The Basics of Credit Repair
A lot of people don’t seem to be particularly concerned about their credit ratings but that’s because so many of us don’t know very much about how the American financial system works. So why worry about what you don’t know? The truth is though, a very WISE thing to do is to closely monitor and manage your credit rating because it is way more important than you probably imagine and most likely you have a lot to learn about it.
The first thing you need to know is that there are three GIANT national privately-owned credit bureaus: Equifax, Experian and Trans Union. These three credit bureaus are responsible for assembling and publishing private information about every person in the country that has a Social Security Number. That information is contained in what is commonly called a Credit Report and each of the three credit bureaus publishes a separate credit report about each person.
The information contained in our credit reports is provided on a regular basis to the national credit bureaus for the most part by our creditors usually monthly, bimonthly or quarterly according to the creditor’s frequency policy. In addition, the credit bureaus have access to Public Records and other official sources of information. From all of these sources they find out about our credit payment histories and other private information including our home address, our employment histories, our income, our marital status, information about any lawsuits brought against us, any child support delinquency, etc.
You should also know that the process or assembling and publishing private information in the form of personal credit reports is legal but it’s closely governed by federal and state legislation. Only users who are authorized by the legislation are allowed access to our credit reports.
Tens of thousands of creditors in this country have entered into formal arrangements with the three national credit bureaus. The creditors provide the personal information about their customers to the credit bureaus, the credit bureaus assemble the information into the various credit reports pertaining to each consumer and then the credit bureaus sell the credit reports to those entities that are authorized to see them which include the following users:
- Existing Creditors
- Prospective Creditors
- Insurance Companies
- Marketing Agencies
- Consumers for accessing their own credit reports
Three users that might jump out at you from this list are prospective landlords, insurance companies and employers. Many people are surprised to find out that their credit reports are routinely reviewed when they try to rent an apartment, purchase insurance or find a job. A bad credit history or the lack of good credit history could mean that a landlord won’t rent you that apartment you want or that you’ll be charged an excessive up front security deposit.
The cost of insurance will also be higher especially auto insurance if you have a negative credit history, or no history at all. Statistics confirm that people with below average credit history are a greater risk than the other half of the population so they have to pay higher insurance premiums.
And when you apply for a job, one of the criteria the prospective employer will use is a credit evaluation based on the thinking that people with good credit history will be more responsible and better performers than the other folks. If all other things are equal, the person with negative or no credit history is at a disadvantage. How many millions of people over the years have been turned down after what they thought was a favorable job interview and it was a perceived “character” issue caused by the lack of good credit history that caused them to be rejected, a cause that could have been corrected?
Now, each of the three national credit bureaus administers a proprietary computer model that summarizes all the information about us they have in their files in the form of a weighted INDEX. Each of the three credit bureaus publishes a credit score for each consumer and the score ranges from approximately 350 to 850. The three scores will be different because the three computer models are different but over time they tend to be similar. The higher your credit score is, the better the credit rating; and the better your credit rating is, THE LOWER THE INTEREST RATES YOU CAN QUALIFY FOR WITH EACH CREDITOR.
Our credit scores are often called FICO Scores or Fair Isaac Scores or Beacon Scores depending on the credit bureau. If you want to lower the interest rates you’re paying on your indebtedness, you need to find a way to INCREASE your FICO Scores.
It’s simple to obtain your credit reports. Federal law requires each of the three credit bureaus to provide consumers one FREE credit report per year upon the request of the consumer. All you have to do is go to the following web site and follow the prompts:
There are several alternatives: you can purchase your scores at the same web site or you can go to the various Credit Bureau Sites and purchase them:
Or call: (888) 397-3742
Or call: (877) 322-8228
Note: telephone numbers are subject to change without notice.
As another idea, you could subscribe to one of the various monthly Credit Report monitoring services available on line including the ones offered by the credit bureau sites themselves where for a modest monthly payment you can have ongoing access to all your credit reports including your FICO Scores.
In addition to the three credit bureaus, there are a number of private entities that are approved by the credit bureaus as “resellers” of the information they publish. Those entities often call themselves FREE but they aren’t always free services because you are going to pay an ongoing monthly service charge. Their advantage is that you can access their services any time you want to which allows you to monitor your credit reports and be on top of changes as they occur. Their disadvantage is that the information they publish often runs more than thirty days behind the information at the credit bureaus and their Scores are often not the real ones but approximations. Your prospective creditors, insurance companies, employers and the rest of the users will be looking at the actual credit bureau FICO Scores and credit histories.
One of the credit report monitoring services that is FREE that we use in our ministry is Credit Karma. It is totally free but only two of the three credit bureaus are covered. These are helpful services for watching your credit reports over time for security reasons and to follow trends when you are trying to make some improvements.
Finally, it is estimated that more than 70 percent of all credit reports have errors in them. The chances are that your credit reports DO contain one or more errors that are causing your credit scores to be less than optimal. Because of this, every American should be monitoring their credit reports several times per year. If you find an error or something that is outdated, federal and state law allows and encourages you to write a Dispute Letter to the offending credit bureau(s) and demand that the error be corrected. This is how traditional Credit Repair is conducted: by writing a series of Dispute Letters to the credit bureaus. Check out our publications to find out more about the details of Disputing. You can hire an expensive agency to perform this service for you, often for more than $750 to $1000. However, with just a little study and work, you can learn how to do these things yourself and not have to pay an exorbitant fee. Can you write a simple letter? Surely you can. You just need to learn a few things to say in the letter to FORCE the credit bureaus to obey federal law and update your credit reports. When they do, your credit scores will increase!
If you understand these basic concepts you’re prepared to begin the process of improving your credit rating. And, you have a choice to make: do you want to save a lot of money and do this work yourself? Or, would you prefer to hire a professional and pay their fees of up to $1,000 or more?
Many people could do this themselves if they would just simply study a little and make a sincere effort. If doing-it-yourself is your choice, you can purchase our publication that will tell you EVERYTHING you need to know to carry out your own program: including template Dispute Letters:
You can also make use of the following FREE publications that will help you increase your knowledge as well as making the decision of whether to try to do this yourself or contact a professional:
Nevertheless, if you are time limited or “helplessly” challenged administratively, we recommend the Christian-based agency you can reach through the following link