Your credit scores speak a lot about your financial value. It puts an impression of your net worth and helps you build a good reputation around the banking and money lending areas. It makes you a more dependable person when you try to get loans for different reasons.
Why do you need a credit score?
We often fail to save up the required amount of money for a lot of purposes. Under such situations, we take up loans. The loans are passed on the basis of your credit score. The better the score, the more likely you are to get a loan.
We take loans for a variety of reasons, such as home loan, car loan, educational loan, loan for buying home appliances and also for mobiles and laptops. Your credit score plays a crucial role in these loans. Banks and money lenders evaluate your credit score to know whether you’ll be able to pay off the amount or not. If there is any negative credit information then you might face difficulties with your loan application.
What is negative credit information?
Negative credit information is a drawback for you if you have any. This decreases your credit score and makes you a risky borrower for money lender and banks. An individual or even a company can have negative credit information. This happens when you fail to pay installments within the deadline, bankruptcy, foreclosure, and tax lien. Once there is negative credit information in your credit score history, it might take years to remove it. Negative credit information can cause problems when you apply for loans, no matter what type of loan you are applying for.
For any individual or company, it is better to have one or two negative credit information. Here is a list showing the effect of negative credit information in terms of duration.
- For late payment, the duration is seven years.
- In the case of bankruptcy, there are two durations. Chapter 13 has seven years duration while Chapter 7 has ten years.
- Foreclosures have a span of seven years.
- Collections have a general span of seven years but it may vary depending on the age of the debt.
- In case of public record, the span is of seven years while evading taxes has a greater influence.
It might not be possible for you to pay all your debts on time, you may get some negative credit information. The best thing you can do is improve your credit score rather than worrying about the failures.
How to assess your credit history for free?
In place of falling in the trap of scammers, check your credit score for free and work accordingly. There are three major credit reporting bureaus from where you can receive one free credit score report every year. These bureaus are Equifax, Trans-Union, and Experian. They record your detailed credit history and you can assess your credit report from there. To get access to your credit report, you need to follow three simple steps:
- Get a free copy of all the three reports from their respective online websites
- Review the report thoroughly to locate errors, if any
- Once done, prepare a list mentioning the items you have to dispute
What is Credit Repair?
It is the process of fixing your negative credits or bad credits – this turn helps you improve credit score. Even though the term credit repair refers to the process of disputing errors on the credit score report. As mentioned earlier, you can choose any one of the three credit bureaus to go through the dispute process for free.
All you need to do is to file a formal dispute with your credit bureau by mail or online support system. This dispute needs to be backed by a proper explanation of the error and documentation proving the error.
People who have little knowledge about credit score have no idea on how to file a formal dispute. In such cases, they tend to hire credit repair agencies or companies. Such companies charge a fee for doing their part. It is better to seek help from these companies where there is more than one error in your credit report.
How does credit repair work?
There are three standards of credit repair leverages. Firstly, the credit report needs to be 100% accurate. Secondly, the report must be fully substantial. Thirdly, it has to be completely fair. Often a lot of credit repair companies only check the accuracy and misses out on checking the other two standards.
A well-reputed credit repair company can check your report in details keeping the three standards applicable in all aspects. This will help in better solutions without any legal issues. For instance, you own a collection account and it’s been sold to different debt collectors. As a result, it will appear several times on the credit report. Even though the information is accurate, it not fair. To conclude, it meets the first standard and denies the third.
How to spot a credit repair scam?
These scams are mostly done by credit repair scammers. They will convince you that they can help you evade the long duration of negative credit information and scam you. People who wish to have a clean credit score, often fall prey to these people. You won’t benefit from these scammers but you will surely land into a pool of legal issues.
Here are some of the common indications which prove that the company you chose for clearing negative credit information is a scam:
- The company asks for advance payment for services yet not provided
- You are suggested for not contacting any credit reporting agency by the company
- Even though the credit report information is correct and accurate, the company assures it can change the report
- The company asks you to dispute all the information in your credit report even though it is accurate
- The company asks you to create a new credit identity without sorting previous issues
If you plan to follow or have followed any of the above-mentioned way outs to clear your credit score report then you are in trouble. Generally, all these ways are tricks to scam you, so you shouldn’t fall for their words. If you indulge into any of these then you are indirectly committing fraud.