Credit Repair - Where Do I Begin?

Credit Reports

You know your credit is bad because you can't get approved for a loan. That's not enough to know, however. We need to know exactly how bad it is and why. The first step is to obtain a copy of your credit report. As you probably know, there are three major consumer reporting agencies: Equifax, TransUnion and Experian. You will need a report from each bureau. You can request these reports via telephone, mail or internet. You can also do this through a credit monitoring service. Regardless of the method, you will need to provide all relevant information to avoid any delays.

Dispute Negative Items

Under the Fair Credit Reporting Act, you have the right to dispute any information contained on your credit report. You may do this simply by submitting a dispute letter to the individual credit bureaus. Once they have received your request, they are required to verify the information with the submitting company. By law, they have thirty days to complete this verification. If it can't be verified, it must be deleted.

Many people will tell you that if the account is "really" yours, you can't dispute it; however, if you read the FCRA closely, you will see it makes no mention or distinction of this. Whether or not the account is "really" yours has no bearing on the bureaus' responsibility to verify it. If it can't be verified, it must be removed since it can't be legally reported. It truly is that simple.

Build Positive Credit

After you've mended your credit report, the next phase in your rebuilding efforts is to ensure positive information begins reporting. Acquiring new accounts is just as important as deleting negative information. One of the best ways to do this is by getting a secured credit card. The interest rates are usually pretty high and the credit limits are usually low, but that's OK because you are strictly using these cards to rebuild your credit - sort of a means to an end. Again, keep your balances at about 30% of your credit limit.

The most important part of the credit repair process is learning from your mistakes and realizing where you went wrong. Learn to live below your means and budget your money so that you don't repeat past mistakes.

Credit Repair: Undoing the Damage

With appropriate measures and the right information, you can repair your credit rating and increase your credit scores. This one fact, however, is only half the battle. Because there is so much misinformation tossed around regarding credit repair, finding the truth and learning your federal rights under the Fair Credit Reporting Act is a must. Once you understand how the American credit system works, you are on your way to living a life of financial prosperity.

Here you'll find a few steps that will aid you in your efforts to repair your credit scores:

Obtain Your Credit Report

Request a copy of your credit report from the three major consumer reporting agencies. This will also tell you what your credit scores are.

Evaluate Your Credit Reports

Once you have your reports, you’ll want to ensure the information is correct. There are mistakes in nearly 80% of all credit reports.

Dispute Questionable Items

If you discover an inaccuracy or accounts you're not familiar with, dispute it with the reporting credit bureau. If the creditors cannot verify an account, the bureaus must remove all references from your credit report.

Consumer reporting agencies receive thousands of disputes each day. These disputes are handled by employees who make minimum wages with only a very short time to investigate each dispute. If the negative accounts aren't removed after your initial dispute, don't despair. It make take a few efforts to get the CRAs to remove the account. Be patient and allow four to five weeks between your efforts.

Pay Off Bad Debt

Paying off your most recent past due accounts can increase your credit scores. Use caution when paying on accounts more than a few years old, as paying them can bring your down your scores even more by triggering a "current" status on the account.

Negotiate with the creditor to update the account to reflect “paid as agreed” or to remove the account BEFORE you pay it. It’s difficult to convince the creditor to update or remove it after payment because you don't have as much leverage. That said, it sometimes is easier to dispute paid accounts with the consumer reporting agencies.

Maintain and Utilize Credit to Your Advantage

Another important aspect with raising your credit scores is to keep your existing balances below 35% of your available credit limit. You’ll also want to minimize the number of inquiries you make by not applying for credit unless absolutely necessary.