It’s tempting to consider a quick fix for anything, including your credit. However, some things are too good to be true. Good credit can’t be rushed, but you can create a good credit history with some strategy.
Slow and Steady Wins the Credit Race
Time heals most things. It sounds cliché, but this also applies to your credit score. Time does heal your credit, and it can take a while before you can really build a good credit history and credit score.
However, many borrowers wonder if there’s some quick, magic shortcut to fix their credit. The bad news? There isn’t one. If you see advertisements for companies claiming they can boost your credit overnight, proceed with caution.
There are legitimate services that can help your credit, called credit repair companies. However, they don’t go through your credit reports and remove all your past negative accounts or add points willy-nilly to your credit score.
The purpose of a credit repair company is only to assist you in removing inaccurate accounts – not just those that are causing a lower credit score. Inaccurate accounts listed on your credit reports can bring down your credit score, but you can remove them through a dispute.
It can be a long process depending on the severity of the error, but there are several reasons why working with one of these companies can be beneficial.
How Credit Repair Companies and Disputes Work
Credit repair companies can be helpful to borrowers who had their identity stolen, those with incorrect names or addresses listed leading to incorrect information, or old accounts that were never removed.
If you work regular business hours and don’t have time to call debt collectors, creditors, or the credit bureaus to dispute inaccurate accounts, a repair company can get you on the right track. Legit ones have training in credit reporting practices, and they can contact creditors and the credit bureaus for you.
When you file a dispute with a credit bureau, they have 30 days to look into it. Often, you’re asked to provide proof that the account is incorrect. A dispute also puts a hold on an account for that 30-day period, so reporting action stops temporarily. If the credit bureau finds that the account is indeed accurate, the reporting action begins again. If it’s found to be wrong, the credit bureaus remove it.
Don’t go disputing every negative account on your credit reports, though. This is a misuse of the process, and there could be consequences. If you hire a credit repair company to dispute accounts for you, have them only do so to those that you believe are incorrect, and be prepared to have proof that they’re wrong.
Before you hire a credit repair business, do some research on their practices and policies.
Spotting a Credit Repair Scam
While there are legit credit repair companies out there, that doesn’t mean scams don’t exist. Some telltale signs of a credit repair scam include:
- Tells you not to contact the big three credit bureaus – The big three credit reporting agencies are Experian, TransUnion, and Equifax. If a business tells you to not contact these credit bureaus, walk away. You can dispute accounts on your own through these bureaus without the help of a credit repair company. Disputing errors on your credit reports is a right of yours under the Fair Credit Reporting Act.
- Guarantees a specific amount of points – If a credit repair company promises that “your credit score will increase by 112 points within six months,” look out. There’s no real way to promise a specific point increase (unless there’s fraud involved).
- Promises to remove all negative accounts – You and the credit repair business can only remove accounts off your credit reports that are incorrect. Removing correct accounts (even if they’re negative) is fraud. Additionally, the credit bureaus are going to notice and place that account right back on your reports, so it’s not possible. Any business that says they can remove all negative accounts off your credit reports should be avoided.
- Asks you to pay before providing services – Most credit repair companies do charge for their services, but they can’t ask you for an “up-front” fee, or ask you for any money until they’ve shown results. A good rule of thumb to follow is don’t pay anything until the company has proven results.
There’s no quick, easy fix that can boost your credit score overnight. However, there are steps you can take yourself that can help build a good credit history and increase your credit score over time.
Good Ol’ Fashioned Credit Repair
If you have poor credit, you’re not alone. It’s estimated that around 30% of Americans have bad credit. So, how do you fix it? We’ve got some quick tips:
- Dispute errors yourself – Comb through your own credit reports and look for anything that could be lowering your credit score. If you find something that’s inaccurate on one of your credit reports, you can dispute it online. If you find a lot of errors and aren’t sure where to start, consider a credit repair business. You can request your credit reports for free once a week until April 2021 from www.annualcreditreport.com.
- Pay all bills on time – It may sound simple, but payment history has the biggest influence on your credit score. If you miss any payments, it can harm your credit for up to seven years. Stay current on all your accounts and you can avoid repos, defaults, and accounts being sent to collections – all of which also hurt your credit score.
- Pay down your credit card(s) – Whether you have one credit card or multiple, pay down the balances to at least 30% of their spending limit(s). Any higher, and lenders may assume that you're overextending yourself. Keeping high credit card balances can lower your credit score, so the lower you can get those balances, the better.
- Add some variety – Spice up your credit reports by having both revolving credit, such as credit cards, and installment credit, like auto loans. Lenders like to see borrowers with credit variety. If you manage different kinds of credit well, it can increase your credit score.
- Keep old accounts open – Your credit score is influenced by the average age of all your accounts. If you close old accounts (even if you don’t use them), it can lower the average age of your credit history, and your credit score.
Even with these tips, it can still be hard to build a good credit score. If you have past negative accounts, they can remain on your credit reports for up to seven years. That can be a long time, depending on your perspective and how soon you need to take on new credit.
If you start working on your credit score now, the results will start to roll in. You can check your credit reports every week until April 2021 because of the coronavirus (after that, it reverts back to once every 12 months). Take this opportunity to keep track of your spending habits and what’s being reported, and when it’s being reported, to work on your credit.
Repairing Your Credit With an Auto Loan
Car loans are installment loans, which have the potential to boost your credit in many different ways. Since they are long-term loans, with auto loan terms averaging between four and eight years, you can start a long-lasting and good payment history that can do wonders for your credit if you handle it well.
Having poor credit can make it hard to find lenders that can approve you for financing, as not all lenders can work with people in challenging credit situations. But we know what dealerships are signed up with bad credit lenders here at Auto Credit Express. To get matched to a dealer in your area that has the lending connections you need, fill out our free car loan request form.