Discover how to take control of your finances, dispute legitimate errors and get your credit score back in shape.
Having bad credit is a common concern for people thinking about how to finance a new home or car. This is because lenders evaluate your credit report to assess your ability to repay a new loan, so any black marks on it could reduce your chances of getting approved.
Lucky for you, there are some useful strategies that can help salvage your credit report — either done by yourself or with the help of a credit repair specialist. This guide explains how to remove errors from your credit report and gives you some insight on why a credit repair company might be an option for you to consider before your next loan application.
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How to remove blemishes and credit report errors
A negative item on your credit report can only be removed if the information listed is inaccurate or if it’s outstayed the rightful duration. When legit black marks are on your credit report, the only thing you can do is give it time and wait for it to be removed — most negative marks stay on your report for seven years.
To improve your chances of clearing inaccurate marks from your credit report, follow these three steps.
Step 1. Order a copy of your credit report
To kick things off, request a copy of your credit report from any or all of the credit reporting bureaus — Equifax, Experian and TransUnion. Once you’ve received a copy (or copies) of your credit report, start looking through your history to identify any black marks or defaults.
Keep in mind that the details on your credit report may vary between each agency, so cross-checking between reports to confirm complete accuracy is recommended.
Step 2. Identify the black marks and defaults
The term “black mark” refers to any information on your credit report that may throw up a red flag for potential lenders. Some black marks can have a much worse impact than others, for example, defaults can have more of a detrimental effect to your credit score.
When you receive your report, these are the negative items to look for:
- Missed payments. Your credit report retains negative payment history for up to seven years. This means that any missed payments on your mortgage, loan or credit card will likely show up your credit report, lowering your credit score and hurting your chances of obtaining new credit.
- Defaults. Defaults can be extremely damaging to your credit reputation as they indicate that you’re unlikely to repay your debts on time and may stop making payments altogether.
- Charge-off. When a lender has given up hope that you’ll repay your debt, they’ll charge-off your account. This means that it’s chalking up your debt as a financial loss so it can collect tax benefits as consolation.
- Collections. When you don’t repay what you’ve borrowed, the lender will generally sell your debt to a third-party collection agency to recoup a fraction of its loss. From there, the collection agency will contact you however it can trying to get the debt paid.
- Judgments. Court judgements are public records and they can include bankruptcies, tax liens and civil judgements. Bankruptcies and tax liens can stay on your credit report anywhere from 7 to 10 years depending on the circumstances. A debt from a civil judgement arises when you lose a lawsuit — this can stay on your credit report for seven years.
- Foreclosure. Defaulting on a mortgage results in the lender repossessing your home and a glaring black mark on your credit report.
- Repossession. When a secured loan is defaulted on, the lender can assume ownership of the property that the borrower listed as security for the loan. Repossession happens most often on automobile loans.
- Account in credit counseling. Consumer Credit Counseling Services (CCCS) aims to help consumers overloaded with debt by negotiating with banks and lenders on their behalf. CCCS typically requests to minimize payments and interest rates so the consumer can pay off their debt in a more timely matter. When lenders agree to the request, they may note on the credit report that it’s a negotiated account.
- Credit inquiries. Credit inquiries (including personal loans, mortgages and credit cards) can remain on your credit report for up to two years, regardless of whether they are approved. That’s why it’s important to space out your applications and only apply for credit you have a high chance of being approved for.
Keep in mind that if you’re approved for a payday loan, your payment activity generally won’t be reported to the three main credit bureaus. However, if your account is sent to collections, you can almost be certain it’ll result in a negative mark on your credit report.
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Step 3. Remove the black marks and defaults
Credit repair agencies are experts at spotting these errors and may be more effective at repairing your report than you might be. But these companies can be costly to hire, so the following steps will help you attempt DIY repairs on your credit report.
- Request your credit report. You need to see an up-to-date version of your credit report before you can begin repairing it.
- Identify the negative listings. Using the list above, figure out exactly what information is hurting your credit score.
- Check for incorrect listings. Lenders can sometimes make incorrect listings by mistake. For example, they may report the same debt twice, list it on the wrong person’s account or incorrectly list a debt as a default.
- Report any errors. If you come across any errors on your credit report, you can initiate an investigation by filing a dispute with the credit reporting agency or agencies that have this mistake on file.
- Negotiate with your credit provider. If existing credit accounts are part of the problem, get in touch with your credit provider and try to negotiate a repayment plan that’s manageable for you. This will help reduce missed payments and prevent debts from becoming defaults on your credit report.
- Consider getting external help. If repairing your credit by yourself seems to be an overwhelming task that you don’t have the time or patience for, consider hiring a credit repair specialist who can potentially remove negative listings. Some credit repair companies can help assist you with long term financial planning and management as well.
Credit repair is a legitimate process of removing black marks from your credit report, however, these repairs take time and your credit score won’t be positively influenced immediately.
Depending on your situation, you may find that credit repair is a priority. The cost of credit repair professionals could be a mere drop in the ocean when it comes to the money you could save on loans if you have better credit history.
Things to consider before calling a credit repair service
You can call a credit repair company for a consultation at any time, but remember that credit repair can only remove incorrect or illegitimate listings. Keep these factors in mind before moving forward with a credit repair service:
- Expenses. Weigh up the costs of credit repair against the possible value of the service. For example, the long term benefit of a home loan with favorable terms outweighs the short term costs of hiring a credit repair specialist — but the benefit depends on the service being successful.
- No guarantees. The agency will investigate your listings but cannot by law offer any certainty of removing them.
- Time factor. When studying your negative listings, also take note of when they will “expire”. Most credit black marks disappear from your credit file after seven years, so in some cases it may be worth waiting it out if you’re not planning on utilizing credit in the near future.
Consider your credit report carefully and what may be realistically achieved through a credit repair agency before you take on the expense of this service.
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Bottom line
There are always step you can take to improve your credit score, so if you have less than stellar credit history, start by focusing on cleaning up your credit report before thinking about approaching any prospective lenders.
Now that you understand how to dispute errors that could potentially impact your creditworthiness, you can make an informed decision about how to repair your credit based on your individual circumstances and goals.
I have one default under my name and I’m planning to repay the company the amount due. I need to know what is the next step when I’m done repaying the amount. Is the default going to disappear after the payment or should I contact credit repair specialist to remove the default?
Hi Nam,
Thank you for reaching out.
If the default payment is not yet sold to collection agencies, it should disappear from your records after you have paid it, otherwise it will stay on your records up to 7 years (plus 180 days from the delinquency date).
You need to make sure that your lender forwards the report to credit reporting agencies for removal of the listing once you are paid to avoid having it on your records for up to 7 years.
Please also note that the this may only be apply for the users in the USA and may not be the same for other country.
Hope this helps! 😊
Kind Regards,
Mai
How much does it cost to remove default on my credit report and how long will take to do so?
Hi Jang,
Thank you for getting in touch with Finder.
Kindly refer to the comparison table on this page and check the provider’s features/benefits and when you have decided who to deal with on your default concern, please click the Go to site button to be redirected to the provider’s official page. The cost as well as the time frame varies on the provider as well as the number of your negative listings.
I hope this helps.
Thank you and have a wonderful day!
Cheers,
Jeni
How much to removed the defaults please
Hi Edrei,
Thanks for leaving a question on finder.
You can call a credit repair company for a consultation at any time, but remember that credit repair can only remove incorrect or illegitimate listings. Keep these factors in mind before moving forward with a credit repair service.
Credit repair can either be free or it can cost upwards of a thousand dollars — it’s up to you how you want to handle it. Here are your options:
– DIY credit repair: $0
You don’t have to pay someone or a service to repair your credit, you can do it yourself, however it’ll take time and patience to do the research and implement what you’ve learned. You’re entitled to a free credit report from the three major credit bureaus each year, so start there to begin auditing your credit report for mistakes.
If you find any suspicious information on your credit report, each credit bureau has an online form where you can make a dispute to remove errors for free. If you’d rather make your dispute via mail, you can find a number of sample dispute letters online and then send them to the bureaus — your only cost here would be postage.
– Credit repair software: $30-$400+
Credit repair software can be minimal or very in-depth. On the minimal side, you can purchase software relatively cheap and it’ll come with a sample dispute letter and give you directions on how to handle each situation regarding incorrect details on your credit report.
The in-depth software can cost a few hundred dollars, but it’s loaded with sample dispute letters for different situations, alerts notifying the progress of your dispute, plus it can track your credit score. The really high-end software can even provide a credit expert to walk you though the process.
– Professional credit repair services: $10-$100 setup fee + $30-$100 monthly
Professional credit repair services means hiring a state licensed credit repair attorney to do all of the legwork on your behalf. This option can save you time, but will be the most costly. The service is typically priced with an initial setup fee and then you pay per month — about $60 to over $100 — until you’re satisfied with the credit repair program.
Please send me a message if you need anything else. :)
Cheers,
Joel