Your credit report can provide you with a detailed picture that can make it easier to spot fraud or errors. Credit repair does not happen overnight, but with these tips, you can take the necessary steps to start fixing it.

A good credit score has many benefits, whether you want to apply for a mortgage or qualify for lower-interest loans. On the opposite side, a lower credit score can have a negative impact on your ability to borrow. The higher your credit score is, the easier it will be for you to borrow. 

In the U.S., where a FICO score below 580 is considered to be “poor,” the average credit score was 718 in 2023. 

Let’s review how credit repair works and what you can do to improve your credit scores.

What Is Credit Repair?

Credit repair is any action you take to improve your credit score, such as paying off debt, making timely payments, and removing negative information from your credit report. Credit repair can be a “do it yourself” (DIY) endeavor or can be accomplished through a credit repair company. These credit repair companies attempt to remove unverifiable or inaccurate information from your credit reports. 

There are many steps that you can take to repair your credit scores if there is any inaccurate information in your history. The Credit Repair Organization Act defines what credit repair companies can and cannot do to comply with federal law. 

Practices such as offering guarantees to remove information from credit reports and advising customers to change identification are not allowed under the act. 

7 Steps To Repair Credit on Your Own

DIY credit repair involves identifying problems with your credit report and addressing these issues yourself. Here are seven tips to repair your credit on your own.

1. Get Copies of Your Credit Reports From All Three Bureaus 

Start by obtaining current copies of your credit reports from all three of the major credit reporting companies (referred to as “credit bureaus”) so you can carefully review all the information listed. The three largest and most used credit reporting firms are Equifax, TransUnion, and Experian.  Obtaining copies from all three will allow you to identify issues and errors that might be unfairly negatively impacting your score on one but not the other.

One in five Americans do not know how to check their own credit scores and reports, but getting copies of credit reports is actually free and quite easy to do. Checking your credit reports regularly is an easy way to spot any inaccuracies as soon as they appear before they become a problem.

You can get a free credit report once a year from each of the three bureaus. You’ll have to provide basic details such as your name, address, social security number, and date of birth to get your credit report. You can also check your credit history at annualcreditreport.com. 

2. Review Credit Reports in Detail

Take a closer look at each of your credit reports to see why your score may be lower than you expected. Your credit score is determined based on a number of factors, such as:

  • Your payment history. Borrowers with accounts in collections or late payments can have lower scores.
  • Your credit utilization ratio. This is the total amount of credit you use in relation to the total credit you have available to you to use.
  • Account types. Having different types of accounts, such as mortgages, credit cards, and auto loans, is viewed favorably if you pay them on time.
  • Credit inquiries. When you apply for financial products such as personal loans, mortgage loans, or auto loans, there may be a hard credit pull or soft credit inquiry. A hard credit check will be reflected on your credit report, whereas a soft credit inquiry will typically not be reported on your credit report nor affect your FICO score on the credit bureau (Equifax, TransUnion, or Experian) report that is accessed.

Make sure your credit reports reflect accurate information. Find negative items on your reports, such as late payments and missed payments. You should also look out for other inaccurate information, such as credit accounts that you don’t have.

3. Dispute Inaccurate Information

If there are any inaccurate details on your credit report because of identity theft or a mistake made by lenders, you should ask for its removal. You can dispute information online, by phone, or by mail.

Once they receive your credit dispute letter or email, credit bureaus must investigate the information and resolve any legitimate errors or oversights within 30 calendar days. They’ll usually check with the lender reporting the information to verify it, and after the investigation is completed, they’ll inform you about their decision. 

4. Address Missed and Late Payments

If you have any missed or late payments on loans or credit cards that are 30 days late or more, it can lower your credit score significantly. The sooner you address these outstanding payments, the faster you can start fixing the situation. Ensure you make payments, especially if they go 60+ days past due, to avoid your account going to collections because, by that point, the lender may take legal action.

If you’re struggling to make payments, you can work with a debt relief company. A professional can review your situation and suggest the best debt solution that fits your needs.

You may be able to get a debt consolidation loan to replace your high-interest credit card debt with a personal loan with a lower interest rate. In some cases, you may be eligible for debt settlement, through which you can often settle your account(s) for significantly less than what you owe.

5. Improve Your Credit Utilization

Your credit utilization has a huge impact on your credit score. Credit utilization is the total unsecured credit you have available to you, across all of your credit cards and lines of credit, compared to how much you currently owe on them. Bringing your credit utilization down can improve your credit scores and your financial health.

There are several debt solutions that can help. Debt repayment methods like debt snowball and debt avalanche can help. Ideally, your credit utilization should be 30% or lower. The lower it is, the better your credit score will be.

6. Pay Bills on Time

Your payment history plays a major role in determining your credit score. If you have any late payments of 30-60 days or more on your account, it can lower your credit score by as much as 100-200 points. An easy credit repair tip is to avoid any late payments in the future. 

To reduce the chances of missing a payment, you can set reminders or set up automatic payments with your bank account. This will ensure that you don’t miss any due dates and will help you improve your credit profile over time.

7. Develop Good Financial Habits

Once you have taken the credit repair steps listed above and made progress, focus on developing good personal finance habits. Make a budget to review your spending habits. Do not take on any additional credit card debt except for emergencies.

You can also work with a credit counselor for a monthly fee if you’re not sure how to build a realistic budget and want to learn money management strategies. Continue periodic credit monitoring, and don’t take on any new debt if you don’t think you can pay. 

How Do Credit Repair Companies Work

Credit score repair companies communicate with credit reporting agencies and companies that provide your information to these bureaus on your behalf. The companies that provide data to credit bureaus are usually financial services companies like credit card issuers, banks, and debt collectors.

These companies aim to have your credit information deleted or modified so that it will be favorable to you. Most credit repair companies start by requesting your credit report from the three major credit bureaus - TransUnion, Experian, and Equifax. 

They’ll look for derogatory marks on your credit reports, such as: 

  • Bankruptcy
  • Tax liens
  • Charge-offs
  • Foreclosure
  • Civil judgment
  • Late payments

Next, they’ll create a plan to negotiate with creditors and dispute errors. Credit repair companies do this by requesting that credit reporting bureaus and creditors validate information, sending dispute letters for inaccurate marks, and more.

How To Find a Credit Repair Company

Ask friends and family for recommendations if they’ve worked with a credit repair company before. If you’re using online search to look for companies offering their services, there are several ways you can screen them: 

If a company seems too good to be true, it probably is. Steer clear of anyone who says they can create a new credit identity for you or guarantees improved credit scores.

What To Know Before Hiring a Credit Repair Company

You should exercise caution before you hire a credit repair company because there are many fraudulent individuals preying on vulnerable customers.

If you decide to work with a credit repair company, you should ensure that the company abides by the rules set forth by the CROA, such as: 

  • Charging fees only after successfully delivering the promised service.
  • Allowing you to cancel services without charge within three days.
  • Providing you with a written contract explaining the credit repair services they provide and your legal rights as a customer.   

As a customer, you have several rights. If a credit repair company does not put its services in writing, asks for upfront payments, or does not answer your questions, avoid working with them.

Avoid Scams

Keep an eye on these red flags to avoid being a victim of credit repair scams:

  • Demanding upfront payment
  • Guaranteeing a specific credit score
  • Asking you to misrepresent information
  • Not providing you with a written contract
  • Not being transparent and open about their services or pricing
  • Promise to remove collection accounts completely if they are truly delinquent

Do Your Research Before You Hire a Credit Repair Company

Credit repair can help you improve your financial health and your ability to borrow when done correctly. Unfortunately, the industry is rife with scams, so it’s crucial for you to vet any company you decide to work with carefully.

One way to improve your credit score is by dealing with your debt and improving your credit utilization. TurboDebt is a reputable and experienced debt relief company that can help you lower your debt burden and live a stress-free life.

Contact us for a free consultation today. Our team offers counseling, consultation, and planning services to help you find the right debt relief option that fits your financial situation. 

Here’s what our satisfied clients are saying about our debt relief services in our TurboDebt reviews.