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Credit & Finances

What Is Credit Repair?

Jackie Hug, Senior Defender
November 20, 2020

Let’s quickly break down what credit repair/credit restoration is, what it’s not, and some of the basic pieces of your credit report, the various scores (that’s right, there’s a whole lot of different score models out there) and your credit file (a widely overlooked piece).

What Is Credit Repair

Why Is My Credit Report Important?

Managing your credit report allows you to put you in a better position when applying for a credit card, auto loan, bank loan, mortgage loan, employment, insurance, rental housing, and more. For example, if you check your credit and notice that there were a few negative items on your report, you will have a chance to fix those items before applying for credit. By doing this, you can:

  • Prevent negative items being seen by creditors, lenders, insurance agents, landlords, and employers
  • Potentially save yourself from needless hard inquiries, which can negatively impact your credit report and scores
  • You may be able to get better terms for the account you are applying for

How Your Credit Affects

What You Pay For A Car

Brand New Toyota Camry

$23,000 (5.5 year loan)

John and Jane have 2 different credit scores and they both want this same car. Here’s what it will cost each of them:

In this real-life example, John pays $9,431.06 MORE than Jane for the
exact same car and purchase price! This same thing happens with your credit
cards, mortgage, loans, etc. Cleaning up your credit will lower your bills
and can save thousands of dollars!

Hopefully this shows how big of an impact your credit can have on your finances, causing a deeper hole to climb your way out of. This is why improving your credit should be seen as an investment in your future, not an expense.

What Is Credit Repair?

There are a lot of misconceptions with credit repair. When most of our clients start asking “exactly what is credit repair anyway?”, they often end up doing a quick search and thinking it’s simply removing items that hurt their credit score, but there’s more to it than that.

There are consumer protection laws that can be utilized to remove negative items, but just because a negative item exists, doesn’t mean it can be removed. While disputing and removing negative items is one of the two main ways to improve creditworthiness, another major component is building the right kinds of positive credit accounts. In general, here’s what’s involved in comprehensive credit repair.

  1. What is your goal and timeline? This will help determine the best strategy to fit your needs.
  2. Research negative items on the credit report and dispute them with various credit bureaus, creditors, and collectors.
  3. Build a positive credit history through use of the right mix of revolving credit, installment credit, and other debt obligations.
  4. Keep utilization ratio and hard inquiries to a minimum.

What Credit Repair Is NOT

Now that we got an overview of what is credit repair, let’s cover a few things of what it definitely is not:

  1. A guarantee of being able to remove negative items for credit score increase
    • While we offer an incredible 90 day and 30 day money back guarantee if we don’t produce expected results, we will never guarantee specific results. We recommend you steer clear of any person or company that does. We offer the best guarantee, because we only take on clients that we’re confident we can get results for.
  2. Pay to Play – Buying and selling tradelines is illegal, but that doesn’t stop bad players from taking peoples’ hard-earned money. We recommend staying away from anyone that offers these. Beyond being illegal, the credit models have caught on. It’s not fooling anyone and they no longer help in any way, shape, or form.
  3. An overnight process – The amount of time credit repair takes varies by person. We typically see results within 90 days, and often within 35 days. There are also more aggressive strategies that can get quicker results if successful, but can also result in getting less results overall.

What Is A Credit Report?

Your report is a snapshot of your credit, lending, and other financial account history. It details when you applied for credit, how many positive and negative accounts you have, who viewed your report, and other personal information. Reviewing your report every four to six months gives you a chance to check for

  • Identity theft (an increasingly common problem)
  • Inaccurate accounts
  • Incorrect personal information

Credit Report vs Credit Score vs Credit Profile

There is common confusion among these terms, but they are very different and can all play a role when applying for credit or loans.

Credit Report

This is the report detailing current and past accounts. It contains information, such as:

  1. What credit lines you have previously had or currently have
  2. Status of those credit lines (open, closed, good standing, late payments, collections, etc.)
  3. What type of credit or account – Generally installment or revolving, but could also be a judgement, lien, eviction, bankruptcy, medical bill, etc.
  4. Utilization – How much of your available credit is being used
  5. Inquiries

Credit Score

This is a calculation based on your credit report. There are many different score models, which means two lenders can get your credit score at the exact same time, based on the exact same report, but get two very different scores. There are two main scoring models, with each having various sub-models.

  1. FICO – This is the most commonly used scoring model. There are many score models with the most recent being model 9. The most commonly used FICO score models include:
    • Mortgage Lending often uses FICO model 2, 4, and 5
    • Auto Lending often uses FICO Auto Score 2, 4, 5, and 8
    • Credit Card Issuers often use FICO Score 3 and FICO Bankcard score 2, 4, and 8
  2. Vantage Score – This is the top competing score model to FICO and is gaining popularity. According to the 2019 VantageScore Market Adoption Study, since June 2015, VantageScore usage has grown ~20% ever year. Much like FICO, credit card issuers, auto lenders, mortgage lenders, credit unions, banks, tenant screenings, and many more use the VantageScore.

Credit Profile

There’s a lot of talk around credit scores and as a result many people have the misconception that a good credit score is all that matters with credit lines, loans, etc. Often times this is far from the truth, especially with home loans. Home loans are a great example of where your credit profile is used. Your credit profile gives a much more detailed picture of your creditworthiness and net worth. The better your credit profile, the more likely you are to qualify for a mortgage. Your credit profile mainly includes:

  1. Credit Report
  2. Credit Score
  3. Income
  4. Savings
  5. Debts

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