subject: Tread Carefully When Repairing Your Credit [print this page] Cleaning up your credit can be one of the best things you can do to improve your financial well being. An improved credit score can help lower bills and give you the ability to get approved for new lines of credit such as home loans and low interest rate credit cards. With a good credit score, less of your money goes towards interest payments and more goes towards actually building equity and generating wealth.
But this is not to say that credit repair is all positive and that you should immediately dive in to the process. As you would expect with something as important as your credit score, there are still precautions you should take and consequences you should be aware of before you get to work.
For starters, you should note that legal credit repair is not an overnight process. Sure, there are some steps you can take to increase your credit score by a few points in as little time as a week or two, but you certainly should expect to go from a poor credit score to a sparkling clean credit report. Those who have a long way to go on their credit should be prepared to spend up to a year working to repair their credit. A beware of perceived shortcuts such as creating a new credit file as these can get you in legal trouble.
Along with knowing that credit repair will take time, you should also be aware that there are mistakes you can make. This may seem like a point that doesn't need to be made, but it is something that people don't always realize. If you don't take the time to learn about the processes involved in credit repair, you can accidentally do things that will delay the process, lower your credit score, or worse.
One of these mistakes is to submit credit bureau disputes via the credit bureaus' websites. While using the online forms may seem like a time saving convenience, it can hamper future efforts. The law requires the credit bureaus to respond appropriately to disputes so when they do not, there are addition legal actions you can take. However, if you submit disputes online, you don't have proof of if or when the dispute was received. This is why credit repair experts recommend sending disputes to the credit bureaus via certified mail so you get a notification of the date and time the dispute was signed for.
Another mistake many people make is to dispute unpaid accounts on their credit reports. This can have a couple of unintended consequences. First, often times, a creditor will eventually give up on collecting a debt and will in turn stop reporting the account to the credit bureaus. Even though the account remains unpaid, as time goes by the credit scoring model gives it less weight so it has less of a negative impact on your score. But when you dispute the item, you may alert the creditor that you are interested in your credit score (after all, you are trying to improve it), so they may start reporting the account again. This new reporting will update the date on the account giving it more weight again and causing your credit score to drop.
Disputing an unpaid account can also be an indicator to the creditor that you are looking to get a loan. Assuming this is the case, the creditor may also assume that you now have money to pay off the debt and will start working to get it from you. This could cause them to resume collections calls or in a worst case scenario, sue you.
For these reasons, it is advised that you invest the proper amount of time in learning about credit repair. If you are looking to repair your credit yourself, make sure you understand the process and don't just use some template dispute letters you found online. If you are planning to use a credit repair company, make sure you know which negative items on your reports should and should not be disputed. Also make sure you understand the general rules regulating the credit repair industry (see the Credit Repair Organizations Act) so you don't end up selecting a company that might not be there for you down the road.
