How much does credit repair cost?

Ranjit PunjaCreditmantri.comRepairing your credit costs not just money but also takes time, perseverance, and financial discipline. Any attempt at rebuilding credit involves a certain process, and your monetary costs are based upon the steps you require in that rebuilding process. What does this process involve and what are the costs associated with it?The first step in restoring your credit health is to obtain a copy of your Credit Information Report (CIR), commonly referred to as a credit report, from a credit bureau. The three most popular credit rating agencies, or credit bureaus, that are authorised by the RBI to issue credit reports in India are CIBIL, Experian and Equifax. It can cost between Rs.200/- and Rs.500/- to obtain a copy of your credit report from one of these agencies, and you can obtain these directly through their websites.Once you get your credit report, you need to analyse it to identify weaknesses in your credit profile and the rationale for your credit score. This can be an additional, but necessary, cost. Sometimes, the language or format of the credit report is too technical for a layperson to follow. Or, maybe you do not have the time or inclination to study your credit report. In such situations, it is important to approach a credit management company that can analyse the report for you, determine what your credit issues are and suggest ways in which you can resolve these issues in order to restore your credit profile. It is akin to having a medical report in hand, and going to a doctor to have the findings in the report explained and understood. It is well worth the money to go to an experienced person who will identify your symptoms, diagnose your problem/s, suggest a course of treatment, and stay with you till you recover.Using the services of a professional company will cost you in the range of a few thousand rupees. Some companies will not only make recommendations, they will also execute these recommendations for you, for a fee. For example, if there are administrative errors in your credit report, they will file a dispute with the bureau concerned and follow up the matter until it is resolved. Or, they could negotiate with the lender on your behalf in order to close a previously ‘settled’ loan, on reasonable terms that you can afford. Next, resolving any negative issues with the bank (whether directly or through a credit management service) will also cost you money. Your expenses here are directly proportionate to the size of your outstanding payments. For instance, if you want to replace a negative status like a ‘Settled’ loan into a ‘Closed’ loan, you will need to approach the lender to determine how much you need to pay to close the loan. Banks typically charge you the difference between the total amount due and the Settlement amount that has already been paid. For example, if you owed the bank Rs.1 lakh and you Settled the loan by paying Rs.60,000/-, you will need to pay the bank the remaining Rs.40,000/- in order to remove the ‘Settled’ status and replace this with a Close status on your credit report. Once you have taken care of the existing negative marks in your credit report, you need to work on building your credit score. This can be an additional cost. Your credit score is contained in your credit report and gives potential lenders a snapshot of your creditworthiness. It is essential to have a good credit score (of 750 or above) for banks to consider your loan application favourably. It takes an average of about six months for a score of around 650 to improve to 750. It could take nine months to a year for a score around 550 to improve to 750. Please note that these are merely estimates and could vary based upon your individual circumstance. There are some variable costs associated with score building. For instance, if you apply for a secured credit card to improve your score, you will need to make a small fixed deposit with the credit cards issuer (Rs.20,000/- to Rs.25,000/-), that will be used as collateral. Similarly, you can choose to take out a small loan and make full and timely repayments in order to increase your credit score. Both these actions involve a financial commitment, though the exact amount depends on your requirements and affordability. So while it is difficult to impute an average cost to rebuilding credit, the process of repairing it involves some necessary expenditure. The good news is that investing money on building your credit is always money that is well spent.