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The Myth Of Instant Credit Repair

The Myth Of Instant Credit Repair

Good credit is required in most aspects of society and it is important to remember to always protect yourself financially. While it is possible to live a cash only existence, it will often create an inconvenience at best and an outright roadblocks at worse. Credit histories are often reviewed by employers conducting background checks on potential hires and landlords looking to lease apartments to financially responsible individuals. Due to the importance of good credit, many consumers are often lured by the myth of instant credit repair.

Before you can understand why instant credit repair is a myth you need to know how credit reports work. A credit report is reflection of an individual's credit history which is then summarized into a credit score. Credit reports contain information on various types of loans extended to consumers like lines of credit, also known as credit cards and mortgages. For most consumers, a few credit cards, their personal information and a mortgage is all that will appear on their credit report. However, there is an additional section where legal judgments, bankruptcies and liens are listed. In the lines of credit section, most consumers will have a listing of their credit cards showing outstanding balances and payment histories. A credit report is broken down into key categories with different weightings. Payment history, debt utilization, length of credit, new credit and types of credit all comprise your FICO credit score. As you can see many of these will not be susceptible to instant repair.

Now that you know what aspects make up a credit report you will have a better understanding of why instant credit repair is a myth. Payment history, the single largest aspect of a credit score, is something that can only be rectified with time. Making monthly payments for the correct amount and on time is the only way to improve this section which can take years. Debt utilization is the total amount owed relative to the amount of credit available. What this means is that the only way to lower the debt utilization ratio is to pay down existing debt which will also take months if not years. Opening new credit cards in an attempt to lower your debt utilization ratio is actually a negative. This is because any lender worth their salt will notice maxed out credit cards with a few new credit cards recently added which is a red flag. Black marks like charge-offs and bankruptcies appear for 7 to 10 years and normally cannot be removed prior to that.

Legitimate credit counseling services will understand these limitations and convey responsible and realistic information to consumers looking to repair their credit. They will make it clear that there is no quick fix and that it will take time and consistent payments to repair existing damage. Avoid common techniques of quick credit repair like partial settlements and closing accounts as both of these will reflect poorly on your credit report. Even options which are legitimate like correcting inaccurate credit information can easily be done by most consumers saving money for more important uses. At the end of the day there are many shady organizations selling consumers a bill of goods looking only to take their money. The old staying of "if it looks too good to be true then it probably is" is important to remember to avoid any companies perpetuating the myth of instant credit repair.

Image by: Nick Lee