The Ultimate Guide to Credit Repair

For many people, the news about their low credit score comes at a very bad time for instance when they are applying for a mortgage, car loan or even applying for a new credit card. The time they get disapproval is the time they realize just how bad things are. When this happens and you decide to investigate the matter, you will be surprised to find a few or many negative items on your credit repot, which are responsible for your low score. While some people will decide to accept the situation as it is and not try their luck repairing their credit, a lot will start their credit repair journey on the spot. This is the only way you will be able to get that which you are unable to access with a low credit score.

Repairing a bad credit will take some time. There are a lot of improvements you have to make on how you spend your money as well as seek the help of a professional in order to see some improvements. This does not mean it will take years though; depending on the number of negative items on your credit report, it can take a few months to six months to see some improvement.

To start your credit repair journey, you need to know what affects your credit first because these are the areas you will pay more attention to during credit repair.

Factors affecting your credit score

Your credit score is calculated from the information on your credit report. It is just a numerical representation of the information on your credit report. In the country today, there are three main credit reporting agencies whose reports are used far and wide; TransUnion, Experian and Equifax. These are the agencies that are contacted by companies that need your credit information in order to know if you are creditworthy or not. A lot of factors are put into consideration in the determination of your credit score and they are summarized under the following categories:

1. Payment history:

This is the category that contributes much to your credit report. Your payment history is basically how you pay your bills each month. 35% of your credit score will be determined by this, therefore it is very important to pay your bills on time without delay or fail. Your payment history is listed on your credit report through the different accounts you have had over the last seven years. Such accounts are for instance loan accounts, credit card accounts, mortgage accounts if you have any among others. The report will show how much you have paid each month compared to the total amount of money you owed each month.

Creditors like utility companies only report late and skipped payments. These will be marked with how late you were in making payments, from 30 to 150 days. Those payments that were made so late will significantly lower your credit score.

2. Total debt

This is equally important as it accounts for 30% of your credit score. The amount of debt you owe especially in terms of revolving debt is very important in determining your creditworthiness. Under this category, creditors will consider your credit utilization. In terms of credit cards, they will weigh the amount of money you owe compared to the maximum line of credit on your cards. If you are the kind of person who maximizes so much on credit use, your credit score will be affected negatively. It is important for creditors to know that you use the credit you receive wisely, and only when it is necessary.

3. The length of your credit history

Loan lenders will not be able to gauge your willingness or ability to repay back a loan if you do not have any credit history showing what you have done with your previous credit. That is why this is an important factor in the calculation of your credit score. It accounts for 15% of your credit score. Under this category, the length of time your credit accounts have been opened will be considered and this includes loans and credit card accounts.

4. New credit

This is usually listed as inquiries on your credit report. It refers to every credit application you have submitted recently, at least in the last two years. New credit accounts for 10% of your credit score. Every new account that you have opened in the last one year can take off about 5 points from your score.

5. Credit mix

The last 10% of your credit score is determined by the types of credit you have. There are mainly two types of credits; revolving credit like credit cards or retail cards and installment loans. Your credit report needs to have a balance of these two types of loans for you to get a higher score. The most important type of credit in the calculation of your credit score is the revolving loan. They hurt your score more than the installment loans because the latter usually have an asset attached to them like a house or a car.

The negative items on your credit report

The kinds of items appearing on your credit report will be the positive ones, neutral and the negative ones. The positive and the neutral items will be reported on your credit report indefinitely but the negative ones have a limited time length when they will appear on your report. Again, the amount of negative damage every negative item causes on your credit score diminishes with time. This means that your bad credit score is not meant to last forever especially if you start working on positive behavior.

The good thing these days is that the negative items can easily be removed from your credit report before their time limit is over. If this is what you want to do, work on the newer negative items since the older ones are fading out slowly and their impact on your credit score may not be that significant.

Here are some of the negative items you can find on your credit report:
i) Charge-offs: these come as a result of a creditor selling your debt to a debt buyer, who will then attempt to collect the amount owed plus the interest, court fees, late charge and anything else that is chargeable on that debt. Charge-offs can stay on your credit report for 7 years and 180 days from the date of delinquency.
ii) Collections: these are debts that have been sent to a debt collecting agency. They are a bit complicated in that you may hurt your credit score further if you pay them off. They are also reported up to 7 years from the date you first fell with the original; creditor.
iii) Repossessions: these are reported for seven years too. The repossession does not take away the debt you previously had, therefore you will still have to pay the debt in full even after it appears on your credit report.
iv) Late payments: late payments are bad even if you will catch up on what you owe. Any payment that is more than 30 days late will appear on your credit report.
v) Bankruptcies: these can appear on your credit report for up to 10 years from the time bankruptcy was filed.
vi) Tax liens: unpaid tax liens will appear on your credit report indefinitely. Those that are paid can stay up to 7 years.
vii) Foreclosures: these are also reported for up to 7 years on our credit report. However, after two years, you can qualify for mortgage if you regain your financial footing.

How to repair your own credit

Even when you have some or most of these negative items on your credit report, there is a lot that you can do on your own to repair your credit score:

1. Get your credit reports from the three main credit reporting agencies I mentioned earlier on.
2. Review each report carefully. Ensure that your basic personal information is accurate and that no other person is listed on your report. Go through every account information and ensure that all of them have been listed accurately.
3. File disputes if there are any errors found on your credit report. You will likely find untimely, inaccurate, incomplete or even questionable information on your credit report. What you do is to dispute that information and have it removed from your credit report. This might help your credit score a lot.
4. Request your creditors to have the negative items removed from your report. If there are accounts that you have already settled but they have been negatively reported, you can request your creditor to have such removed. You can request an item removal too if you promise to pay the amount owed in full. If you succeed in this, your credit score will be much better than it was in the beginning.
5. Work on your credit utilization ratio: once your report is free of all the errors and most of the negative items, you can continue working on strengthening your credit score more. By lowering your credit utilization ratio, you might end up improving your score significantly within a short period of time. This can be achieved by paying off your credit card balances especially on those cards that have huge balances and working to maintain lower balances on all your cards.
6. Access your accounts in collections: if you have any accounts that have been sent to collections, you need to work on them immediately especially the most recent ones. Deal with those that affect your credit scores significantly first and make full payments on them. If you are not in a position to make full payments, negotiate for a settlement with the debt collector so as to pay less than what you owe.
7. Apply for a credit-builder loan: these types of loans are issued by credit unions and smaller banks as a way to help people build their own credit scores. What the loan lender does is to deposit the loan amount on an account that is not accessible to you, which you access once you finish paying off the loan. You are then required to make monthly payments on the loan amount until it is paid in full.

Maintaining a healthy credit over time

After repairing your low credit score, you need to start working on maintaining a healthy credit as this is the only way you will get to enjoy the benefits of a good credit score for a long time. There is a lot more that you can do after you have taken care of all the negative items that were affecting your current creditworthiness:

1. Pay your bills on time: since the biggest part of your score is determined by how timely you are in paying your bills, it is important to ensure that all your bills are paid on time. Note that a single late payment will cause a significant drop on your credit score, and this is not what you want after working so hard to repair it. Organize your due dates or automate all your bill payments to make it easy for you to make all your payments on time.
2. Stick to a budget: a budget will help you live within your means, and then you will not have to spend so much more than you need to. If you are able to keep your finances on track, you will not need to use so much credit and this is good for your credit rating. Save up some money so as to be ready for any emergencies that may come up. When that happens, you will not have to use credit to cater for such emergencies, which leaves you with so much money as credit balances. Do no spend so much money on your credit cards too, because every time you pay on credit, you are left with a lot more to pay.
3. Use a secured credit card: a secured credit card can help you in repairing your bad credit score. If you apply for this card and use it responsibly, your credit score will not be affected.

The Most Legitimate Credit Repair Companies

Credit scores are becoming more important as the days go by. More and more companies are today considering their client’s credit scores before they can offer their services. When your credit score is low, your ability to obtain credit, rent a house, get a good job, get good insurance terms among other things is affected so much because you are considered as a risky borrower. When applying for a loan, some loan lenders will reject your application and others will charge a higher interest rate because of a low credit score. That is why we have credit repair companies.

Credit repair companies are very efficient in matters to do with eliminating the negative items on credit reports in order to repair your score. These companies do this so easily because they know the system too well and how it works from the inside out. This is what makes it hard for an individual to repair their own credit score. The outdated items on our credit report, those that are inaccurate and also the erroneous items may be the reason why your credit score is low. These companies know too well how to remove those items in order to give a significant boost to your credit score. Then you will not have difficulties convincing lenders to loan you money at a good interest rate.

What makes a legitimate credit repair company?

A credit repair company that is able to meet your needs is the most ideal to work with. Many people pay a lot of money for credit repair but they never get to see good results. You therefore have to be sure that you are working with the best company at all times. Here are some tips you might consider in picking out the best credit company:

1. How long the credit repair company has been in business

Experience is always good when you are choosing a service provider and for such an important service as credit repair, you do not want to take chances with a company that is not well known. A company’s track record speaks volumes about the kinds of services you will get and this is how you know if it is worth your attention or not. If a company has been in business long enough, it means that it has a strong foundation. It has also acquired good experience to be able to serve its clients better.

Three years or more is a lon The fees the company charges for its servicesg enough time for a credit repair company to master all it needs to help its clients to repair their credit scores.

2. What rating the credit repair company has on BBB?

Better Business Bureau is a body that evaluates the success and validity of American businesses. Its rating is very important as it shows just how good and credible the business is. Many consumers use the same body to file a complaint if they have a problem with a certain service. This reflects on the rating the company gets in the end. For a good credit repair company, you need a strong and positive rating to be sure that you are dealing with a good service provider.

New credit repair companies will obviously not have a good rating because they are just getting started. This is how you avoid paying for services whose effectiveness you are not sure about. With BBB, you do not have to worry about getting the best credit repair service. You can use the body to get all the information it has uncovered when investigating the credit repair company you are interested in.

3. The fees the credit repair company charges for its services

The cost of credit repair services should be important to you, which is why you need to work with a company that charges a reasonable fee. There are some credit repair companies that charge so much more than they should. Others have hidden charges, which makes the services even more expensive. There are others that promise low-cost services that are charged per item. All these are companies to avoid. If you need a good credit repair service, do not be quick to pay more than $500 for all the services rendered.

Go through the charges for the legitimate credit repair companies you know, and then pick out one that charges fairly to avoid paying a lot more than you should.

4. The length of time it will take to see results

On average, many companies take about 6 months to repair their client’s credit score. This, however, depends on the details one has on their credit report, the amount and type of negative items that have to be removed. This means that the length of time it will take to see results varies from one individual to the other. However, it is important to consider this time so as not to be kept waiting by a credit repair company that is in no hurry to help you.

By 45 days after the beginning of the credit repair process, one should start seeing results. This is because the credit repair company will take about 30 days to investigate the different disputes on your credit report. If you have so many negative items on your credit report, you might have to wait a little longer to see results.

The most legitimate credit companies:

There are so many scam credit repair services on the market today. That is why it helps a lot to know which ones are legitimate. Working with a trustworthy company that can guarantee its services can be a great relief especially if you have struggled for a long time with a low credit score. A legitimate credit repair company is one that is reliable, can be trusted; will meet the end of its bargain and one that will not mess up your relationship with your lenders. For the best of these services, you need to work with the best service providers. Here are some of the few services that stand out above all the others:

1. Discount Credit Repair

Our most recommended credit repair company is Discount Credit Repair. There are a large number of reasons for this. The first of these is that it has been voted the Best Credit Company for the year 2016 and 2017. Second, it is controlled by a team of Credit Repair experts and credit repair specialists who are skilled in a wide range of areas, including legal. The team is consistently being increased to cater to new customers, meaning that at no time are they strained or hampered when it comes to delivering first class service. In addition, it is possible to receive tracking of any issues that you raise on your credit report, so that they can be cleared up in excellent time. Their reputation for brilliant service is unsurpassed.

2. Credit Target:

This is among the best credit repair company you will find in the country today. It is the only credit repair company that is run by actual lawyers. The company offers guaranteed services; therefore clients are only required to pay for services that have already been completed.

The first service is called Concord Standard and it mainly deals with the fundamentals of credit repairs. Under this service, the mistake on your credit report will be fixed, letters of good faith will be sent to your lenders and also, the service providers will look for legal loopholes to get your credit score back to where it should be.

The second phase is the Concord Premier. On this level, clients are taken to the next level of assistance, where their credit is monitored on a monthly basis. Service providers also take you through credit score improvement analysis especially if the first phase did not yield much success.

After that, there is the PremierPlus phase, which adds identity fraud alerts and personal finance tools to the first two phases in order to help you monitor your finances. The company has established an excellent customer service network that is helpful and quite supportive.

3. USA Credit Repair

This is among the most affordable credit repair companies in the country today. It may not have all the fancy offers that are seen in other credit repair companies but it has trustworthy and highly reliable credit repair services you can count on for the best results. The company offers straightforward credit repair services that are easy to understand and therefore easy to pay for. They will fix mistakes on your credit report; send good faith letters to your lenders as well as look for legal loopholes just so they can get your credit score back to where it should be.

Sky Blue also offers its services on a monthly basis; therefore clients are free to cancel the services any time they want. Having been in the market for a long time, it has mastered different ways through which it can effectively help their clients attain a better credit score. Its services are guaranteed, with a full 90-day refund guarantee no matter what the reason.

To serve its clients even better, the company has put together a very efficient and helpful customer service network that does its best to help and offer support.

4. The Credit People Credit Repair Company

This is a great credit repair company too. First of all, it offers a seven-day trial for a small fee of $19, which is good because you can try it out before you buy the service. The company also offers a lump sum price for 6-month services which is a great and affordable offer. There is also a choice for people who prefer to pay on a monthly basis.

One of the things that make this company stand out from the rest is its straightforward services, which are similar to what is offered at Sky Blue. It offers clear credit repair services including fixing any mistakes that could be on your credit report, sending good faith letters to your lenders as well as looking for any legal loopholes that could help get your credit score to where it should be.

The company is easy to deal with and clients can cancel whenever they wish. There is generally a mixed reaction on how other reviewers have written about the company. But it has a great feature, which is the money back guarantee. This is what assures you of a full refund just in case you are dissatisfied with the services rendered. If for instance you had paid for six months and you want out before they are over, you can cancel if you are not satisfied and still get back all your money.

Customer support service offered by the company is a bit limited. You can for instance call between 8 am and 5 pm. You can email the company and its customer support will get back to you within 24 hours.

Be careful about credit repair companies scams

It is unfortunate that scammers are all over the internet these days and they pose as credible credit repair companies only to steal from you and offer no help. For a person that is new in these kinds of dealings, it might be a great challenge determining what a legitimate company is and what a scam is. However, there are telltale signs, and these can tell you where you are headed to. If a company guarantees to raise your credit score within a short period of time, they may not be genuine. A genuine company will take time to study your credit report before they can give you any assurances. Other scammers will ask you to make a large amount of money as an upfront deposit. A genuine credit repair company will only charge for services it has rendered.

It is good to be on the lookout not to be scammed in the process of repairing credit scores. Take time to conduct an intense research and to compare different services so as to be sure that the company whose services you will buy is a genuine one.

Remove Tax Liens

Tax liens are basically legal claims by the government entity against the assets of a noncompliant tax payer. They are usually the last resort to force a person or business to pay back taxes. These tax liens are imposed by the law as a way to secure payment of taxes. They can be imposed for delinquent taxes owed on personal property, real property or even as a result to pay income taxes and other forms of taxes.

If the taxes remain unpaid, the tax authority is free to use a tax levy in order to legally grab your assets which may include bank accounts, investment accounts, real property, and automobiles among others. These are meant to cover up for the money you owe as tax.

In order to get rid of a tax lien, a taxpayer must pay what he owes, reach an offer in compromise with the tax authorities or even get the debt dismissed in a bankruptcy court.

The problem with tax liens is that they are publicly recorded and so, they may be reported to credit reporting agencies. This automatically lowers your credit score and eventually credit worthiness and you might start facing problems borrowing money. Paid tax liens will remain on your credit report for 7 years starting from the date it was filed. However, those that remain unpaid can stay on your credit report indefinitely.

The danger of having a tax lien

Tax liens on your credit report are just the same as judgments; both are basically a legal remedy for your creditor to collect money from you. You stand to lose a lot with a tax lien, for instance IRS gets the legal right to your property including financial assets and personal property. Other than this, there are other serious problems one can face with a tax lien.

It becomes impossible for one to sell their home with a tax lien. Already, IRS has obtained the legal right to what you owe, therefore you cannot sell it. If you do, part of the money you get from the sale will go to satisfy the lien, which is not agreeable to many.

It also becomes impossible to qualify for new credit. If you have not been paying taxes as per the government requirement, it will become very challenging to convince a loan lender of your willingness to pay back if they loan you money. Once tax liens are filed against you, IRS establishes that it is first in line to collect; therefore creditors automatically know that they will not have much alternative in case you fail to repay back the borrowed money.

The most obvious danger of having a tax lien on your credit report is the significant drop you will experience on your credit score. You can experience a fall of up to 100 points after his and this means that your credit report will not remain where it was. This kind of damage can be a little difficult to undo because these kinds of items can stay in your credit report for close to ten years.

How they affect your credit score

Even though some tax liens eventually get removed from your credit report, those that stay on your report can cause great damage on your on your credit score. This is one of the indications that loan lenders look out for in order to understand the kind of debtor you are. If the government has filed a tax lien against you for not paying your taxes, it portrays you as a risky borrower. Failure to pay taxes gives potential lenders the impression that you might be in financial distress. It might also send a message across to your future employers that you are prone to forgetting or even ignoring payment obligations.

Once the lien gets added to your credit report, your credit score will then be affected. Its weight on your credit score is not easy to establish though as it is considered just like all other items on your financial report. One’s credit score is determined by many factors, therefore the lien may have a major or not major impact on your credit score depending on the kind of financial history you have.

However, it is an item to think about as it is always a derogatory entry, just like a bankruptcy, a collection, a judgment, a charge-off, a repossession among others and its impact can, therefore, be little or so much.

What is the way forward?

The best you can do if you have a tax lien on your credit report is to pay what you owe. Good thing is that the credit reporting agencies update the credit file within a day of being notified. The problem with this is that the lien will not be removed from your credit report for at least 7 years after it has been released. One that has not been paid can stay up to ten years after it was filed.

Tax liens are the same as bankruptcies and foreclosures when it comes to the effects they have on your credit score. It can cause your credit score to plummet within a short period of time. This can take a very long time; say up to ten years to recover fully.

If you are hit with a tax lien, it can help a lot if you start paying your credit cards and loans on time. Keep your balances low as well so as to minimize the amount of damage on your credit score. The best news is that there is a way to get a tax lien removed from your credit report. This is the best way forward as it can reduce the effect of the negative impact that the lien had on your credit score.

How to get a tax lien off your credit report

Even though it is the IRS that files the tax lien that appears on your credit report, they do not report such matter to the credit reporting agencies. Like I mentioned earlier, tax liens are usually made public, just like bankruptcies and judgments. This is where the credit reporting agencies obtain their information. In trying to have the item removed from your credit report, you have to deal with both IRS and credit reporting agencies.

In as much as many people would love to stop the tax lien from appearing on their credit report before it actually happens, you are never informed of the tax lien, at least not until it has already appeared on your credit report. The only notice you receive is from IRS demanding payment from you. If you fail to make payments, that is the time they file a notice of tax lien with the amount you owe. This item will stay on your credit report indefinitely as long as it is unpaid.

Filing for bankruptcy cannot help much when you are in such a situation. The tax lien item on your report will still remain there. If you are lucky to file for bankruptcy before the lien is attached to your report, which is the only time you will avoid having it in your credit report. However, you will have to deal with the effects of bankruptcy on your credit report too; therefore you are not safe either.

The only option you have after all this is to dispute the tax lien. If the government is unable to prove that you owe the debt, you will succeed in having the lien removed from your credit file. If however you owe the government a lot of money, it will not ignore the dispute. IRS can confirm and even update the information and this means that you will still be stuck with the tax lien on your credit report. Paying the debt in full is also not a good idea if you want to get rid of the item from your credit report. After paying in full, IRS releases the lien but that released lien will be reported for about 7 years after the time you made the full payment.

There is a way out though, through which you can remove the lien from your credit report when it has not been paid in full.

1. Complete an IRS form 12277 to request a withdrawal

This is the form that will serve as a request for withdrawal of the original tax lien. The withdrawal is very different from having the tax lien released after you have made complete payments. A withdrawal can be requested even when one is still making payments on the lien. The only thing you will be required to do here is to pay in full. IRS will not agree to withdraw tax liens from your report on settlement offers; the total amount of money owed has to be cleared in full.

The other reason why this is good is because it will help a lot if you need new credit or to sell your home, which is a bit difficult with the tax lien on your credit report.

When completing the form, try to locate the form that was sent by IRS as notification of the original tax lien. This can help speed up the process. You can still send the form without the notification though.

If you convince IRS that withdrawing the tax lien is for the best interest of the tax payer and the government, you might succeed.

2. Send the completed form 12277 to IRS

Find out the regional address where you should email the form and ensure that you use a certified mail for this.

3. Wait for a response

If you are successful in filing for a withdrawal, IRS will act after 30 to 45 days. They will do this by contacting the court where the lien was filed, instructing them to withdraw it. You too will get a copy of this notification from IRS.

4. Contact the reporting agencies to dispute the lien

Contacting IRS alone will not help much because the lien is already listed on your credit report. That is why you need to deal with the reporting agencies as well. When you contact them disputing the tax lien, the three reporting agencies will contact the courthouse where the lien was filed in order to establish whether or not the information you have given them is accurate. Since the courthouse already knows that your lien has been withdrawn, its response will be quick and this will speed up things to have the tax lien removed from your credit report quickly.

5. Confirm the removal

After receiving a response from the courthouse, the three reporting agencies will act on the lien, and then send you a notification of how the dispute turned out. You have to confirm this to be sure that the lien does not appear on any of your the Confirm the removalee credit reports. If it was not removed in any of them, you should file a second dispute in writing. Include a copy of the notification that you received from IRS that your lien has already been withdrawn.

All this has to be done as soon as possible because tax liens can really affect your credit score if allowed to stay on your report a little longer. Credit card companies and loan lenders will consider this in issuing you with credit and deciding your credit limit, which may not work well for you especially if you have a major purchase to make like a car or a home.

Since IRS does not work together with the credit reporting agencies, this process can be very frustrating and confusing. It is even worse for someone who is not familiar with the tax laws. You might find yourself dealing with a release versus a withdrawal without knowing what to do in order to restore your credit to where it should be. That is why you should seek the help of a professional who understands tax liens better. Such a professional will know how to proceed with your particular case better to give you a good outcome in no time.