How to Repair Your Credit
We’re your one-stop source for comprehensive information about repairing your credit. You’ll find reliable information about credit scores and why they are important, the key factors that go into determining your credit score, and how you can repair your credit. Also, read our recommendations for the best credit repair agencies and request our free do-it-yourself guide on repairing your credit on your own.
Free Guide on how to Repair Your Own Credit
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What Is a Credit Score?
A credit score is a number that reflects your ability to repay a loan. Typically ranging from 300 to 850, the higher your credit score number, the better your credit rating. Your credit score is determined based on a process called credit scoring. According to Investopedia.com, various factors are used in a statistical analysis to assess your credit risk.

Among these factors are: credit history, current level of debt, payment history, types of credit used and new credit. Read more about these factors. Credit scoring is often performed by lenders, financial institutions, credit card companies, auto dealers and mortgage banks to determine their risk of loaning a specified amount of credit or money to you. Thus, if your credit score falls below a certain set number, your credit and or loan application may not be approved. 
What Is a FICO Score?
FICO is the most commonly used form of credit score. It was created by Fair Isaac Corporation, one of the largest and most known companies that provides software for calculating a person’s credit score. Fair Isaac Corporation and other similar companies aggregate credit data and sell it to either your lender or any or all of the three main credit bureaus: Equifax, Experian and TransUnion. Lenders typically access your credit data from these credit bureaus.
Three Scores and Why
If you’ve checked your credit score recently, you might have noticed three different figures. Each score is pulled from each of the three main credit bureaus, and they can differ. While small differences are completely normal, larger deviations between scores can impact the credit or loan decision.Ideally, your credit score should be the same among all three credit bureaus. However, some differences can occur due to:
 
• Varied credit reports by your creditors to the credit bureaus that factor into the percentages when calculating your score;
• Different inquiries;
• Erroneous information reported by your lender.

 Whenever lenders request your credit report, they usually get all three credit scores. How the variance in scores is treated to determine your creditworthiness depends on the type of loan or credit for which you applied. If it’s a mortgage, your lender will most likely consider the three scores, but in most cases and for ordinary loans, the middle score will be used.

For example, if your credit scores are 500, 780 and 810, the middle score, 780, likely will be used to determine whether you qualify for a given loan or credit. Furthermore, the interest rates you will be charged will depend on the amount of the loan or credit for which you applied. If it’s a large amount, all three credit scores will be considered. So, be sure to check your credit scores frequently.  
What Determines Your Credit Score
Payment History - 35%
This is the most important component that credit bureaus and lenders look at when calculating your credit score. Payment history often accounts for 35 percent of your credit score.

Your Bills: Part of your credit report contains information on whether or not you always pay your bills on time. Paying bills late has a negative effect on your credit score. Also factored in is how late the payment is made, for example, a month, two months, etc. The longer the time span, the bigger the negative impact on your credit score.

Other factors likely to impact your loan application are charge offs, debt settlements, foreclosures, wage attachments, bankruptcies, legal lawsuits and liens. 

Amount Owed - 30%
Amount owed is another very important component of your credit score that credit bureaus and lenders look at when calculating your credit score. Amount owed looks at these two factors:

- The amount in use of your total available credit.
- The amount left of your total credit is less than that in use, but not zero.

Lenders are concerned about your ability and responsibility to pay the amount owed on your different accounts. The scoring formula is designed to give higher values to potential borrowers with different and properly managed types of credit.

The total amount you owe lenders also plays a part in determining your credit score. This is often compared to the original amount on installment accounts. For a favorable credit score impact, less is definitely better. 

Length of Credit History - 15%
When calculating your credit score, credit bureaus and credit agencies also consider the period of time that you have been using credit. For example: How old is the oldest credit entry and what’s the average of all accounts?

A long history is certainly helpful for you, as long as it is not marred by late payments or other negative concerns. A brief credit history is acceptable, too, as long as you made your payments on time.
New Credit - 10%

Your new credit accounts will be reviewed in terms of their amounts. Lenders often assume you are a greater credit risk if you’ve made several credit requests within a considerably short period of time.
Mix of Credit - 10%

The fifth most important factor when determining your credit score is the types of credit you are using, such as credit cards, insurance premiums, installment loans, mortgages, stocks and store accounts. The FICO formula typically looks at the number of accounts you have in total. But don’t worry if you don’t have accounts in all categories and definitely don’t open new ones just for the sake of it because, as mentioned under the new credit factor, it can harm your credit score.
How to Check Your Credit Score
You can check your credit report for free. There are several options available:
 • Sign up for a free account at Credit Karma;
• Reach out to the credit bureaus;
• Request a free copy of your credit report from Equifax, Experian, and TransUnion once each year at AnnualCreditReport.com, or call toll-free, 1-877-322-8228. 
Why Check Your Credit Report
Besides checking your credit report for errors, you should ensure your personal information and the addresses on your old accounts are correct. Frequently checking your credit reports also helps you fight fraudulent information, cancel unused credit cards and verify your files are properly linked to your spouse’s.
What Is Credit Repair
Credit repair is the process of cleaning up a bad credit report. The practice is used for raising a low credit score, regardless of the reasons that caused it to drop. Some activities that fall under credit repair are:


• Removing erroneous information from your credit report;

• Correcting inaccurate information on your credit report.
• Sending dispute letters to the credit bureaus to get outdated negative information removed from your credit report.
 
Credit repair usually doesn’t take that long to resolve most issues, but for some people, the process can take up to a few years, depending on the reasons and extent of the credit damage. For example, issues such as identity theft and eliminating erroneous information may take longer to resolve.

 Performing credit repair can be as simple as finding a reputable credit repair agency to identify inaccuracies and clean up your credit report, or doing it yourself. 
Credit Repair Agencies
The services you’ll receive from credit repair agencies include:
 
• Identifying items in your credit report that can be removed or rectified;

• Filing complaints concerning any erroneous information in your credit report;
• Negotiating with your creditor for a review of your loan and agreements;
• Seeking goodwill adjustments from your creditors on your behalf;
• Taking legal measures, when necessary, on your behalf.

 The fee for credit repair services ranges between $59.95 and $99.95 per month, depending on the agency you choose. Usually, you do not have to commit to a long-term contract, which means you can opt out at any time.

If you have reservations as to the effectiveness of credit repair services, seek out credit repair agencies that have a money-back guarantee and a free case evaluation program that determines if credit repair services can help your situation before you sign up for them.

 Also take time to review testimonials provided by credit repair agencies. Many document the number of clients who attest to better credit scores after only a few months, a result of the credit repair agency’s work with credit bureaus following a review of credit records and deletion of late payments or defaults, compelling disputes and regular follow-ups with lenders. 
Top Rated Credit Repair Agencies
See our overview and price comparison of each of the top rated credit repair agencies.
Top Credit Repair Agency Overview
How to Repair Your Own Credit
Get step-by-step instructions on how to repair your own credit score.
Click Here for a FREE Guide on How to Repair Your Own Credit
Why Repairing Your Credit is Important
Credit repair is important because your credit history is the main factor in determining your credit score. Good credit takes more years to build than to destroy, so it’s essential to maintain both a good history and a good score. Credit repair can help you achieve that goal.
 
Only through the credit repair process can you fix bad and erroneous credit information in your file and maintain a good credit history. Improving your score not only proves vital when applying for a credit card or loan, it also helps during financial emergencies and builds a healthy credit reputation. Here are other life events that demonstrate the importance of repairing your credit. 

Employment
Your credit report may play a role in your desire to get a good job. Employers are always interested in knowing whether the person they are hiring has a sense of responsibility. To find that out, many companies request a modified view of an applicant’s credit reports, as allowed under federal law and with the applicant’s permission.
 
A bad credit report may be an indicator of poor management skills, personal integrity and questionable financial honesty. In preparation for your next interview, expect a question about your credit history.
 
Major Purchases
Credit card companies, insurance agents, auto dealers, mortgage banks, as well as other product and service providers, are likely to request your credit scores from any or all of the credit bureaus and use them to define what they will charge you for a particular product or service.

 For instance, when you apply for your first car loan, your bank will look at your credit score and use it to determine how much interest you’ll pay back. A low credit score means you will pay more in interest, thus a higher car loan amount, whereas a higher credit score delivers a lower interest rate and a lower loan amount.
 
Therefore, your credit score will influence your choice of a particular product or service, or in this case, the type of car you’ll drive away from the showroom.
 
Property
Whether you are thinking about owning a home or renting property, your credit report will be checked. Getting a mortgage requires a good credit score, one that is even higher score than for a car loan. With renting, it’s a typical practice in some states for a landlord to check your credit score before signing a rental agreement. The reason is simple: no one wants a tenant with a bad credit report.
Family
Raising a family is perhaps the most difficult, yet very rewarding, life experience. It is also one of the best arguments for establishing and maintaining a good credit history and score. Besides needing a good credit score to provide the best you can for your family, you need good credit for life events, like college, weddings, births, etc. For example, when an emergency financial situation occurs, only a good credit score can get you an instant loan.
Marriage
More often than not, people fail to consider the impact of divorce on their creditworthiness. But here’s a common scenario: A couple decides to part ways and one fails to pay his or her share of a jointly-held credit account. The negative mark on the credit report will affect the other person as well. To avoid this, contact the bank as soon as you learn about the delinquency.
 
On a more positive note, adding your spouse as an approved user of your credit accounts can help you build your credit history. Together, you can get a higher credit score and enjoy higher credit limits, more loan options and, ultimately, the ability to purchase a better home. 
College
Any parent would agree that the cost of higher education is often more than projected. For many families, sending a child to a good college means taking out a loan, and a good credit score will play a significant role in getting the best rates. So, whether you are paying your child’s college tuition or paying for your own education, a good credit history and credit score are essential.
Retirement
In retirement, every penny counts. If you are a homeowner, the equity in your home can act as an income stream to help you meet your financial obligations and reduce your monthly expenditures. However, without a steady income, you may find retirement quite difficult.
 
Financial advisers often recommend preparing for retirement early. In order to do that, you’ll need a good investment plan, which is backed by a strong credit history, good credit report and high FICO score.
 
More specifically, your credit score impacts the amount and type of loans you can borrow from financial institutions during your retirement years. Your score also dictates the interest rates you will be charged.
 
That’s why it’s so important when building your retirement nest egg to also build a good credit history. A bad credit report will stay with you for many years and work against you, while a good credit report and score will work for you during retirement. 
The Credit Repair Law
 Before signing up for any credit repair service, you should familiarize yourself with the credit repair law. This law guards you against bad and unprofessional credit repair practices and ensures you get quality services and value for your money.
 
The Credit Repair Organizations Act is a federal law that prohibits any credit repair clinic (agency) from taking your money until they fully accomplish services pledged in your contract. The contract between you and the credit agency should be in writing and all services defined alongside the terms and conditions of payment.

Under the Credit Repair Organizations Act, you can withdraw from your contract with any credit repair agency and not owe any payment as long as this action is taken within three days of your agreement.
 
The law also makes it illegal for credit repair agencies to suggest what can mislead credit bureaus about your accounts or recommend fixing any bad credit information by changing your identity. 
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