Bad credit not only looks bad but it makes it difficult in the future to receive fair loan interest rates and may affect your ability to buy a home when you want. The Federal Trade Commission, which claims to protect America's consumers, recommends starting with self-help rather than going with a credit repair agency such as the ones that send out fliers advertising quick fixes to your credit repair problems. These companies often involve scams. While their methods may work for some people, they are not useful for everyone. For this reason, the FTC recommends self help first. They provide a list of steps to follow. They are summarized below.

Step One

When you receive a report from a consumer reporting agency that you believe is inaccurate, tell them you think it is inaccurate. Many times, mistakes are simply made. It is important that they are aware that you know something is amiss and that you are paying attention to what they send you.

When you send them a letter detailing inaccuracies, you need to send off copies of documents that support your position. Do not, under any circumstance, submit the original documents. If your originals are gone, so is any proof that you have that supports your side.

Once your report is submitted, the reporting agency generally has 30 days to rule on your report. If they view your dispute as frivolous, they can dismiss it immediately.

Step Two

Tell the creditor or other information collector that you dispute an item. This group needs a copy of documents that support your position as well. They will need your dispute in writing, not over the phone, and will probably request an address as well. If your dispute is shared with a consumer reporting agency, the creditor must enclose a copy of the dispute. If the information in dispute is found to be inaccurate, the information provider may not report it again.

This two step process seems easy enough but when there are issues with the future rates on loans which affect your entire financial life, it is important to get these things done correctly. The credit reporting system is flawed to a degree.

In addition to these two steps, the FTC also recommends that people not buy into the quick-fix groups. These groups are often just running scams. The biggest clue that they are running a scam is that they ask for money before they provide any help. Another big sign that the company may not have your best interest in mind is the company that won't tell you your legal rights. The third biggest clue, and the one that directly contradicts everything else the FTC recommends, is the company that tells you not to contact the credit reporting agency on your own.