Credit reports have become big news lately with a proliferation of advertisements on television, radio and the internet for credit repair companies, free credit reports, and credit monitoring services. What often happens when something becomes trendy among the general public, many companies and individuals try to benefit from the opportunity by offering services and products to complement the trend. Some of these companies, unfortunately, do so by preying on consumers who need help and offer poor or outright deceitful services designed solely to turn a profit.

Credit repair is one of the services that has been targeted by unscrupulous providers and has earned a reputation as being fraudulent. While there are some “credit repair” organizations out there to be avoided, increased regulation and scrutiny by the federal and state governments has created an environment where “credit repair” companies who operate dishonestly are quickly located and shut down. This is a step in the right direction.

The result is a new era where the good providers will eventually take the business away from the poor providers because of their bad reputations. The good guys offer quality credit repair, they operate under close supervision to help consumers legally fix their credit by removing erroneous entries from their credit reports. They give timely advice on rebuilding a strong credit portfolio, and proper strategies for dealing with debt.

For many customers, this service proves to be very useful since studies have shown that approximately three out of four credit reports contain errors and most folks do not have the time or resources to repair their own credit. Legitimate credit repair companies work on behalf of their clients by interfacing with the major credit bureaus and sometimes individual creditors.

Whether you decide to try credit repair yourself, or choose to hire a credit repair firm, the scrutiny that the whole industry is under is working to clean up the entire trade. Consumers still are the best defense, know the laws, ask tough questions, and make sure you are dealing with a reputable company that understands your needs.

A lot of people wonder if credit repair is truly legal.  The truth is it’s not only perfectly legal it is imperative for the majority of us.  Research has shown that up to 70% of all credit reports in the United States have errors on them.  These mistakes need to be repaired or your credit scores will not reflect your true risk factors. Yes, there are some firms out there touting repair services that are illegal, and some that are simply unethical.
A couple of things to look out for are firms that want you to apply for a new social security number or just wants to delete all negative information from your files.  These types of operators need to be avoided, they are involved in illegal acts or do not have your best interest as there motivation. There is much more involved to repairing and optimizing a person’s credit report than just blanket deletions.

It’s important to remember that when dealing with credit reporting agencies you have the law on your side.  Without it, they would not concern themselves with the accuracy of your reports.  The credit bureaus are required to present fully accurate reports on each consumer, however if you do not initiate complaints of errors and inaccuracy, the credit bureaus will simply do nothing. You need to defend your rights as a consumer to have clear and accurate reporting of your credit history.

When looking for assistance or advice on credit repair you want to deal with those who are willing to give you a complete consultation before you make any decisions. Ask if those that will be working on your behalf have any professional education or certifications. Will they be doing anything to help protect your information from identity theft? Do they have strategies to help you deal with your debt, and to rebuild a positive credit profile as you move forward.

A good credit repair agency will let you know that you have the right to do it yourself. Many folks just don’t feel they have the time or proper knowledge to be effective themselves. If this is the case do your due diligence and make sure you will be represented by a qualified individual that will work legally to improve your credit profile.

As the economy continues to sink into a deep recession and other sources of available credit have all but dried up, defaults on credit card debts are expected to soar to unprecedented heights in 2009. For decades credit issuers have ferociously competed to be the first card in your wallet, and now they are just competing to be the first paid back. Although they won’t admit it publicly, lenders and their collectors are beginning to realize they need to round up whatever money they can before things get even worse. In some cases that could mean agreeing to longer payment plans or even accepting pennies on the dollar as payment in full.

The first thing you need to remember is even if you feel your debt is manageable it may still be affecting your credit score, especially revolving (credit card) debt. Paying down your revolving debt is a sound credit repair strategy. If you are using over 50% of your available revolving credit you will be able to raise your scores considerably just by paying it down to under 30%. This is one of the easiest credit repair fixes there is.

If your credit card debt is getting out of hand there may be no time better than now to negotiate in your favor. You may even be flirting with the idea of bankruptcy right now, but that should only be the last resort. If you are not sure seek the assistance of a Credit Counselor or Bankruptcy Attorney to help make the correct decision.

If you plan on trying to negotiate with your creditors here is some advice to help you get started. Please be patient, this will not be done overnight, make a plan and stick to it.

Plan a Strategy

The first thing you need to find out is whether you are dealing with the original creditor or a collection agency. Your negotiation strategy will be quite different for each. For example; working with the original credit card company over the phone is actually the preferred method; however, it’s often best to keep communications with a collection agency to writing. If your debt is still with the credit issuer do everything you can to keep it there. They are generally much easier to work with.

Start With a Low Offer

Don’t be afraid to make the first offer and decide up front what amount that will be. Most collection agencies have paid cents on the dollar to buy your debt, and as previously mentioned, even original creditors are willing to wheel and deal these days. If you’re negotiating with a collection agency, 25% or less of the total balance is a good place to start. With the original creditor you will want to make a better offer somewhere between 25% and 50%. Of course, every situation is different, so be sure to make an offer you feel you can defend.
Keep a Record of Everything

Keep this principle in mind, your organization of records from day one can really make the difference between a good and bad settlement.  Now that you understand who you are dealing with and where you will begin, record every phone call, take names of who you spoke with, make copies of every letter, and don’t expect anyone to remember who you are or what was agreed to at an earlier time. Keep this principle in mind, and you will save yourself a great deal of headaches along the way.

There are steps you can take to avoid financial trouble or at least minimize its effect on your life. The first thing each of us should do is to have a planned budget for our finances, as well as saving money for many of our purchases instead of buying most things on credit. If you don’t know how much money is coming in and going out each month you have a recipe for disaster. Your first step should be to list all of your income sources, and all of your bills and payments for the month on a sheet of paper. If your bills are more than your income you are already in trouble. Hopefully after listing all of your bills including food, gas, and entertainment you will at least have 30% of your income left over to put into a savings account or rainy day fund. If this is not a possibility you basically have two options, either you need to generate more income or reduce some of your liabilities. Ways that you might be able to generate more income are to get a better paying job or even second part time job, sell some of your possessions that are not needed, or even take on a roommate to lower your monthly expenses.

The next part of your plan would be to go through your list of bills and payments and break them down into to lists called WANTS and NEEDS. You definitely need a roof over your head with electricity, and water service. Food is definitely a need. Many people will consider their auto mobile and cell phone as a need, especially if you must have them for your job, but you need to be honest with yourself. Can you take a bus or train to work, can you carpool with a friend. If you must have a cell phone for work see if your employer will pay for at least part of your monthly bill. Find ways to lessen you food budget by not eating out often and using coupons at the grocery store. Find ways to lower your electric bill by adjusting your thermostat and turning unneeded appliances off in your home. Insurance can be both a WANT and a NEED. If you own a home or car you will need to insure them, and health insurance will keep you out of financial difficulty if you have an unexpected illness. Make sure that you are not over insured and when it comes time for renewal shop around to see if there are better deals. Remember, the higher your credit score the less you will pay for insurance of all types!
Let’s talk about your WANTS. These are items that you do not need to have to live, they may make your life more enjoyable but you do not absolutely have to have them. Things like Cable TV, Internet access, Gym or Health Club Memberships, Beauty Salons, Second Car or Phone Line. These are item that may be reduced or eliminated to help keep the budget in line. These may be tough decisions for you, but it is better for you in the long run to reduce or eliminate these payments than to pay your bills late and get Late Pays, Charge Offs, and Collections showing up on your credit report.
If you have gone through all of these steps and still find yourself having financial difficulty see if you might be able to get some temporary assistance from family, friends, or even possibly your church or a local charity. If you’re financial troubles are going to be with you over the long term you may need to see if you are eligible for some type of Government Assistance like welfare, food stamps, or housing assistance from the Department of Housing and Urban Development (HUD).
When you have truly done every thing in you power to reduce your bills, or you have an unexpected event in your life that is going to prevent you from paying your bills on time, there are still thing you may be able to do to lessen the effect on your life and your credit scores. The first instinct we all have when we cannot make a scheduled payment is to avoid our creditors and hope they will go away. We all know that they never do. It is in our best interest to call your creditors prior to your due dates and let them know you are having problems and see if they are willing to do some type of work out plan that will be in the best interest of both parties. Not all creditors will be willing to work with you but some will, you do not know until you try. If you just don’t pay your bills you know your credit will be damaged. By calling your creditors you may have a chance for a work out, or at least they might give you more time to pay. Many times a Mortgage Bank, and Auto Finance Company might let you make interest only payment for a short time and roll the principal payments into the back end of the loan. This may give you several months to catch up on your bills.
Sometimes in life even after you do everything we have discussed you are going to have too much month at the end if the money. If this is the case deciding what bills you should pay, and which ones you shouldn’t can be very important for your overall financial health. Your first priority should be your secured debt. Secured debt is loans that have been secured with some form of collateral. Examples of secured debt are your Home Mortgage and Auto Payment. If you do not make these payments the creditor has the legal right to take back the property that secured the loan. This can lead to the Foreclosure of your home, or Repossession of your vehicle. These should be your first priority because you need a roof over your head and transportation to your job. Remember that if these secured loans require insurance coverage as a requirement of the loan you will need to make sure that these payments are made as well. The next priority would be your utilities like electric and gas. Call the utility company to see if they may have some type of short term assistance program. Your last priority to pay is unsecured debt such as credit card payments or the items listed in the WANTS column in your budget. While missing these payments will negatively affect your credit, these creditors cannot take back any property that was purchased as unsecured debt.
In summary: Always pay your bills on time for a healthy credit report. Create a budget for you and your family. Start or add to a savings account or rainy day fund for difficult times that may pop up in the future. Save money for the things you need to buy instead of buying most things on credit. This is the beginning of a brighter financial and credit future.

Here’s a tip.  Save Money Each Month - On average, consumers who carry a balance owe $2,200, on which they pay 15.2 percent in annual interest charges. Eliminate that and you can save $28 per month on your household budget. Some 15 percent of consumers carry balances of $10,000 or more, according to Fair Isaac, the credit-scoring company; these folks can save at least $125 per month by paying off their debt. Not to mention you will raise your credit scores by having lower revolving debt!

How to Do It - Paying off your balance is easier said than done. The trick is to stop charging. Then pay more than the minimum required each month until it’s paid off. Dig up cash for this from your U.S. Treasury stimulus check, garage sales, IRS refund, or extra work part-time.

See Where Your Credit Report Stands

You need to see where your credit stands before you take any action. Look for any discrepancies such as other people’s information mixed up with yours. This could happen due to the credit bureau’s mistake or worse, someone has targeted you for identity theft. It is a very good idea to look at and be in control of your credit history. To view your credit report, check out our articles on getting your credit report.

Open a Checking and Savings Account

If you have a couple active bank accounts, you are seen as someone who has steady income and this provides the bank with answers to questions they may have including;  do you pay your bills on time? And are you consistently using the overdraft protection?

Apply for a Credit Card

If your bank approves you for a credit card, do not allow your bank to approve you with a higher limit than you can handle. You should never reach your limit. Keep your credit use to 30% for the best possible credit and pay all of your bills on time.

Be a Part of Someone Else’s Credit

If possible, attach your name to a trusted family member or spouse’s line of credit as a co-signer. While this loan will not be used by you, the primary signer’s loan will affect your credit history. It is extremely important that you trust this person and know of his or her credit history. Be sure to request a copy of this person’s credit report. Your can build credit if you co-sign with someone who maintains positive credit.

Once you have begun to build good credit, maintain your credit by establishing a budget to pay your bills on time and consider opting for car loans, mortgages and personal loans. When you prove you can pay these loans regularly and on time, building a good credit report will be simple and will not take long to become established.

What does your credit report look like? If you don’t know you will want to find out. Even if you have a bad credit record you can change this over time. Believe it or not, building a good credit record is not as hard as you may think. Once you get on track and know how to move forward you can build better credit soon enough.

Building a good credit record can often times be frustrating. Many people find that in order to build credit they need credit. But of course, if you stick with things you can make headway soon enough.

First things first, open a checking and/or savings account. This will not help you establish credit, but it can be used to show that you not only have money but that you also know how to manage it. For the majority of consumers this is the most obvious first step to take.

As you move forward you may want to look into opening a store credit card. But remember, just opening the account is not good enough. You must use it and then repay the money when it is due. Remember, when building credit your main goal is to show that you know how to manage your money. If you begin to miss payments you are not building good credit but instead giving creditors a reason to turn you down in the future.

Some people, no matter how hard they try, cannot get started. In this case you should seek a cosigner. For example, you may not be able to get a car loan on your own but with a parent as a cosigner you can. As long as you keep this account in good standing both you and your cosigner will build good credit.

It may seem like a lot of hard work to build a good credit record, and it can be. But remember that the hard work you put in now will pay off later when you have a good credit record and high credit score. 

Are you looking for information on credit repair and self help?  How much help do you need when you are looking for credit free repair?  Before you answer that question consider three ways to “fix” credit. 

The first way is rather obvious.  You pay off all of your debts and thus are given more credit to spend.  This is problematic for some because money is often times scarce and interest charges can be predatory.  The second way to pursue credit free repair is by negotiating with creditors for a lower price than what is stated on file.  You the consumer may perform this, or you may get help from a debt relief agency or by a debt relief lawyer. 

Is there any difference between the three?  A debt relief lawyer would have experience in this situation so might be more knowledgeable in his negotiating strategy.  Debt relief agencies may refer you to an attorney or have their own financial specialist help you on a case.  However, you must beware of some debt relief companies that are actually scam operations.  The usual model of a legitimate debt relief agency allows the debt-ridden consumer to refinance through the company.  In turn, the company negotiates with the many creditors to create a consolidated balance.  However, scam operations may simply offer to negotiate balances and not actually do anything—all the while requesting more money.

The third type of credit repair service is even more concerning—some companies will offer to create a new credit file, or a new credit identity, so you can wipe the “slate” clean and start over.  This is an absurd promise, and you should hope it’s a scam.  Otherwise, you may be committing a crime.  There is no way to fix a repair file other than to satisfy your creditors.  The credit bureau merely reports on what financial transactions have been taking place.  The individual creditors have the most power to remove an item.  Only by legal dispute can a credit bureau remove items from a credit file.  This can only be done after a thorough investigation into the matter.  If you want to dispute charges, be sure to provide as much evidence in your favor as possible.

If you want to repair your credit it’s time to start analyzing your credit history.  You can do this by requesting a free copy of your file from any or all of the big credit agencies, Experian, Equifax and TransUnion.  You are legally entitled to one free review every 12 months, as well as unlimited access through one of the commercial providers.

You may also want to check out our tips at: 3 Things You Can Do Now To Improve Your Credit Score.

There are plenty of options available to you if you have bad credit.  However, are they really worth it?  Some of these options may end up costing you much more money than legal credit repair would.  Independent lending companies that offer bad credit loans often subject their borrowers to predatory lending.  They insist on high interest rates, strict terms and not much room for negotiation.  Payday loans have low limits and must be paid back immediately.  Car title loans and Refund Anticipation Loans are also flawed, mainly because of their high interest rates as well as the high-profit scheme of the lending companies.

In some cases, it really pays off to invest in credit improvement.  How can you work to improve your credit when you’re thousands of dollars in debt?  You may pursue a solution in the way of refinancing, negotiating with creditors or disputing charges on your credit report.  When it comes to debt consolidation, this is a profitable idea that you may want to consider.  However, investigate the company you are working with thoroughly.  The mission of a debt relief agency is to refinance a loan while negotiating with creditors for a lower payoff.  This way, they can consolidate all of the consumer’s bills into one convenient payment.  Without refinancing, this option is useless.  You can try negotiating with creditors on your own.  All that a debt relief company or credit score repair attorney can do, short of taking on your debt, is inform you of any illegal items listed on your credit report.

Some creditors may be willing to reason.  Creditors have been known to drop a consumer’s dated charges just to keep the customer happy.  If you are in major debt, then this may not be an option for you.  However, you can pursue credit improvement by negotiating terms with your creditors as to how much you can send. 

What about the matter of credit disputes?  This is definitely an area of credit improvement that needs attention.  You can contact the creditor directly or the credit bureau for more information.  You will be required to dispute the charges in writing and give the bureau about a month or so to respond.  As per the Fair Credit Reporting Act passed, the bureaus are required to investigate your dispute claim at no charge to you.  Know that the same act also made it illegal for consumers to take advantage of this system and dispute a charge that is obviously valid. 

Credit improvement is an investment that pays off.  Your negative items are stored for seven years (or ten for bankruptcy) and then wiped clean.  If you make an effort to pay off your most important bills one at a time, you will be returned to a clean slate and be respected by all major credit companies.  This will mean better terms, with lower interest rates, more generous time frames and lower monthly prices.  Having good credit saves you money!

According to the folks at Fair Isaac, one of the biggest factors that affects your credit score is your history of paying debts.  If you have one or more debts that are in “collections”, your credit score has probably taken a big hit.

So it makes sense that if you were to pay off the bad debt, that your credit score would rise. 

Unfortunately, that is not always the case.  Here’s why.  If you negotiate with a creditor to pay off an old debt, the creditor will happily take your money and list the debt as paid off on their books.  However, they will not necessarily ask the credit bureaus to delete the debt from your credit history.  In fact, they most likely will NOT ask for the debt to be deleted.  It will continue to show up as an “uncollected” item on your reports for years, continuing to hurt your credit score.

So what can you do?

Here’s one (important!) tip that you can use when settling old debts—as a condition for paying the debt off, demand that the creditor ask the credit bureaus to remove or delete the account from your credit reports.  That’s right, tell your creditor that you will pay off the old debt, but only if the fact of the old debt is eliminated from your credit history.

This simple tip will usually cause your credit score to skyrocket.