What You Need to Know About Credit Scores, Credit Repair, and Credit Rebuilding

 

We recently addressed the topic of credit scores.  Today, we want to take some time to discuss credit repair and credit rebuilding. Though the terms sound similar and people often use them to mean different things, there is a difference between repairing and rebuilding credit. Regardless of your history of using consumer credit or your current financial circumstances, understanding what you can do to make your credit score better is valuable.

Credit Repair Is Not Always Possible

You may come across advertisements or articles that claim you can repair your credit and improve your credit score almost immediately. While credit repair is a possibility, it isn’t always an easy process or available to everyone.

By credit repair we mean the process of removing erroneous, harmful information from one or more consumer credit reports.

A credit report is a collection of information that details each individual consumer’s past use of credit. Credit reporting companies assemble this information from various sources and use it to determine a borrower’s credit score. Sometimes, the information found on one or more of an individual’s reports is inaccurate, incomplete, or completely wrong. As a consumer, you not only have the right to view each of your credit reports each year for free, you also have the right to demand the credit reporting companies remove any erroneous or harmful information. As long as you follow the notification and removal process properly, you can remove the wrong information and see your score rise because of it.

Credit Rebuilding Is Always Possible

While repairing credit can be an effective strategy, it isn’t always possible. If your credit reports contain correct information, there aren’t any mistakes to correct. In this situation, credit rebuilding is the only way to achieve a higher credit score.

Credit rebuilding refers to taking actions as a borrower that will increase your score. Credit scores are based on how you’ve used credit in the past. If you know how credit scoring companies use that information to determine your score, you can take actions that will lead to a better credit score.

For example, simply paying all of your bills on time is one of the best ways to rebuild your credit. Even if you have a negative credit history that will keep your score low, such as filing for bankruptcy, you can begin rebuilding your credit almost immediately. As long as you take actions that reflect on you positively, you can begin the rebuilding process whenever you wish.