Only 1.6% of Americans have a credit score of 850, which is a perfect score. The rest have scores that range from bad to good.
What is your score? If it's less than you want it to be, you could work on fixing it.
The best way to fix your credit score is through credit repair services.
Have you heard of these services? Even if you've heard of them, you might not understand how these services work. If you want better credit, read this guide to learn how credit repair services can help you fix your credit.
The Basics of How Credit Scores Work
Learning how your credit score works and the importance of protecting it aren't things that most people learn in school. Instead, they often learn the hard way - by going through credit issues and recovering from them.
If you can learn how credit scores work, it might help you protect yours. It might also help you learn how the best credit repair services work. Therefore, let's start with an understanding of how credit scores work.
Your credit score is a reflection of how you manage your money. While there are three main credit reporting bureaus, each one uses similar algorithms to calculate a person's score.
These bureaus factor in the following things when calculating scores:
- The history of your payments toward debts
- The amount you owe compared to your credit lines
- The length of your credit history
- The debts that you owe and their types
- The inquiries you have on your credit report
These factors reveal a lot about how you manage your money and debts. They tell if a person is responsible at managing their money or if they aren't great at this job.
A person's score also tells a lot about their risk level, which matters to lenders.
High credit scores reveal a high level of responsibility with money management, which equivocates to low risk.
Low scores reveal a lack of good money-management skills, which equivocates to high-risk levels to lenders.
The Role of Credit Reporting Bureaus
In the U.S., you will find three main credit reporting bureaus: Equifax, Experian, and TransUnion. These bureaus hold important tasks, and the main task is to record the credit history of all the adults in this country.
While each one may use slightly different methods to calculate and record credit scores, each works the same way. As a result, if you look up your score with each bureau, you might notice some differences.
Each bureau might calculate different scores for several reasons.
First, they might not all have the same information. When creditors report your financial information, they might only report it to one bureau instead of all three.
Secondly, each bureau might factor in things differently. For example, one might place more weight on your repayment history, while another might factor in public records a little differently.
Finally, some credit reporting bureaus might drop old information faster than others. The result is differences in credit scores when you compare the scores and information from each agency.
When you hire a credit repair company, they will know how to handle these differences with the bureaus.
The Causes of Credit Problems
If you check your credit to discover that your score is lower than you want, you might wonder why you have poor credit. Unfortunately, people have poor credit for many reasons, and here are some of the reasons:
Your payment history plays a significant role in your score. If you pay your bills on time every month, you build a positive repayment history, which causes an increase in your score.
When you miss one or more payments, your creditors post these details to your credit file. When you have a late payment on your file, it decreases your score.
Late payments demonstrate a problem with paying your bills on time, which is a red flag to creditors.
Public records on your report can also bring your score down. A bankruptcy filing is an example of a public record. If you have public records, they can remain on your report for many years, and they cause poor credit scores.
A write-off occurs when you fail to pay a debt you owe, and the creditor writes it off as uncollectible. Write-offs reveal that you don't necessarily pay the debts you owe, and these will cause a decrease in your score.
Too Much Debt
Poor credit can also occur if you owe too much money. If you max out your credit cards, for example, it will affect your credit score negatively. If you have too many outstanding loans, it can also cause a drop in your score.
Your score might be low for one of these reasons or multiple reasons. If it is, you can fix it by hiring a company that offers fast credit repair services. They will work on your credit in anyway they can to increase your score.
Signs That Your Credit Needs Work
Some people might not even realize that they have poor credit, while others ignore the signs.
If you're wondering if you need credit repair services, you might want to consider the following signs that indicate your credit needs work:
You Carry Balances on Your Credit Cards
If you can't seem to ever pay off your debts, you might need some help with your credit. If your score is still good now, it might not be in the future if you keep carrying balances on your credit cards.
You Get Denied Credit When You Apply
Another sign that you need credit repair is getting denied credit when you apply. If you apply for a credit card or loan, getting declined by the lender is a sign that you might have some credit issues.
You Don’t Want to Look at Your Credit
You might also have credit problems if you refuse to look at your score. If you avoid looking at your credit score, it might be because you don't want to know how bad it is.
You Have a History of Financial Problems
Finally, you might know that you need credit repair services if you have a history of financial problems. If you've struggled in the past to pay your bills on time, you might know that your credit is worse than you would like.
You can find a credit repair online company to handle the repairs you need. If you start now, you might have a higher score in just a few months.
How Credit Repair Services Work
So, what is a credit repair service? Credit repair companies offer services that help people fix their credit. The main goal is to increase a person's credit score.
Companies that offer these services fix credit in many ways. First, they begin by checking the person's credit reports to see what they contain. Next, they start disputing the derogatory entries they find.
Here are some of the common things that credit repair companies dispute:
When a credit repair company finds entries on your report with inaccurate balances, they can dispute them. The credit bureaus must have proof that the balances they list are correct. If they don't, they must update your file.
For example, suppose that you owe a bill that should be $500. If the report says the balance is $1,000, the credit bureau must update it if they can't prove that you owe $1,000.
You must supply proof, though, that you only owe $500. In some cases, the credit bureaus will remove the entries (instead of updating them) if the information is not accurate.
Debt Is Paid
Next, the credit repair company might dispute an entry for a debt that you paid. If you paid a debt and have proof of payment, they will dispute the item on your credit report.
If you can prove that you paid it, the credit reporting agencies must update your file with a "paid" status. When they make this change, it can lead to an increase in your credit score.
Age of the Debt Calls for the Item’s Removal
Another common thing to dispute is a debt that should no longer be on the report due to age rules.
For example, some debts should drop off a credit report after they are seven years old. If you have a debt that is older than seven years, the credit repair company can dispute it.
If the agencies see that the debt shouldn't be there, they will remove the posting. When this occurs, it can cause your score to increase.
There are also times when credit reporting agencies have duplicate postings on a person's report. If the duplicate posting is derogatory, getting it removed can help you improve your credit score.
One last thing they can do is to remove false information. If there is something on your credit report that is not yours, the credit repair agency will fight it.
The credit reporting bureaus must prove that it is yours if they won't remove it. If they can't prove it, though, they must legally remove it.
When disputing the items, the credit repair company must send a letter to each of the bureaus that have inaccurate information.
If only one bureau has the information, they send just one letter to that agency. If several agencies have the item they are disputing, they must send a letter to each one.
Additionally, when they send the letters, the credit repair companies must attach any evidence they have that the item is not correct.
After they complete these steps, they look for proactive ways to help the person's score increase. One option is by applying for a new credit card. Another option might be getting an installment loan.
If you're ready to get started, you can begin by looking for a good credit repair company to hire.
The Benefits of Good Credit
Now that you understand how credit scores work and how credit repair companies work, you might want to learn the benefits of good credit. Why is good credit so important?
Here are some of the benefits you can experience with good credit:
You Can Get Credit When You Need It
The first benefit of good credit is that it allows you to get credit when you need it. If you want to buy a house or car and have good credit, you'll be able to get the loan you need.
If you want to get a new credit card, you'll have no problem getting approved for it. You can also get approved for rental properties a lot easier with a good credit score.
You Can Avoid Embarrassment
Secondly, you can avoid embarrassment if you have good credit.
Have you ever tried to apply for a loan only to find out that the lender declined to offer it to you? Getting rejected is embarrassing, but you won't have to worry about this if you have a great score.
You Can Get Better Rates and Terms
The other benefit of good credit is that it provides a way to get better rates on the terms with loans and credit cards. Lenders reward people with good credit by offering the best terms for the loans and credit lines.
As you can imagine, you can also experience a lot of other great benefits from good credit.
How to Choose a Company for Credit Repair
Understanding how credit scores work and the things that cause credit problems is vital if you want to improve your credit. As you consider your credit situation, do you feel like your credit needs some work?
If so, look for a reputable company that offers credit repair services, such as Pinnacle Credit Repair. We are a company that specializes in helping people improve their credit scores, and we can help you!
You can call us or visit our website to learn more about the services we offer.