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.