Repairing Your Credit – The Basics
Everyone’s credit/debt situation is as different as the individual themselves so no single solution will be the best choice for all. Many people will be able to do at least some credit repair themselves but most people would benefit from professional assistance. Repairing your own credit involves knowing your rights as well as becoming acquainted with the laws, rules and procedures within the lending industry.
Whether you are considering debt settlement, debt consolidation or possibly filing for bankruptcy, the first thing that needs to be done is to find out exactly where you stand. The most useful tool to do this is your credit report. This report is actually three separate reports, one from each of the three major nationwide credit reporting agencies: Equifax, Experian, and TransUnion. Now, where do you get your credit report?
On April 2, 2010 a new Federal Trade Commission rule allowing consumers to obtain an annual no-strings-attached free credit report took effect. This law requires the reporting agencies to supply you with your report at least once within every 12 month period. Your free credit reports from all three agencies are available at AnnualCreditReport.com, or 877-322-8228. This is the ONLY authorized source for the free annual credit report that’s entitled to you by law.
It is important to note that the free credit reports do not contain your credit rating number, only the details of what effects your credit rating. However, these details are what determines your rating. Everyone says you need to check for errors in your report and have them corrected. This is usually true but some errors may actually help you depending on your situation. More about that later, but first you must decide on when to get your reports.
When you go to AnnualCreditReport.com, you are given a choice of which reports you want; the TransUnion credit report, the Equifax credit report and the Experian credit report. You can choose any one, two or all three. The advantage of getting all three is that there can be different information on each of them, so viewing all three will give you a clearer picture of your situation. On the other hand, since you can only access each report once per year, getting one report every four months will help you monitor your credit for fraud and errors throughout the year. In most cases, anyone trying to repair their credit should get all three at once.
The first things to look for on your reports are negative items with no activity for 7-1/2 years or more. Since 7-1/2 years is the maximum amount of time they are allowed to report, these can easily be removed by contacted the reporting agency. If you have had any debts turned over to collection agencies, then you need to make sure there is no more than two entries for each debt; one for the original creditor and one for a collection agency. A common practice with these agencies is to continually flip the debt to other agencies and each record is not always removed.
Morally and ethically, all known errors on your credit report should be reported and corrected immediately. With that being said, let’s look at how and what kinds of errors can actually be advantageous to your situation. Obviously, if you are trying to get a debt consolidation loan, an error such as a credit card with a good payment history, a high credit limit and low credit debt would only help you get the loan. However, if the same error appears on your report when you are negotiating with a lender or a collection agency, it could be detrimental. The lender would want you to simply pay what you owe them with the available credit on this non-existent card. Conversely, a negative entry on your credit report could actually give you more bargaining power in the fore-mentioned negotiations while it would be potentially damaging to someone seeking a loan.
This is only meant to be a brief overview of what a consumer can do to improve their credit score. The ideas contained in this article are in no way intended to be legal advice and anyone who wants to improve their credit score are strongly encouraged to seek professional legal assistance.
Nice article.
When seeking professional advice, be very careful. Seek out credit counselors (there are several in local communities that are even free) and not shady credit repair companies.
Many credit repair companies will bombard the bureaus with complaints about items on your report. The bureaus have 45 days to respond, but because there are so many disputed items, they cannot get to them in time. They will remove any they can not verify.
You credit score temporarily goes up. Then the banks, etc. eventually report the negative marks that were removed and they are added back on. Not good.
If you have time and are patient, it is a good idea to fix your own credit using your annual credit report (as mentioned above) and a letter of dispute for negative items needing removed. When you find an item that needs removed (including old items or other people’s information on your credit report), write a letter disputing the items and send it to the three credit bureaus. They have to repsond to your dispute within 45 days or remove the item from your report.
Of course, making payments on time accounts for most of your credit score, so making your payments on time is the best and easiest way to fix your credit.
Adam,
You are so right. So many people hire companies to repair their credit and just end up spending a ton of money with no real results. The best way is to try to work it out yourself and pay your bills!!
Ann@debt solutions´s last [type] ..Negotiating With Credit Card Companies
Hallo,
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Ik wacht op uw dringende reactie,
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Hi! I just got my first credit card and I could say that I don’t have enough information on how to use it and deal with my credits. Thanks for the info! It gave me a better idea about my credit report!
Amy´s last [type] ..A loan guide
Hi there,
This is great advice. The only thing I would add is to form the habit of pulling that free credit report every year – make it one of your New Year’s resolutions. Errors and inconsistencies are much easier to fix if they are less that a year old. Everyone should check their credit annually.
Ann@Debt Advice´s last [type] ..How to Check Out a Business or Company to Avoid Getting Scammed or Ripped Off
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