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Should I Hire Someone to Help Fix My Credit or Fix It Myself?

May 12, 2014
Credit Score, Personal Finance
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When it comes to finances, some things are best left to the professionals. You may choose to hire experts to prepare your taxes or manage your investments. But if your credit needs fixing, should you outsource or do it yourself?

Your credit report is inaccurate. How do you fix it?

If your credit score is less than stellar due to inaccurate reporting, take the following steps:

First, request your free annual credit reports from all three reporting bureaus — Equifax, Experian and TransUnion. This is easy. Just go to Annual Credit Report, enter your personal information and answer a few verification questions.

After receiving your credit reports, look them over for any discrepancies. According to a 2012 study by the FTC, 26% of credit reports contain errors, and 13% of credit reports contain errors that hurt credit scores. Make sure you aren’t part of the 13% by carefully looking over all three reports. If you aren’t sure what to look for, check out this NerdWallet article on how to read your credit report.

If there are discrepancies, gather any relevant proof that shows why the errors are incorrect. Make copies of this proof and send them to the various reporting bureaus with a written explanation of your claim. This explanation should include your name and address, a statement on which items are inaccurate, and the reasons why they are inaccurate.

After 30 days, you need to follow up and make sure the false items have been removed. Continue to monitor your credit regularly to make sure future errors don’t pop up. For more details on fixing your credit report, check out this article.

You made mistakes with credit in the past — how do you fix it?

Your worst credit mistakes — such as bankruptcy — will stay on your report for a maximum of 10 years. However, the majority of credit mistakes drop off your report much sooner than that. Most credit issues are solved with a combination of time and responsible credit use.

Here are the five factors that make up a credit score — in order of importance — and how you can improve your score by focusing on each one:

  • Payment history (35%): Make all of your payments on time, every time. One-hundred percent on-time payments should be an absolute priority.
  • Credit utilization (30%): Decrease your credit utilization ratio by paying down your debt and/or increasing your credit limits.
  • Length of credit history (15%): Just let time do its thing here. And don’t cancel credit cards you’ve had for a long time.
  • Types of credit in use (10%): Leave this one alone, there’s no reason to apply for multiple types of credit unless you need them.
  • New credit (10%): If you need to increase your credit score for a certain reason in the near future, you shouldn’t apply for any credit at all between now and then. Just work on fixing your old credit. If you just want to increase your score in general, apply for credit sparingly. 

Should you pay someone else to fix your credit issues?

Most credit problems are best solved on your own. While disputing errors can be time consuming and responsible credit use isn’t instantaneously reflected in your score, these credit-boosting tasks are pretty straightforward.

If you can’t find the time or don’t want to deal with the credit bureaus, you can pay for professional help. However, it’s expensive and credit repair professionals won’t do anything you can’t do yourself, according to the FTC. We recommend you try to fix your credit issues on your own. If you continue to struggle with the credit bureaus and they refuse to remove credit mistakes, then you can consider outsourcing.

Understand your credit score isn’t forever. It changes regularly as you make decisions that influence it. If you have bad credit now, you aren’t doomed to a life of bad credit. So chin up, buttercup! Your credit history may be dim, but your credit future is looking very bright.

Fix credit image via Shutterstock