Credit Repair

Credit repair can be a daunting task for many people. It takes research, persistence and in some cases, a lot of work. However, for many people, the alternative is filing bankruptcy, so the efforts required for credit repair will be well worth it in the long run.
 
The first step to repairing your credit is to know what's on your credit report. To request your credit report, you can go through the three major consumer reporting companies:
  • Equifax
  • Experion
  • TransUnion.
 
Each of these companies will provide one credit report for free per year.
 
Credit report repair begins with disputing any inaccuracies on your credit report. Look through carefully for anything that is incorrect.
 
If you find any inaccuracies, you must report them both to the consumer reporting company and to the company or organization that provided the inaccurate information. Report any of these inaccuracies in writing, and make sure to keep copies for your own records. The consumer reporting company should investigate your claim within 30 days, and if your claim is accepted, you will be notified in writing and will receive a copy of your correct credit report.
 
Bad credit repair continues with paying off any outstanding or late payments. Do you have late fees on a credit card? Did you miss any car payments or payments on any other products you've purchased? If you are over your credit limit on any accounts, also make sure to get your balance within the given credit limit.
 
The Federal Trade Commission can also help by providing tips on credit repair and dealing with creditors.

Credit Repair Services

Because of the time and effort involved in repairing credit, many people are tempted to turn to credit repair services to do the leg work for them. However, going through these companies can have a negative impact on your credit and could end up costing you more money.
 
Some of these organizations are simply scams set up to take advantage of people and take their money. Additionally, there is nothing a credit repair service can do or claim to do that you can't do yourself.
 
Credit Repair Services Defined
Credit repair services fall into these categories:
  • credit counseling agencies
  • credit repair companies
  • debt consolidation agencies.

Negative consequences of dealing with credit repair services can include:

  • disputing correct information – some agencies send dispute letters to creditors on correct information, which could later remove correct, positive information from your credit report
  • large fees - both at the start of services and throughout
  • late payments – many of these organizations skip the first month of your payments and pocket the money that you give them at the start of their services
  • rejection by lenders – when you deal with these agencies, your credit report may reflect this, which can make certain agencies refuse to lend to you.
If you decide to use a credit repair service, at least make sure to check out the company with the Better Business Bureau and other agencies that monitor scams and business practices.

Sample Credit Repair Letter

A handy tool for anyone trying to repair their credit is a credit repair letter. You must remember to include copies of your credit report and copies of any documents supporting your claims when you send letters to consumer reporting agencies and creditors. Rather than create a letter from scratch, most people find it much easier and more efficient to modify a sample credit repair letter.

Resources

About (2008). How to Repair Your Credit. Retrieved January 11, 2008, from the About Web site: http://credit.about.com/od/creditrepair/ss/creditrepair.htm.

Federal Trade Commission (2005). Credit Repair: Self-Help May Be Best. Retrieved January 11, 2008, from the FTC Web site: http://www.ftc.gov/bcp/conline/pubs/credit/repair.shtm.

Federal Trade Commission (2006). How to Dispute Credit Report Errors. Retrieved January 11, 2008, from the FTC Web site: http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm.

TransUnion (2008). The truth about credit repair. Retrieved January 11, 2008, from the TransUnion Web site: http://www.truecredit.com/help/learnCenter/welcome/credit
Repair.jsp.