Top 5 Compelling Credit Repair Tips

In today’s world, credit is indispensable. Most of us use credit nearly every day. it is so common that most of us use it, without even thinking about it: credit cards, car payments, house payments, etc. Regrettably, most people don’t give their credit rating much thought, that is, until they run into trouble with it. Bad credit rating affects much more than your ability to get a loan: you will also have problems securing any kind of credit at all – you’ll no longer be able to get store financing, you’ll have to ‘put money down’ on phone lines and other utilities, and face problems renting property. It’s important to take action to repair credit yourself as quickly as possible. Here are 5 Compelling Credit Repair Tips:

Tip #1: Get Your Credit Report

Your credit report contains all of the information reported by banks and other agencies, about your credit score, thus it contains everything you need so you can repair credit yourself. Most people never think to review their credit report until they are attempting some form of credit repair.

This should be a free service; you just need to request it. If you have been turned down for a loan or credit card, the company is required to provide you with the name of the credit bureau that reported you as having bad credit. Once you have obtained your report, check it for anything you feel that is a mistake.

If you find that there are discrepancies in your credit report, notify the credit agency that issued the report, it is their legal obligation to conduct an investigation into your report within 30 days of notification. If they are unable to back up their claims with proof, or do not respond to your claim within 30 days, they are required to remove the score from your credit report.

Tip #2: Contact Creditors

Once you have obtained your credit report, and checked it for accuracy, it is important to contact the agencies who you have outstanding accounts with. The trick to credit repair is dealing with these accounts so you can repair credit yourself successfully.

Initially, this may seem overwhelming to many of you. However, keep in mind a creditors goal is to recover as much of the outstanding balance as possible. They can be surprisingly accommodating while working with you to arrange repayment. In many cases they may ever eliminate interest all together, or lower the bill itself to encourage immediate payment. If you can’t settle the debt right away, propose a payment schedule that you can stick to, you might be surprised at how accommodating they are, as their priority is to recover as much debt as possible.

The important thing to remember is that you are trying to repair credit yourself, so proposing a payment plan with your creditors that you will be unable to stick to, will cause you more problems down the road. Be conservative, make sure that you have budgeted your finances properly. If needed visit a financial planner to help you figure out how much income you have to put towards your debt reduction.

Tip #3: Avoid Collection Agencies

This is the final step a creditor will take when they are unable to recover their bad debt. At this point, the creditor has deemed the chance of repayment so low, that they have sold the debt to a collection agency at an extreme discount, sometimes up to half of the amount owed to them.

When creditors do this, they have ‘written off’ the loan and apply the lowest possible mark on your credit report. As soon as you have been contacted by a collection agency, try and contact the creditor, as sometimes they will remove the ‘write off’ score from your credit report in return for immediate payment. The important thing is to do whatever possible to get the debt back into the hands of the original creditor and get it cleared up as soon as possible.

If your creditor is unwilling to negotiate a deal with you, you’re stuck with the collection agency. Collection agents are known for taking an intimidating and threatening demeanor, and often threaten you with legal action. Remember two things, first, the collection agency bought your bad debt for far less than its face value, second, that means taking you to court is most likely unfeasible. Your best course of action is to offer to make an immediate payment for less that what you owe. Many collection agencies will accept this – they are generally making a profit on anything you give them that’s more than 50% of what you owe, and by paying immediately, they can close your account and start working on other accounts sooner. When working with collection agencies, only offer full payment as a last ditch effort when trying to repair credit yourself.

Tip #4: Secured Credit Cards

When you repair credit yourself, it requires patience to get your credit score back up to where you want it. Looking into getting a “secured” credit card is a great way to get started. These cards are generally marketed by companies to people who are trying to improve their credit score. Unlike traditional credit cards, which you will most likely not qualify for, a “secured” card requires you to put down a deposit equal to the balance of the card (ie: $500 deposit for a $500 limit), which they will use at any time to pay off the balance of any overdue payments owed to them.

This is a win, win situation for both you and the card issuer. They assume no risk as the total limit of the card is covered by your deposit, and you’re never going to owe them more money that you will be unable to repay. Once you have your card, use it regularily, but conservatively. Ensure that you pay all of your bills on time, doing this will slowly improve your credit rating, and earn back the trust of the creditors that have refused to give you credit in the past. The downside to this situation is that secured credit cards often have annual fees that regular cards don’t. However it will provide a platform for you to repair credit yourself.

Tip #5: Consult a Credit Repair Company

If none of these tips are successful in helping you repair credit yourself, think about contacting a company that specializes in credit repair. Many of these companies offer their “credit repair” service for a fee. Keep in mind, they are unable to do anything for you, that you are unable to do for yourself. Make sure you read the fine print carefully and check them out with agencies such as the better business bureau to avoid scams, and to ensure you are getting exactly what you paid for. If you have limited time and resources to repair credit yourself, the services of a credit repair agency can be a great help.

The basic strategy these companies will take, is to investigate everything on your credit report in order to overwhelm the credit agency with requests. Remember, any documentation they cant provide within 30 days, must be removed from your credit score. However, the credit company usually continues to investigate the claim, and when they can produce the documentation, the items will be re-added to your credit score.