A Short Note on Credit Repair

Credit repair is a phrase often used in business, especially finance. The term credit repair, in essence, means to repair or fix one's credit report. Thus, to fully understand what credit repair is, it is imperative to define the term credit report first.

Credit report is the record of an individual or an organization's past borrowing and repayments. This type of report usually includes information about late repayments or bankruptcy of the concerned individual or organization.

Credit report is generally used by money lending institutions, such as banks, credit card companies etc. to determine an individual or organization's credit worthiness, or in other words, to determine if an individual or an organization has the both the means and the willingness to repay any potential indebtedness.

Credit repair, in professional terms, refers to a consumer's right to challenge any information on credit history included in his/her credit report.

Why is credit repair important?

The fact that a credit report is used by a money lending institution to determine if credit (or loan) should be extended to a person or a company puts huge importance on credit repair. It is evident that a person or company will receive credit to finance itself only if it has an impressive credit report; whereas any negative information included in the report might reduces that person or company's chances. With the trend of credit based production and consumption rising globally, a lot of business organizations offering to improve one's credit record, and offering credit counseling have sprouted.

The Controversy Regarding Credit Repair

However, the role of these companies in helping people improve their credit rating has been a topic for debate. While almost all of these companies claim to have done so, the regulatory bodies that have the authority over credit reports tend to say that no such agent has jurisdiction over the matter. In the United States of America and Canada, where credit based sales is more commonplace than in any other country, the law permits any citizen to ask for an investigation of information in that citizen's credit report that he/she disputes as inaccurate or incomplete. There is no charge for this.

So, any assistance a credit repair clinic can do legally for its clients, the clients themselves can actually do for free. A misconception on the matter exists that credit repair clinics can erase negative information from one's credit report. But the fact is that no authority has the right to erase any negative information from anyone's credit report as long as the information is accurate and timely. This time limit for most negative information is seven years, though for bankruptcy it is ten years.

Abuses by credit repair companies are becoming more and more frequent due to the change in consumption patterns. While people's urgency to get credit push towards approaching such companies, it might be helpful to remember these few things. Also, using one's common sense may enable one to improve one's credit rating, and to stay away from any such potential problems. Learning what is my credit score is one of the most important things that you can do.