Credit repair is big business, and there are many companies that will promise to help you get out of bad credit problems.  There are a number of legitimate resources that can help you in improving your credit score but there are also a number of less than reputable companies out there that will take your money but offer you few (if any) valuable services.  A few basic tips will help you see the difference:

Importance of  Seeking professional help

If you are in over your head, and your credit is so bad that you cannot get a loan and may even be facing bankruptcy, you may want to seek help from professionals.  There are a number of financial professionals that can help you with credit repair:

Bankruptcy lawyers and bankruptcy advisors: Bankruptcy lawyers can help represent you in bankruptcy proceedings.  Advisors can help you decide whether to apply for a bankruptcy and how to proceed once you do decide to file.

While getting a bankruptcy lawyer and filing for bankruptcy can be upsetting and can dramatically affect your credit score for many years, it can also give you a chance to start over financially and can help you reestablish good credit again in the long run.

Credit repair companies and credit counseling companies: These companies can help you by acting on your behalf with credit companies, by advising you on what you can do to repay your bills faster, and by helping you make better financial decisions.

Accountants and tax services: Accountants and tax filing services can help you make the most of your money by making sure that you do not end up overspending on taxes.

Bankers and bank officers: Most banks today want to not only help you keep your money but are willing to work with you to make the most of it.  As a banking service, many banks today offer free investing advice, saving advice, and personalized meetings with bank officers that can help you figure out your money situation.
Lenders and bad credit lenders: How you deal with lenders will determine how well your credit score works. Avoiding too many inquiries by not applying for too many loans, establishing long-term business relationships with bankers, and doing business with bankers in an organized and professional way (i.e. paying your debts on time) will go a long way towards giving you a credit rating.  In turn, a good credit rating will make it easier to deal with lenders.

Look out for credit repair companies.

Many companies out there advertise that they can help you with credit repair, but the quality of these services – not to mention what they offer – varies widely.  Some companies really can help you with credit repair while others are actually under investigation for suspect business practices.  If you decide to seek help from a credit repair company, be sure that the company is legitimate and offers you viable services.

In general, you should be looking for non-profit credit counseling services rather than credit repair companies (some of which are really just lenders offering home equity loans anyway, which are of limited use to you if you want to improve your credit).

Check to make sure that the company has good standing with the Better Business Bureau and clients who are happy with the credit repair services they received from the company.  Always read the paperwork carefully before you sign and make sure that you understand how much you are paying for and how much you are paying.

Before deciding to seek help from a credit help or credit counseling service, be sure that the problem cannot be resolved on your own.  Indications that you may need credit counseling include:

• You cannot pay your bills and avoid the necessities of life.
• You avoid the phone, the mail, and the door because you are being harassed by collection agencies.
• You have avoided going out because you feel terrible about your financial state.
• You have no idea how you will repay your bills and loans – you do not know where to start.

Seek free or inexpensive help before seeking paid credit repair help

If you need credit repair, odds are good that your finances aren’t in the best possible shape.  That likely means that you should attempt to spend as little as possible on credit repair – the money you save can be channeled into repaying your debts.  Before seeking credit repair services, follow the tips we have posted on this site in order to repair your own credit.

Also, seek out free or inexpensive sources of credit repair help.  Some non-profit credit counseling services are actually registered charities and will work on your behalf.  If you can get help from one of these companies or undertake credit repair yourself, you will be able to save money quite easily.

In addition, these companies tend to be more legitimate than credit repair companies that take your money, anyway.

Read the full story

Big, bad problems can happen to you – bankruptcies, divorces, law suits, non-payment of taxes.  These are big problems that can affect your credit score in as big way.  If you have faced a large problem that has ruined your credit, you need to take action fast and work consistently to boost your FICO score:

If you have bad credit, establish better credit by taking out credit and repaying it quickly

If you have terrible credit following a bankruptcy or other major financial upheaval, you may need to get back into a good credit rating by taking out a loan you can handle.  Make an appointment to see your bank or bad credit lender a few months or years after the problem in question and arrange for a small loan.

You should have enough savings to pay for the loan before you do this.  Pay back the loan quickly.  It will not hugely boost your credit score but it will show lenders that you are having an easier time paying your bills.  Taking out a small loan you can repay is part of the slow process of reestablishing good credit following a big financial problem.

Try secured credit if you cannot qualify for other types of credit

Secured credit is credit or a loan which uses something as collateral.  In some cases, this could be an asset like a house.  In some cases, this collateral could be money frozen in an account by the bank for just such a purchase.

If you need credit following a big problem with your credit score, secured credit may be something you can qualify for. You can use this secured credit to reestablish a good credit rating so that you will qualify for other loans in the future.  You may have to pay slightly higher interest if your credit score is quite low, but in the long term repaying this type of loan can improve your credit score.

Give it time

Many people believe that simply paying off debts will improve their credit score at once.  This is not true, unfortunately.  If you have experienced a bankruptcy, have been reported to a collection agency, or have had charge-offs, the record will remain on your credit report – even after you have repaid your debts and resolved the problem.

In fact, major problems such as a bankruptcy will remain on your credit report for seven or ten years, affecting your credit score.  Even if your credit problems stem from simply not paying bills on time, it will take some time for the mark to fade from your credit report and for your credit score to reflect your better repayment.

Paying off your debts and resolving problems will help your credit score (since overdue accounts will be marked as “paid” on your credit report), but only time will remove the mark of the problems from your record entirely.

This means that if you have faced a major setback such as a bankruptcy, you may have to wait in order to get the best interest rates on larger purchases.  The good news is that the further away you are from a major financial problem, the less dire it appears.

For example, if you have declared bankruptcy, you can expect it to have a huge impact on your credit score for the first two years, during which time you will have a hard time getting any credit at all.

However, after two or three years, if you have been paying your bills on time, then the bankruptcy from two years ago will matter less because you have been rebuilding your credit.  Your credit will still suffer – but you will slowly be starting to work your way out of the credit problem.  Persistence and good financial habits will get you there.

This means that if you plan on making a major purchase (such as a house of car) that may require a loan, you should start working on improving your credit well in advance – even years in advance – of your actual purchase.  This is because you simply will not have enough time to radically alter your credit score in time if you wait too long.

Even if your credit score is already fairly good, you may need to give yourself several months of time to boost your credit rating enough to get the best loan rates.

Read the full story

If you want to improve your credit score, you need to go right to the source – your credit report.  Your credit report contains the information and data on which your credit score is based.  If you can alter or update the information in your credit report, your credit score will change to reflect the alterations.  For this reason, getting and checking you credit report is one of the first things you should do when you attempt to repair your credit score.  There are a few tips that can help you deal with your credit report so that you can give your credit score a boost:

Dispute errors on your credit report

Contact each of the three major credit bureaus -  TransUnion, Equifax, and Experian – and get copies of your credit reports and credit scores.  Carefully read over the reports and note any errors.  In writing, contact the credit bureaus and ask that mistakes be removed or investigated.

This is called a dispute letter and once it is received, credit bureaus have to investigate your dispute within thirty days of receiving your letter.  It is important to keep a copy of your letter and it is important to note the date the letter was sent.  You should not be accusatory or abusive in your letter – calmly and clearly state the problem and request an investigation.

Note that you are aware the agency is required to investigate the claim within thirty days and note that you will follow up.  Be sure that you do follow up with the issues you raised in your letter – just because the agency investigates does not always mean that your credit report will end up error-free.

Many credit bureaus now make it possible for you to correct errors on your credit report online – and many have information on their web sites that tells you exactly how disputes must be handled to be effectively removed.  It is important that you follow this information exactly so that the inaccuracies on your credit report are removed promptly and your credit score is updated as soon as possible.

Add a note to your credit report if there is a problem you can’t resolve

Sometimes, there are legitimate reasons why you didn’t pay a bill.  If a contractor refused to finish a job or did a poor job, then you may have refused payment, but the non-payment may still count against you on your credit report.  If there are any unusual circumstances surrounding your credit report that may affect your credit rating – such as a case of identity theft – you can ask that a note be attached to your credit report to explain the problem.

Some lenders will pay attention to this and some will not, but it is a better solution than nothing at all.  Such a note will not affect your credit score but will affect your credit report. More importantly, it leaves a paper trail of the problem that lenders can look at if they choose.

Make sure you know who is looking at your credit report and why

Many inquiries look bad on your credit report, but more than that you likely want to know who can see your personal financial information, now that you know that your personal information is stored in a credit report.  If you sign a document with a lender or apply for credit online, you can be sure that someone is looking at your credit report.

However, you may want to look over other documents in order to see who is taking a peek.  Insurance agents will often look at your credit report, for example.  Some landlords and potential employers will, too.  You need to be careful about online sources, too.  In general, when you provide someone with your social insurance number, you may be giving permission to look at your credit report.  You shouldn’t bar people from looking, but knowing who is looking is good financial practice.

Know the difference between soft and hard inquiries

When you pull your credit report to look at it, it is counted as a “soft inquiry.”  Only “hard inquiries” from lenders will affect your credit score dramatically.  Although checking your credit score too often is an expensive habit, you should not avoid checking your credit report because you fear it will make your credit rating worse.

Read the full story

There are a few things that people do without realizing it that have a bad effect on their credit score.  Follow these tips to avoid the common traps that can sink your credit risk rating:

Beware of debts and credit you don’t use.

It is easy today to apply for a store credit card that you forget all about in three years – but that account will remain on your credit report and affect your credit score as long as it is open.  Having credit lines and credit cards you don’t need makes you seem like a worse credit risk because you run the risk of “overextending” your credit. 

Also, having lots of accounts you don’t use increases the odds that you will forget about an old account and stop making payments on it – resulting in a lowered credit score.  Keep only your used accounts and make sure that all other accounts are closed.  Having fewer accounts will make it easier for you to keep track of your debts and will increase the chances of you having a good credit score.

However, realize that when you close an account, the record of the closed account remains on your credit report and can affect your credit score for a while.  In fact, closing unused credit accounts may actually cause your credit score to drop in the short term, as you will have higher credit balances spread out over a smaller overall credit account base. 

For example, if your unused accounts amounted to $2000 and you owe $1000 on accounts that you have now (let’s say on two credit cards that total $2000) you have gone from using one fourth of your credit ($1000 owed on a possible $4000 you could have borrowed) to using one half of your credit (you owe $1000 from a possible $2000).  This will actually cause your credit risk rating to drop.  In the long term, though, not having extra temptation to charge and not having credit you don’t need can work for you.

Be careful of inquiries on your credit report.

Every time that someone looks at your credit report, the inquiry is noted.  If you have lots of inquiries on your report, it may appear that you are shopping for several loans at once – or that you have been rejected by lenders.  Both make you appear a poor credit risk and may affect your credit score.  This means that you should be careful about who looks at your credit report. If you are shopping for a loan, shop around within a short period of time, since inquiries made within a few days of each other will generally be lumped together and counted as one inquiry. 

You can also cut down on the number of inquiries on your account by approaching lenders you have already researched and may be interest in doing business with – by researching first and approaching second you will likely have only a few lenders accessing your credit report at the same time, which can help save your credit score.

Be careful of online loan rate comparisons.

Online loan rate quotes are easy to get – type in some personal information and you can get a quote on your car loan, personal loan, student loan, or mortgage in seconds.  This is free and convenient, leading many people to compare several companies at once in order to make sure that they get the best deal possible. 

The problem is that since online quotes are a fairly recent phenomenon, credit bureaus count each such quote estimate as an “inquiry.”  This means that if you compare too many companies online by asking for quotes, your credit score will fall due to too many “inquiries.”

This does not mean that you shouldn’t seek online quotes for loans – not at all.  In fact, online loan quotes are a great resource that can help you get the very best rates on your next loan.  What this information does mean, however, is that you should research companies and narrow down possible lenders to just a few before making inquiries.  This will help ensure that the number of inquires on your credit report is small – and your credit rating will stay in good shape.

Read the full story

If you have a lower credit score that you would like, odds are that the score is caused by some small financial mistake or oversight you have made in the past. Not every person with bad credit has a low credit score caused by something they did, though. Sometimes, other people’s criminal activity can affect your credit score. There are a few tips that can keep you and your credit safe form online and financial predators:

Look out for identity theft.

Many people who are careful about paying bills on time and having minimal debts are shocked each year to find that they have low credit scores. In many cases, this happens as a result of identity theft. Identity theft is a type of crime in which people take your personal information and steal that information to pose as you in order to get access to your accounts or identity.

For example, someone with your PIN numbers can remove small amounts of money from your bank account each month or someone can use your name and personal information to get credit cards in your name and use those credit cards with no intention of paying back the money. You are stuck with the large debts and the poor credit score.

To prevent identity theft, always check your account statements carefully each month. Report any suspicious activity or any charges you don’t recognize at once. Also check your credit report regularly and immediately investigate any new credit accounts you do not recognize – this is the best way of detecting and acting on identity theft.

If you have been the victim of identity theft, report to the police at once and get a police statement. Send copies of this to your bank and credit bureaus. Better yet, get the credit bureaus to attach the report to your credit report, if you can. Close all your accounts and reopen new ones. You should not have to pay for someone else’s illegal activity.

Practice safe banking, safe computing, and safe business practices.

To stay safe from identity theft, always follow safe banking and financial practices:

1) Keep account numbers and PIN numbers safe. Cover your account and PIN numbers when using debit at the store and refuse to give your PIN number to anyone. Avoid writing down your PIN and account numbers – you never know when this information could fall into the wrong hands.

2) Only do business with businesses you trust.

3)If you get applications for credit cards in the mail that are “pre-approved” rip up the applications and enclosed letters before discarding them. No, this is not paranoid. Identity thieves sometimes go through garbage in order to find these forms so that they can fill them out and steal your identity.

4) If you use a computer, install good firewall and antivirus protection system and update it religiously. Better yet, take a course in safe computing at your local college or community center. You will learn many good tips for keeping all your information safe while you are online.

5) Never buy anything online from a company you do not trust of from a company that does not have encryption technology and a good privacy policy.

Read the full story

Before you start boosting your credit score, you need to know the basics. You need to know what a credit score is, how it is developed, and why it is important to you in your everyday life.

Lenders certainly know what sort of information they can get from a credit score, but knowing this information yourself can help you better see how your everyday financial decisions impact the financial picture lenders get of you through your credit score. A few simple tips are all you need to know to understand the basic principles:

Understand where credit scores come from.

If you are going to improve your credit score, then logic has it that you must understand what your credit score is and how it works. Without this information, you won’t be able to very effectively improve your score because you won’t understand how the things you do in daily life affect your score.

If you don’t understand how your credit score works, you will also be at the mercy of any company that tries to tell you how you can improve your score – on their terms and at their price.

In general, your credit score is a number that lets lenders know how much of a credit risk you are. The credit score is a number, usually between 300 and 850, that lets lenders know how well you are paying off your debts and how much of a credit risk you are.

In general, the higher your credit score, the better credit risk you make and the more likely you are to be given credit at great rates. Scores in the low 600s and below will often give you trouble in finding credit, while scores of 720 and above will generally give you the best interest rates out there. However, credit scores are a lot like GPAs or SAT scores from college days – while they give others a quick snapshot of how you are doing, they are interpreted by people in different ways. Some lenders put more emphasis on credit scores than others.

Some lenders will work with you if you have credit scores in the 600s, while others offer their best rates only to those creditors with very high scores indeed. Some lenders will look at your entire credit report while others will accept or reject your loan application based solely on your credit score.

The credit score is based on your credit report, which contains a history of your past debts and repayments. Credit bureaus use computers and mathematical calculations to arrive at a credit score from the information contained in your credit report.

Each credit bureau uses different methods to do this (which is why you will have different scores with different companies) but most credit bureaus use the FICO system. FICO is an acronym for the credit score calculating software offered by Fair Isaac Corporation company. This is by far the most used software since the Fair Isaac Corporation developed the credit score model used by many in the financial industry and is still considered one of the leaders in the field.

Read the full story

There are many misconceptions about credit scores out there. There are customers who believe that they don’t have a credit score and many customers who think that their credit scores just don’t really matter. These sorts of misconceptions can hurt your chances at some jobs, at good interest rates, and even your chances of getting some apartments.

The truth is, of you have a bank account and bills, then you have a credit score, and your credit score matters more than you might think. Your credit score may be called many things, including a credit risk rating, a FICO score, a credit rating, a FICO rating, or a credit risk score. All these terms refer to the same thing: the three-digit number that lets lenders get an idea of how likely you are to repay your bills.

Every time you apply for credit, apply for a job that requires you to handle money, or even apply for some more exclusive types of apartment living, your credit score is checked.

In fact, your credit score can be checked by anyone with a legitimate business need to do so. Your credit score is based on your past financial responsibilities and past payments and credit, and it provides potential lenders with a quick snapshot of your current financial state and past repayment habits.

Read the full story