What is Credit Repair Anyway?
First things first, we need to set the difference between credit repair and credit score. There is always a confusion between the two.
Basically, the phrase credit repair could refer to one of two things:
- Correcting mistakes on your credit reports
- Improving your credit scores through better financial habits
Usually the word “repair” is what throws a lot of people off, because it’s a general word that can have a few different meanings. In other words, credit repair could apply to either of the two situations listed above, even though they are two different things.
Let’s talk about each one of these topics in more detail, starting with corrections made to a credit report.
What can be corrected on your report ?
Did you know you actually have three different credit reports? It’s true. You have one for each of the credit-reporting companies — Experian, Equifax and TransUnion. The reports are not shared between these companies, but unique to each company. This means that you could have a mistake on credit report but not on the other two. Or you could have the same mistake on all three reports from all three companies.
In turn, your credit score is derived from the information found within your three credit reports. So as you might have guessed, you have three scores as well. It’s a bit redundant, I know.
When you buy a home and apply for a mortgage loan, the mortgage lender will check your credit by requesting information from all three of the credit-reporting companies. So it’s important for your credit reports to be accurate and free of errors. An error on one or more of your reports (such as a loan that’s not yours) could potentially lower your credit score, thus lowering your chances of being qualified for a loan.
So this type of credit repair involves corrections made to your reports. Of course, the first thing you need to do is request copies of your credit report. Only then can you review the information for accuracy. If you find a mistake on one or more of your credit reports, you should submit a dispute on the company’s website that produced the erroneous report.
So the first aspect of repairing credit refers to your reports. The second form of credit repair has to do with improving your credit score by changing your financial habits for the better. So let’s talk about that next.
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