Credit is an essential tool to most people's lives. A good credit rating allows for many things that we take for granted: having a credit card, being able to rent property, qualifying for in-store financing etc. . . If you fail to make payments towards a creditor this will affect your credit report collected by your credit bureau, and will make doing the above things difficult if not impossible. When your credit rating becomes poor, you must take steps as soon as possible to repair it. Credit repair can be a slow process, and requires that you build a better credit rating over time. Here are some steps you should take:
1) Add accounts to your credit report. If you are denied for credit, you should immediately obtain your credit report from the credit bureau in question. Once you have the report you should examine it closely for errors. In the event that there are no errors, you may find that your credit rating is "poor" not because of outstanding debts, but because you don't have enough of a credit history to inspire a good rating.
Many types of credit from smaller organizations are not tracked by credit bureaus. Things like gas-cards or department store cards are not usually on your credit report. As long as the account is verifiable, most credit bureaus will add it to your file. They are not obligated to do so, and thus usually charge a fee for this service. By adding these accounts to your credit report you will establish a better credit rating.
2) Credit Counseling. Once you become mired in debt, the process can feed on itself, and it can be difficult to get out of it. If you find yourself having continual problems with your credit repair, you should consider credit counseling. It's important to notice the distinction between a credit counselor and a credit repair company. The former is usually a non-profit service that offers advice and guidance on credit repair, while the latter are for-profit companies of dubious ethics that generally charge fees for steps that you can easily take care of yourself. A good credit counselor will help you make a realistic budget and stick to it, and help you make practical decisions with regards to your outstanding debts.
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By adding whatever accounts you have in good standing to your credit report, and seeking credit counseling if necessary, you will make headway into your ultimate goal of credit repair. The difficult thing about credit is that it takes a long time to build a good credit rating, and a very short time to destroy it. When your credit rating has been marred you have to understand that there is no quick solution: you will have to build your credit rating again - essentially from scratch. If you avoid the temptations of credit repair companies that promise a quick and easy credit repair for a fee, and think instead of long term changes to your budgeting and spending habits, you will - over time - be successful in credit repair.
When a dispute is filed with the credit bureaus, they must contact the creditor and confirm that the information in dispute is accurate, verifiable, and not obsolete.
If the credit bureau has not received verification from the creditor within 30 days, then the credit bureau must promptly delete the credit listing.
Bad Debt
It is difficult to get your credit repaired without somehow taking care of your outstanding debts. When you have an outstanding debt, in some cases you may be able to negotiate the deletion of the negative credit as part of the debt payoff.
You do have some negotiating power with the creditors after all they do want their money, so make the most of the little bit of leverage you have and try to negotiate.
Be aware that by paying a bad debt off, that alone will not improve your credit rating much.
By paying an outstanding debt you will change the account status to "paid collection," "paid was late," or "paid was charged off" - which will still stand out as very negative credit. And negative credit is allowed to stay on the credit report for a maximum of seven and a half years, except for bankruptcy which may remain on the credit report for ten years.
Keep in mind that it is almost always prudent to seek professional help to settle your debts before any further damage is done to your credit.
100 Word Statements
As a part of the revised Fair Credit Reporting Act, they have included an amendment to allow you to post a 100 word statement to your credit profile allowing you to explain some of your negative credit.
Many credit repair sites will recommend that you prepare a 100 word statement to add to your credit profile. The fact is that most, if not all, creditors will not even see this.
They will simply take your numerical score from your credit report and make their decision from that alone, not even looking any further into your credit. Not to mention your FICO score won't even take this 100 word statement into account when calculating your score.
What this 100 word statement does is that it validates your credit problems and makes it a much more difficult task to try and remove these issues in the future.
Therefore, it is best not to file one of these statements with the credit bureaus as it will only serve to make your, or the credit repair specialists, task of repairing your credit much more difficult.
Legal Credit Repair Methods
To better understand what legal credit repair is, it would be helpful to understand a few types of illegal credit repair:
Illegal: Changing your social security number to obtain a clean bill of credit. If any company should suggest this type of credit repair, report them to the authorities.
Illegal: Disputing every item on your credit report, regardless of nature. The Fair Credit Reporting Act specifically states that only items that are unverifiable, inaccurate or misleading should be disputed. Items that are clearly yours, and reflect your credit history should not be disputed.
Illegal: Charging for services that have not yet been completed. This is to protect the consumer from fraudulent companies that charge for services that never get completed (charging to "repair your credit", then hitting the road...) So, what exactly is Legal Credit Repair?
Legal Credit Repair consists of removing the negative items on a credit report. There are a few different methods of going about this, the most common and effective are:
"Goodwill" Negotiation Negotiating directly with creditors and asking them to "please" remove negative items from your credit reports is a viable method of credit repair for mild late-pay accounts.
There are no laws that require that negative items stay on your reports for any amount of time, and creditors have the ability to simply remove these items if they see that it could somehow work to their benefit, even if that simply means a pleased customer.
The Fair Credit Reporting Act gives you the right to contact credit bureaus directly and dispute items on your credit reports. Just as in a court of law, you have the right to plead "not guilty" to negative information on your credit reports, and leave the burden of proof to the credit bureaus.
You can dispute any and all items on your credit reports that you feel classify as inaccurate, unverifiable, or misleading. If the bureaus cannot verify that the information on your reports is indeed correct, then those items must be deleted.
Summation
In theory and law, the process is deceptively simple, thus leading many people to think that they can easily handle this themselves "for the price of a few postage stamps." Most quickly discover that the credit bureaus have made it much more difficult than one would imagine. For help in this, it is recommended that you seek out a qualified and reliable credit repair company that will go to work for you to resolve your credit problems. The really good credit repair companies can do this quicker and easier than you would be able to and most are quite affordable as well.
Repairing your credit on your own is possible and you can do it yourself. But you must remember that the credit bureaus are more interested in the failure of credit repair efforts and are very skilled at discouraging these efforts.
Both Mark Henry & Parker Graham are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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