What is Credit Repair Anyway?
Credit repair can mean many different things. Some tactics are legal, while others may subject you to personal liability. Know the difference and make the right decision when considering credit repair.
The term “credit repair” can mean different things to different people. For some, credit repair refers to the process of legally strengthening a credit profile. For others, the term refers to the process of artificially inflating a credit profile.
If you’ve been turned down for credit, you may want to increase the likelihood that subsequent requests will be approved. Likewise, if you are looking for employment (many employers check credit profiles during the application process), you may benefit from a stronger credit profile. Lenders consider credit profiles when refinancing and insurance companies consider them too. Credit card companies consider credit profiles before approving credit lines as well as determining applicable interest rates. In all cases, the credit profile is being used to assess the risk of lending to or working with the consumer.
If your credit profile is interfering with your ability to obtain financing or employment, you may be interested in working with a professional to strengthen your credit profile. If you are concerned about legal versus illegal credit repair professionals, ask yourself the following:
Are you interested in strengthening your credit profile by correcting errors on your credit reports and implementing healthy financial habits that will impact how the credit models perceive you? Or -
Are you looking for a quick fix to artificially inflate your credit score?
These questions are important. If you answer “yes” to the first question, you’re ready to work with a qualified credit professional. In the alternative, you can research and work on your credit profile on your own. For some, that’s a viable option. For others, the assistance of a qualified professional may be in order.
This type of credit repair begins with correcting errors on your credit report (only about 20% are error free). Although correcting errors seems straight forward, in reality the process can be frustrating and time consuming. After the credit report is accurate, the next step involves understanding how the credit report algorithms establish credit risks. By adjusting financial habits, an ideal and optimized credit profile can be established and maintained.
If you answer “yes” to the second question, you’re trying to trick the parties that are using your credit reports to assess credit risks. There are several tactics for this, and frankly, you should avoid them all. Most are illegal and/or ethically challenged, and companies assisting you with these tactics may be subjecting you to personal liability. In the past, the most common tactic involved establishing a new social security number or corporate tax identity and then merging it with your current credit profile.
The most common tactic today to artificially inflate credit scores is called “credit piggybacking.” This tactic involves a broker that adds you to another person’s credit accounts so that you can “piggyback” on the other person’s stronger credit profile. For example, a broker finds an individual with a strong credit profile. The broker offers the individual money to allow someone else to be added as an authorized user on an aged credit line with a positive history. The broker then finds someone who wants to artificially inflate their credit score. That person is added to the credit line and the credit line is subsequently reported on the in individual credit profile. Most credit scoring algorithms are wise to this tactic and do not reward individuals listed as authorized users that do not actually use the credit line. This tactic may not be illegal per se, but there is no doubt that its only objective is to make your credit score appear higher than it should be for a short time.
Ultimately, your best choice is to pass on any tactics designed to artificially inflate your credit score. In the long run, only accurate credit profiles and healthy financial habits will result in stronger and sustainable credit profiles.
By Terry Cordell
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