Bad Credit Repair

Understanding Four Ways To Repair Credit

Bad credit debt has become rampant in this country, as many debtors fail to make good on their promises and abuse their purchasing power. It’s no wonder, then, that credit card debt reduction has become a multi-billion-dollar industry. What most Americans don’t know is that they can repair credit history and right their wrongs on their own. The first step is to honestly assess your situation by tallying all the incoming income and all the outgoing fixed/variable expenses. If your earnings are less than your expenses, then you have serious problems that may require a full restructuring of your life. Do you have a gas-guzzling SUV or an electricity-sucking air conditioner running all the time? You’ll likely have to sell any “money-pit items” and down-size your life a little bit. Hold a garage sale, move to a smaller place, conserve energy, shop around for better prices on medicine and opt for the bare bones cell phone/cable plans.

Secondly, you can try to negotiate directly with your creditors to repair credit history. If you were previously a good customer, then you should have no problem calling your creditors and requesting that they remove the incident from your report. Usually, if you explain the situation, speak courteously and pay them immediately upon realizing your error, they’ll do this for you. Even if you’ve missed a payment here and there in the past, you can sometimes coax them again. If you have a delinquent history on their account, as well as others, and a low credit score, then you can try writing a letter to ask that a charge-off be changed to “paid as agreed” or “paid in full, on-time.” This can be done with collection agencies and law offices as well, but you must do your negotiating before you pay a single penny or you’ll lose all your bartering power. If you’re responding to a settlement letter, then you won’t be able to take advantage of the credit card debt reduction offer and enjoy a clean credit report as well. You must choose.

The third way to repair credit history is to start a fresh history of good credit. Credit repair company experts say that a healthy credit portfolio includes both the unsecured credit card and secured loans, like an auto, home equity, mortgage or student loan. On average, most people have two or three credit cards they regularly use. Your balance should never be more than 30% of the maximum credit offered and should be paid on-time and in-full each month. While past mistakes will remain on your record for seven years, the good news is that the past 48 months carry the most weight, so within a year you’ll see large improvements if you keep up with all your payments. Some people take out self-financed loans by taking $1,000 out of their savings and repaying themselves each month, while the bank reports all these timely payments as good credit history to the bureaus.

One last way to repair credit is to avoid some of the common pitfalls that land people in financial hot water. For example, never co-sign for someone! If he or she defaults on that loan, you’ll be held personally responsible for their actions and may have to pay the full amount! Also, do not close out credit card accounts. Closing accounts will decrease the amount of available credit you have. Don’t apply for a bunch of new credit cards at once because your report will show multiple “inquiries,” which signals you’re getting low on your unsecured credit card capital and desperately need more cash. Lastly, don’t charge more than 25% of your available credit limit. Studies show those who max out their credit cards are more likely to file for bankruptcy.

How To Get Free Credit Repair?

With all the offers out there to “erase blemishes” on your credit report and “give you financial freedom,” you might be wondering if there are any free credit repair services available. After all, there must be some people who are beyond the reach of traditional credit card debt reduction services and there must be someone to counsel you on whether or not spending money to repair your credit is worth it, in your case. In fact, there are plenty of free credit repair and actions you may take yourself.

The first step toward credit repair is getting your free online credit score. Thanks to the Fair Credit Reporting Act, you are legally entitled to one free report each year from each of the three main credit bureaus, which are Experian, Equifax and TransUnion). On your credit report, you’ll see whether or not you have a high or low credit score, as well as all the outstanding debts you owe, people who have checked your credit report, loans you’re paying off and other financial information that is readily visible to loan officers. It is important that you check this report each year to make sure all of your financial records are up-to-date. Any past late payments, collection accounts or blemishes will be on your record for seven years, but your account status should be updated and your score should reflect your recent activity. It’s not unusual to find errors or dated information, so keeping your records accurate is one way to repair bad credit.

Many places offering free credit repair can’t really help you because they only offer vague advice at first, while trying to up-sell you to a premium membership for the “good” service. If you currently have unpaid bills and accounts in arrears, then you can benefit from credit card debt reduction or debt consolidation service. The debt consolidation officer will contact all of your collectors and negotiate better terms for you. You’ll pay them one monthly sum to cover all your debts and your debt counselor will disperse the money to all your creditors. The debt consolidation will show up on your credit report, but it’s much better than collection accounts or bankruptcy. A few popular consolidators to look into include My Credit Group, Lexington Law and Care One.

Finding quality free credit repair may not be simple, but there are many resources for you to turn to, listed at www.cccservices.com. At the Association of Independent Consumer Credit Counseling Agencies (AICCCA), you can gain access to a list of quality credit counseling companies. The National Foundation for Credit Counseling is a nonprofit company that helps consumers maintain financial stability. You can avoid credit repair scams by going through these organizations, checking companies through the Better Business Bureau and not paying large upfront fees to accomplish your goals.

How To Repair Your Bad Credit

If you’re looking for bad credit repair so you can buy a new house, take out an auto loan or fix your credit interest rates, then you may be surprised to learn that you may have to weed through many credit repair companies to find a legitimate one. The industry is inundated with scam artists and criminals! However, there are also many legitimate non-profit organizations and government-approved credit restoration counselors. Two things to keep in mind at all times are that it will take some time to fix credit scores that are poor and that you’ll need to make many modifications.

According to the FTC, there are many credit repair scams out there. Many of these companies request as much as $3,000 upfront to settle your accounts, negotiate better debt repayment deals and erase all blemishes on your credit report. Credit repair companies have become a $7 billion/year industry, but not all parties can be trusted. You should never have to pay before you receive any services, as the Credit Repair Organizations Act mandates that bad credit repair services only charge when they have completed the services promised. As well, you should not trust someone who will not give you practical advice on what you can do on your own to repair your credit. If the company recommends that you not contact the credit bureaus directly, suggests you can get a new credit identity through an “Employer Identification Number” or advises you to fraudulently dispute even the legitimate information on your credit report, you should steer clear of their operation.

Here are some do-it-yourself tips for repairing bad credit. If you feel up to the challenge, then you can use your sales and negotiating skills to get items deleted or amended on your credit report. First, never make arrangements over the phone. It’s always best to craft a well-written letter instead and be sure you write this letter before you give the creditor any money or you’ll have lost your power to negotiate! If you have a “charge-off” listed on your account, then you can sometimes offer to adhere to a monthly payment plan and get creditors to replace them with “paid as agreed and on time.” If you can’t get that, then try for “account closed, account paid or account settled,” all of which are more desirable than a charge-off. The best case scenario you could ever hope for is a creditor to completely remove their account from your credit report, although it’s certainly a rare best case scenario. Often with medical bills, the creditor will remove the bad credit debt if you agree to pay immediately, in full, with an additional fee or two, which will improve credit scores overnight.

If you’re attempting bad credit repair on your own, then understand that there are no guarantees. However, it will only take a few moments of your time to shoot out a letter to your creditors, requesting an agreement that will take your credit report into consideration. If you have a “charge-off” from a closed account, then this could be extremely hard to get removed from your report. If the creditor is still actively trying to collect, you will have a 1 in 3 chance of getting a complete removal from your credit report. If you have an open account, like an installment or revolving loan, then there is a marginal rate of success if you offer to pay the full balance. Open/active accounts reported as “late payment” have a very high success rate of complete removal, particularly if the account is in collections. Creditors may say they cannot remove an account, but they absolutely have the power to do so. It’s just that many of them are trained not to do that.