A Definition of Credit Repair

Credit repair is a three-part process. The first is obtaining and then fixing your credit report. The next is getting your finances organized in order to conquer debt. The final stage is then re-building your credit to the point where you are eligible for important secured loans such as a mortgage.

One a person might utilize credit repair is if they have been a victim of identity theft or stolen credit or bank cards. Thieves can cause a lot of problems for someone's credit report, and if this has happened to you, then you should quickly order a copy of your credit report and begin to repair the damage.

Credit repair can also be beneficial to someone who has just experienced large medical bills. Because the insurance companies are not always on time with their payments, or sometimes even lose the invoices, your credit can suffer. Your report can be marked with late payments or non-payments due to no fault of your own. In these instances, credit repair is a legitimate way to remove these potentially harmful marks from your credit.

Be Wary of Companies Promising the Impossible

With all of the advertisements for credit repair, a person might think that if you give them enough money, some companies are able to simply wave a magic wand, and all of their mistakes, late payments, charge offs, tax liens, and even bankruptcies would disappear from their credit report. The truth is that they will likely take your money, and your credit report won't be any better off for the cost. It is simply not possible to magically erase bad credit from you credit report.

Fixing Your Credit Report

The first use of legitimate credit repair is when the credit bureaus make a mistake. With the millions of credit reports, sometimes the credit reporting agencies accidentally attribute the wrong data to the wrong reports. It's easy to incorrectly write one letter for another, or reverse the numbers on a social security number. If this happens to you, the results could be that someone else's credit report remarks end up on yours. For example, if your name is Jane Doe, but the credit bureau attributes Janie Doe's marks on your report, all of her late payments, charge offs, tax liens, or anything else could end up on your report. This is one of the main functions of credit repair - to erase any false information that is on your report.

Credit repair isn't about removing true information from your credit report. Instead, it is a method used by people who have false and damaging data on their credit report. If you feel that you have information on your credit report that either isn't your own, or in some way is unfair because it was caused by someone else, you should contact the credit reporting bureaus immediately to have it removed.

For an in-depth look on repairing your credit report yourself, visit our article on How to Fix Your Credit Report.

Conquering Debt

After clearing your credit report of inaccurate information, the next step to credit repair is getting your finances in order in order to start making headway on accumulated debt. This may mean consolidating debts, negotiating debts with your creditors, seeking credit counseling and getting your finances organized. During this stage it is critical to make payments on time and to do everything you can do get your payments down to a manageable amount.

Rebuilding Credit

While steadily reducing the amount of your debt, there are several safe ways to build your credit back to the point where you will be eligible for important kinds of loans like mortgage and auto loans, including getting a secured credit card, using a gas station credit card or finding a co-signer on a credit card with a small maximum. During this time, it is important not to rely on credit at all, and instead use the various means for building credit as a step up the credit ladder.

Summary

Credit repair is a three-part process: fixing your credit report, conquering debt, and rebuilding credit
Credit repair companies claiming to be able to erase true items on your report are likely scams
Fixing a credit report involves removing inaccurate information on the report
Getting your finances in order to steadily remove debt is a critical second step to repairing credit
There are several safe ways to rebuild your credit, but it is important not to rely on credit during that time

Now that you know what credit repair is, take a look at our article How Do You Know if You Need Credit Repair to find out if you fit the bill for getting your credit in order.