pieces of legislation, credit agencies should disclose your credit score upon request. Also, they must share with you the information in your credit file. At the same time, credit reporting agencies must investigate any entries that you dispute. If after investigation they find outdated and incorrect entries, they must remove them from your file at once. Besides, your information must remain confidential; not shared with just about everyone. Only those companies that have a valid purpose are allowed access to your credit information. Further, potential employers must obtain your written consent before they can request for your credit data.