Is it just me, or are you getting a lot more offers for real credit repair these days?
Legitimate Credit Repair
Is there a way for someone to do legit credit repair? After all, there are all of these people out there selling credit repair services, so there has to be some real credit repair that isn’t just a scam, right?
The reality is that credit scores, credit reports, and the credit bureaus that run the whole racket is big business. While you may know about credit scores and credit reports as what determines if you get credit or not, on the other side of the equation are big banks and investors who build billion dollar portfolios off of pools of borrowers. The key to both buying and selling these pools is the credit scores of the borrowers. Getting fake credit scores, or borrowers who fixed their credit with a scam, would be a big problem.
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The reality is that there really isn’t any legitimate way to fix your credit, other than to do better with your credit.
Once upon a time, back before the housing bust and the Great Recession, you could fix your credit temporarily by disputing all of the negative information on your credit report. Back then, while the dispute was active, they would not count that information in your credit score. Of course, the banks and the credit bureaus figured that out, and that isn’t how it works anymore.
In fact, a large number of disputes on your credit report is actually grounds for rejection, no matter what your score. After all, what reason would there be so many disputes other than you are a troublesome borrower, or someone has stolen your identity and opened a bunch of fraudulent accounts.
Credit Repair Hackers
What about a credit repair hacker, or someone on the inside?
There is always the possibility that someone could hack into any computer system, including the computers at the credit bureaus. However, the value in a hack like that isn’t in charging people $100 onsie-twosie out in the public where you will get caught. So, while it’s possible, it isn’t very likely.
What about an insider helping with your credit.
One credit repair scam I received claimed to have someone on the inside at a major bank. That’s an interesting claim, but it wouldn’t be useful repairing your credit unless they were at the bank that put negative information on your credit report.
You see, while banks are the major users of credit reporting information, they don’t actually have anything to do with creating and maintain the credit reports themselves. They are separate businesses. So, while a credit repairing insider at Wells Fargo might be able to send a report to the credit bureaus saying that your mortgage is not late after all, it won’t help with that default reported by Capital One.
Anyone who claims they can get you a new credit identity or a new Social Security number is operating outside the law. And, don’t fall for the trick about getting an EIN or a ITIN. Those numbers are for filing taxes, and while you CAN get credit for a business via an EIN, you have to build it up just like regular credit. In other words, the next question a lender will ask after you give them a business FEIN, is for your own personal Social Security Number.
Legitimate Credit Repair Help
Unfortunately, there are no quick fixes for credit problems. The good news is that your credit report is self-repairing, it just might take a little while.
Your credit report is a combination of your past and present. The further something is into the past, the less it counts against your current credit score. So, as time passes, your credit report slowly repairs itself. Everything except bankruptcy drops off your report (and credit score) after 7 years, so in about 8 years, your credit would be fully repaired — assuming you didn’t do any more credit damage.
You can speed up your credit repair by adding good data on top. Again, since newer data counts more, each good standing account increases your credit score, while your negative accounts count less and less each day.
The best thing you can possibly do to repair your credit is to use credit responsibly. Even student loan payments count, so every on-time payment you make helps your score. Throw in a car loan you never miss a payment on, and a credit card you pay off every month, and in just a year or so, your score can be hundreds of points higher.
Of course, top-tier credit takes years to build but most lenders are ready and willing to work with lenders with just “good” credit. It doesn’t have to be “best” credit, or even “great” credit.
While interest rates are important, remember a loan interest rate takes time to cost you money in the reverse of the way it takes compound interest a long time to work. In other words, the difference on a car loan at 4.5% versus 4.8% won’t be that much over a few years. Not enough to risk losing money to a credit repair scam at least.
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Credit reporting is so universal because it works so well. If there were easy ways to trick your credit score, financial companies wouldn’t rely on it so much.