The substantial increase in the graphs of credit providers led to the drastic development of basically two concepts, i.e., credit history and credit rating. The credit creation industry, which is growing like an enormous projectile, day by day, relies heavily on credit history and credit rating, in order to assess the applicant’s reliability and creditability, while approving an application for credit services. In short, to have a better standing and also a good reputation regarding the usage of credit creation services in the eyes of credit providers, one needs to essentially have no good credit history nor a very good credit rating. This is where the credit repair come into picture.
- Credit and Loans
- Credit Report
- Credit Rating
- Credit History
- Disadvantages of a Bad Credit
- Advantages of a Good Credit Report
- Effects of a Credit Rating
- Credit Repair
- How Does Credit Repair Work
- Top Ten Credit Repair Companies
In the olden days, when mankind had just came up with the concept of money, the concept of credit was also introduced. In the ancient times, credit facilities were provided by traditional money lenders. The traditional money lenders fulfilled two basic functions:
- Accepting Deposits: The first function of the traditional money lender was to accept deposits from the people and keep the money safe for a particular time, and then, return the money back along with an interest to the depositor.
- Credit Creation: The second function that was fulfilled by the money lenders was of credit creation. The lender not only conventionally accepted deposits, but also gave out loans or rater created ‘credit’. The borrowers of the loans would return the sum borrowed after a particular time span.
This same function of accepting deposits from people and giving out loans and credit was adopted by the banks all around the world. Today, however, the concept of credit is not just restricted to depositing and lending but has taken several new forms along with the evolution of, commerce, banking, and finance. The following are some of the common credit services.
- Loans: Banking and finance organizations thrive on the process of accepting of deposits and providing a part of the deposit as loans. Based on the nature of the loans, there are several types of loans that have been created by these organizations.
- Debtor-Creditor: The concept of debtor-creditor basically arose through trade and commerce. Let us consider a simple example in order to understand debtor and creditor. ‘A’ is a merchant who takes goods from ‘B’ who is also a merchant, with the promise to pay the amount on or before a due date along with some kind of interest. In this case, a negotiable instrument such as a bill of exchange is used to authenticate such a credit creation facility. ‘A’ thus becomes the debtor of ‘B’ and ‘B’ becomes ‘A’s creditor.
- Credit Cards: Credit cards are a part of what is known as plastic money and digital cash technology that provides a very different kind of credit facility. When a person makes a purchase with the help of a credit card, the expenditure is borne by the credit card company for the time being. The credit card company at the end of the month sends over a bill to the costumer, that carries all credit card transactions that were made by the customer, along with the interest or a service charge
- Negotiable Instruments: In some cases negotiable instruments such as checks, bills of exchange, and promissory notes are often considered to be credit facilities in calculation of credit rating and credit history.
A credit report is a document that is created by the credit rating agency. It is basically a list of all past borrowings of any individual. It is a combination of credit history and current credit rating. The credit report is nowadays known as an individual balance sheet. Banks, credit card companies, and lenders always request and consider the credit report in order to analyze and assess an individual’s capacity to bear the risk of a credit facility and the same individuals capacity to repay the loan. The following are some of the contents of a credit report that credit reporting agencies furnish to the banking and finance institutions with credit creation facilities.
- A list of all the loans that have been availed in the past.
- List of late payments in case of installments of the loan
- List of defaults if any
- List of Credit Cards that are in use and have been used
- List of late payment of fees
- Number and value of the assets and securities that have been pledged till date
The credit report is prepared on the basis of the Fair Credit Reporting Act, abbreviated as FCRA. The format of the report is also to specification and the document is kept highly confidential and is ensured that it would not be party or a source of any negative activity fraudulent in nature. The governments all over the world have strictly enforced the use of credit reports. The list of organizations who are permitted to have a credit report made are also regulated and monitored by the governments. Another similar act that was enforced was the Credit Repair Organizations Act, which is used as a means of statuary regulation for the operations of credit reporting agencies and services and also makes provision for the functioning of the credit repair services. To name a few, A.M. Best, Fitch Ratings, Moody’s, Standard, and Poor’s are credit reporting agencies that are in operation in the United States of America.
The concept of credit ratings has already been elaborated in the above paragraphs. Experts in the field of finance often define the concept of credit rating as the ‘credit worthiness’ of an individual, organization, corporation, or even a whole nation. In simpler words, credit rating is defined as the borrower’s capability and potential to repay debt of any sort. The two factors that are taken into consideration while preparation of the credit rating are, the current economic status of the persons current assets, liabilities, current income, and income projections. A negative credit rating may cause the rejection of a credit facility, or a very high interest or pledging of a very costly security.
A credit history is a part of the credit report. The credit history is a concept that is very similar to that of the credit rating. A credit history is basically the historic data of a person’s past assets, liabilities, late payments, defaults, and bankruptcy. There are several manners in which the credit history of a person is determined. The compilation of the credit history of a person is done by all the credit reporting agencies.
There are several disadvantages of having a bad credit rating. The following are some of the common ones.
- High rate of interest
- Compulsory secured loans
- Lengthy approval process
- Excessive checks and verifications
- Delayed approval procedures
- Higher probability of application for a credit getting rejected
Good credit is always good, no doubt about it. Here are some genuine advantages of a good credit report which can be listed down as follows.
- A very favorable rate of interest and also time period
- Loan can also be an unsecured loan
- Short and quick approval processes
- Very less checks and verifications
- Very good terms and conditions of the loan
- Lender’s trust
The following are the deciding factors of the approval of a loan which play a very influential role in the approval process.
- Rate of Interest: The lender usually calculates the rate of interest on the basis of the credit history and ratings of the applicant. If the applicant has already borrowed some or the other loan or is in debt with a credit card company, the lender levies an above the average rate of interest. However, if the applicant has a very good record of credit history, with timely payments and is not in debt with any company or organization, the rate of interest is kept low.
- Secured Loan or Unsecured Loan: Whether the loan is to be a secured loan or an unsecured loan, is decided on the basis of the credit history and timely payments. The people who have a bad credit history, usually need to pledge an asset as a security to get the loan. Sometimes, in case of a credit card application, bad credit history applicants also need to pledge a security.
- Credit Limit: In case of a credit card application the credit limit is decided on the basis of the credit history and current credit rating. The applicant cannot spend beyond the credit limit. The better the credit history and rating, the greater is the credit limit.
- Speed of Approval: The speed of approval of a loan, is basically determined on the basis of the credit rating and history. The better the credit history, the quicker is the approval.
Thus, it can be concluded that it is necessary to have a good credit history and hence, one needs to avail the services of a credit repair company or a credit repair agency in order to improve the economic standing and the current credit ratings.
Credit repair can be defined as the process with the help of which a person’s current credit rating can be changed and improvised upon. Some companies have also claimed to have improvised upon the credit history of their clients. However, the legality and validity of this process has always been a topic of debate. There are, several ways with the help of which companies improve the credit standing of people and also organizations.
All credit repair services have structured different types of processes and modifications in order to repair and improve the credit report of an individual or an organization. However, the basis for this process is the same and the original procedure is similar.
One of the initial steps that the credit repair company undertakes while going through the credit repair process is analyzing the documents of the customer (who has a bad credit rating). The credit repair company usually asks the customer to hand over the power of attorney, in order to become the official legal representative of the consumer.
The second step is the analysis of the credit ratings. In this process, the company usually undertakes a very careful analysis of all the different types of loans and debts that have been taken by the borrower. With the help of the credit reports and time based ratings, experts who work in the field of credit creation, compile a small list of elements and items that make the credit rating negative. In many cases, credit repair services have found elements in the credit reports making them void. In such cases, legal documents pointing out the invalidity of the document are sent over to the agencies which had made the credit rating. In most of the cases the mistake is rectified. However, the matter can also be taken up by the legal system if the credit reporting agency refuses to comply. The legal documents are termed as dispute letters.
If the mistake is rectified by the credit reporting agency, then a drastic change is observed in the new credit report. At times, the credit history is also to be rectified by the credit rating agency.
The final step that is initiated by the credit repair company is the rectification of the current credit rating. The current credit rating is rectified basically with the help of counseling and establishing the priority and amount for each debt. Many people have reported the process to be a highly effective one for the improvement of credit ratings.
The following are some of the top rated companies that provide credit repair services.
- Lexington Law
- DSI Solutions
- Sky Blue Credit Repair Services
- Veracity Credit Repair
- Ovation Credit
- My Credit Group
- Academy Credit
- Apex Credit Services
- 180 Credit Solutions
- Credit Attorney
Well, if you do not have a good credit rating then you should definitely consider availing credit repair services of one of top companies. All you need to do is analyze your credit rating and then approach the suitable company.