Credit Repair

What is Credit Repair?

Many people are confused by the term credit repair. When asked to define credit repair, most people find it difficult to articulate a coherent response. People believe services like debt settlement, debt consolidation, credit counseling, to name a few, fall under the term credit repair. Nothing could be further form the truth. While these companies would like you to believe that they can help you repair your credit, they cannot. In fact, debt settlement and credit counseling companies can actually hurt your credit.

So what is credit repair? The more correct term is credit report repair or credit correction. This implies that you are cleaning or repairing your credit report.

How Credit History is Related to Credit Repair

Your credit history is compiled by credit bureaus. The data reported to these agencies is primarily provided to them by creditors and include detailed records of the relationship a person has with the lender. Detailed account information including payment history, credit limits, high and low balances, and any aggressive actions taken to recover overdue debts are all reported regularly (usually monthly). This information is reviewed by a lender to determine whether to approve a loan and on what terms.

The detailed account information reported by the creditor are known as trade lines on your credit report and are used to determine your FICO score better known as your credit score. Your credit score is what every creditor including mortgage, auto finance, credit cards and banks use to determine your credit worthiness or credit rating which in turn determines the interest rate you will pay for the money you borrow.

The information in your credit report is sold by credit agencies to organizations that are considering whether to offer you credit. The consequence of a negative credit rating is typically a reduction in the likelihood that a lender will approve an application for credit under favorable terms, if at all. Interest rates on loans are significantly affected by credit history—the higher the credit rating, the lower the interest while the lower the credit rating, the higher the interest.

Defining Credit Repair

Credit Repair is the process of removing negative information from your credit report and working with your creditors to stop reporting the information to the credit bureaus in an effort to improve your credit score and lower your interest rates.

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