Creditors use your credit report to help them decide whether to extend you a loan—whether this is for a personal loan, credit card, mortgage, auto loan, or another type. Credit reports are also frequently referenced by landlords, employers, and cell phone and utility providers, making it important to have a favorable credit report and score. The better your credit, the more likely you are to qualify for loans with favorable terms and interest rates.
Most people have multiple credit reports, because there are three main credit bureaus that compile your financial information: Equifax, TransUnion, and Experian. Credit reports are not perfect, and sometimes errors occur. Since not all creditors report your information to each of the major credit bureaus, it’s important to check all of your credit reports—you may find differences among them. In 2013, a study by the Federal Trade Commission (FTC) found that one in five consumers had an error on at least one of their three credit reports. These types of errors are caused by everything from typos to identity theft, but they can make it difficult to access credit when you need it.
Credit repair software can help you navigate your credit reports, track changes, and correct any errors that you find along the way. There are three main types of credit repair software: credit score trackers, cleaning kits, and credit simulators.
This software service integrates with the three major credit bureaus to monitor your credit reports and alert you about any activity that could lower your credit score. For example, you could receive notifications about credit pulls, potential late payments, and suspicious activity that might be fraud.
Cleaning kits provide more extensive services than trackers by allowing you to request copies of your credit reports, detect fraud, and submit dispute letters. For instance, if a late payment incorrectly appears on your credit report, the cleaning kit could send you an alert and also provide you with a dispute letter template to request its removal.
This software can project the way that purchases, loans, and investments will impact your credit score before you make those choices. It can also monitor your financial habits and identify patterns to predict your future credit score. Since a simulation doesn’t actually affect your credit score, you can experiment with different purchase scenarios to decide what works best for your finances before acting. Keep in mind that simulation results are just estimates, so they may not be entirely accurate.
Each type of credit repair software can play a different role in managing your personal finances. Credit score trackers work best for day-to-day management. If you want an automated way to keep tabs on fluctuations to your credit score, this software can send you alerts that make it easy to stay informed without remembering to check each of your reports regularly.
Since a credit repair cleaning kit offers dispute letter templates in addition to fraud detection, it gives you access to a few extra tools that can help you correct errors on your credit reports. Credit score simulators could be useful for anyone considering a major purchase, like a home or new car. The software helps provide a picture of how their finances and credit score will be impacted by the purchase decision.
These are the purposes of credit repair software—but should you use it at all?
Credit repair software can be a helpful tool for keeping an eye on personal finances, as long as it comes without an expensive price tag. The problem with most credit repair software is that you can do the same work—or find the same tools elsewhere—for free.
Ensure that your credit reports remain accurate by reviewing them yourself periodically. Each credit bureau allows you to view your report for free once every 12 months at AnnualCreditReport.com. In some states and other situations, you may be allowed to view your credit reports more frequently at no cost.
In the Fair Credit Reporting Act (FCRA), Section 611 states that everyone has a right to dispute information believed to be incorrect from their credit reports—and if the information cannot be verified, it must be removed. Since the dispute process is available to everyone at no cost, it isn’t necessary to use credit repair software for this purpose. You can find a wide variety of free dispute letter templates online, or you can write one yourself. Read more about using dispute letters.
To see how major purchase decisions could impact your credit score and financial health, there are free tools you can consult as well. Budgeting programs and calculators can be found online at no cost, or are sometimes offered for free through your bank or credit card institutions’ websites.
If you need help communicating with your financial institutions, Kredit can help.