Credit restoration is a collective term for various strategies
designed to repair or restore a damaged credit rating. The origin of the credit
issue usually determines the strategy or group of strategies utilized to initiate
the process of correcting
or updating
credit reports, raising a
FICO score and in
general restoring good credit. This process of restoration can be handled
by the individual consumer, or implemented by agencies that specialize in restoring
credit worthiness.
There are three basic sets of circumstances where credit restoration may be utilized.
The first and most common scenario has to do with the destruction of a
credit score
due to choices made by the consumer. This would include situations where the
debtor willingly refused to make payments on time, defaulting on loans, mortgage
agreements, and other
debt obligations. Since the consumer directly caused
the damage, restoration of a credit score under these circumstances can take a great
deal of time and effort.
Engaging in
credit restoration is also necessary when the consumer is recovering
from unforeseen financial circumstances that reduced or eliminated the ability to
honor outstanding debt obligations. Consumers who experience an unanticipated
job loss or extended illness would fall into this category. In addition, people
who go through a divorce and experience financial reversal as a result would also
be included. While the consumer is directly involved in the factors that led
to the lower credit rating, he or she did not willingly choose to default on any
debt. While the result is similar to that of people who choose to not honor
their debts, circumstances of this type are sometimes easier to correct before initiating
the credit restoration process.
A third instance where credit restoration is necessary does not involve any direct
action or unexpected life situations on the part of the debtor.
Identity theft
involves the unauthorized use of an individual’s credit and identity. Consumers
often become aware their identity is being fraudulently used when unusual items
begin to appear on the
credit reports of one or more rating agencies. This
application of credit restoration can be extremely involved, as it usually puts
the burden of proof on the victim to confirm that certain
bad debts logged by a
rating agency are fraudulent and should be removed.
Because the exact approach for effective credit restoration varies, many people
who need to repair their credit will seek professional assistance. While it
is possible for an individual to conduct each task associated with cleaning up reports,
making arrangements with banks and other lenders, and obtaining credit education
in order to prevent a recurrence of the issues leading to the
debt problems, these
can often be very labor intensive. A professional credit
restoration agency
can evaluate the current status of the client, identify the origins for the credit
problems, and develop a focused approach that will fix as many issues as possible.