Glossary of Credit Repair Terms
Written by: Kristy Welsh
Last Updated: March 24, 2017
Whether you’re just flirting with the idea of repairing your own credit or you’re ready to jump in with both feet today, do yourself a favor. Take a few moments to read over the credit repair terms you’ll see throughout the process. Even if everything doesn’t sink in right now, you’ll have given yourself a solid jumpstart that will make every subsequent step feel less intimidating and more familiar.
Credit repair – The process of improving your credit. Though you can pay a credit repair company to do the work for you, it is something you can do for free on your own.
Credit scores – The numbers used by creditors to determine your creditworthiness. These scores are generated by algorithms used to interpret the credit reports compiled by credit reporting bureaus. Credit scores are the numbers that credit repair is aimed at improving.
Both FICO and VantageScores range from 300 to 850, broken down as follows:
- 750-850 - Excellent
- 650-749 – Good
- 600-649 – Fair
- 300-599 – Poor
Industry-specific FICO scores range from 250 to 900.
FICO Score – This is the credit score that a reported 90 percent of creditors use when assessing your creditworthiness. The Fair Isaac Corporation – or FICO – has been generating these scores since the 1960s. You have multiple FICO Scores specific to the type of credit you may be seeking, including different versions for auto loans, credit cards, and mortgages. You can purchase your FICO Scores through myFICO.com.
VantageScore – This is a score created by the three major credit reporting bureaus in 2006, aimed at competing with the FICO Score. You can purchase your VantageScores through Experian, TransUnion, and Equifax.
Credit reports – The record of your credit history, including credit inquiries, credit accounts, balances, credit limits, timeliness of payments, accounts in collections, and public records (e.g., wage garnishment, tax liens, bankruptcies, foreclosures, lawsuits, judgments). Creditors often look at your credit reports, as well as the credit scores that the reports generate. That’s why looking over your credit reports is the first step in the credit repair process. The only way of cleaning them up is knowing what’s on there. You can see your credit reports every 12 months through AnnualCreditReport.com.
Credit reporting bureaus – The agencies that compile your credit history into credit reports. The three main credit reporting bureaus are Experian, TransUnion, and Equifax. All three agencies have separate credit reports on you, so it’s important to see all three.
Credit report dispute – The action you take to challenge a mistake that you find on your credit report. Though every credit bureau has an online dispute process, it is recommended that you dispute the error in writing and send it via certified mail with return receipt requested.
Debt validation – The action you take to challenge an old debt that has been turned over to a collection agency or purchased from the original creditor by a debt buyer. When you request debt validation, the collector is required, by law, to verify the debt, including their right to collect on it. If such proof cannot be provided, you are not required to pay the debt and the listing must be removed from your credit reports.
Secured credit card – A credit that requires a cash deposit. Generally, the amount of the deposit is equal to the credit line. Provided you apply for a secured credit card that reports to the credit bureaus, it’s a great way to rebuild bad credit. Once you have improved your credit score, the secured credit card may be upgraded to a regular credit card or you may apply for one through a different issuer.
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