Mistakes that have been made in the past concerning your payment history and your credit will remain on that report for several years. Even if you make a change and start paying everything on time and even get a better job, those few moments where you let the credit fall to the side will reflect on there for several years. But, the bright side is that lenders will look more at your recent history, such as the past year or two, and make most of their decisions based on how you have been recently. This is a good thing to keep in mind when wanting to make sure your personal credit report shines.

What is Listed

On your personal credit report you will find personal information about yourself such as your past and current address, your employment history, and your social security number. This information is used to make sure it is really you when applying for credit so this is meant to protect you and the company, or lender, involved. Your personal credit report will also give a detailed description of what accounts you currently have opened and even the ones that you have recently closed. There will be information on your payment history and the balances you owe.

And then the next thing that can be found on your personal credit report is that of who has inquired about your credit history recently. This will give a lender a good idea of how many credit cards you are applying for at the same time. If they find too many inquires on your personal credit report, they may consider you to be too high of a risk to lend any money to. The important thing to remember is that the information, be it good or bad, will follow you for several years so make sure your personal credit report is important to you.

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The amount of time and energy devoted to rebuilding is directly related to the severity of the credit history.  A person who has a couple of late payments is not going to need to dedicate as much effort to someone who has charge-offs, delinquencies, and maxed out credit limits throughout the credit report.  Errors on credit reports can turn into time-consuming nightmares too, as the reporting agency demands piles of documentation.  

There are two routes people can travel when attempting to rebuild a credit history.  They can pay a company to clean up their credit report and another company to pay their bills, or the person can take care of all the details themselves.  In general, it is much better to take the bull by the horns and do all the dirty work personally.  There are some rebuilding credit companies who are nothing more than crooks, taking advantage of consumers in an uncomfortable situation.  Even if a consumer manages to hire scrupulous companies, isn’t it better to take care of things personally? Not only does it result in a sense of accomplishment, but also there is no better way to know the ins and outs of credit and finance than by taking control of the situation.

It is undeniably better for the consumer to do the job of rebuilding credit instead of hiring a company to do it.  One of the biggest lessons a consumer must learn is that if a delinquency is a valid item on the credit report, it simply isn’t going to go away.  Even paying off an account, although better than not, doesn’t erase the fact that for a while the consumer wasn’t paying on time.  It is certainly better with regards to credit scores to pay delinquent bills, but a consumer should not be shocked when the item shows as paid, but was once in a late status.  It’s just one more of the frustrating facts that people repairing their credit must face. 

For someone rebuilding his or her credit after discharging a bankruptcy, the process of rebuilding credit becomes a bit trickier.  The many creditors willing to grant them a second chance with credit may pleasantly surprise these consumers initially.  The truth is, however, that these companies aren’t necessarily being benevolent with their gestures, but rather they are taking advantage of the fact that bankruptcies cannot be filed in consecutive years.  The creditors know that consumers fresh from a bankruptcy will not be able to turn around and declare bankruptcy for years, making these consumers attractive to creditors.  Not to mention that these companies are going to offer horribly high interest rates.   

Some financial experts ask why a person even needs to build their credit back up. After all, unless a fundamental change occurs in the spending habits of a consumer it is likely they will wind up exactly where they once were: behind in payments and avoiding collectors.  Maybe avoiding credit all together is a viable option.  There is no harm in trying out a cash-based system for a while after wrecking your credit report.  Studies have shown that people buying items with cash are more likely to think about their purchases and show restraint as opposed to folks buying items with credit cards.  Sure, living without credit cards will undoubtedly result in less spectacular purchases, but oftentimes it’s the spectacular purchases, which send people into a financial pickle to begin with.

If trying a cash-based system isn’t appealing in the least, then at the very minimum make sure to pay all bills, every month, promptly and without fail.  As your credit starts to take on a more steady history, call up your creditors and demand lower interest rates.  Pay attention to where your money goes, and don’t wind up in the same situation as the one which forced you to repair your credit in the first place.

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When people hear credit repair, a lot of them think of credit repair kits or debt consolidation. You could be bombarded by commercials and ads for these tools daily. The good news is that some of these companies will really help you. The bad news is that you have to be extremely careful so as not to be scammed.

If you choose to use a credit repair kit make sure that it’s a legitimate company. If the company wants you to pay for services up front, they may not be genuine. If they don’t inform you of your legal rights when it comes to credit repair this can also be a sign telling you that they’re not genuine.

Certainly not every company that offers a credit repair kit wants to rip you off but make sure you keep your eyes open in the process. You are certain to come across a few bad guys.

Another option is do it yourself credit repair. Because there’s so much available information on credit repair, it’s really not difficult to do it yourself. All over the Internet you will find free information from credit agencies, individuals, and companies that want to help consumers. Debt is a downward spiral and people need help getting out of it.

If you want to repair your own credit, it’s perfectly attainable. You’ll do a lot of research on the Internet and maybe at the library. You’ll need to use a chart to keep track of your debts, payments, and balances. You will be making a number of phone calls to creditors and negotiating with them. You may need to speak with supervisors and write letters as well.

You need to stay on top of things when repairing your own credit. But it comes down to the old saying, “the squeaky wheel gets the oil.” And that’s exactly it when it comes to credit repair. You need to be heard and tell them exactly what you want. You need to let them know that you’re not going away until you get what you want.

The tasks at hand will include: closing accounts, paying off old debts, disputing incorrect information, making repayment plans with your creditor, writing a 100-word statement to be included on your credit report.

Debt consolidation is another option for repairing your credit. You would take out one big loan, preferably with a low finance rate, and pay off all of your other debt. This way you would only make one payment each month. You would have a lot less stress because you’re only paying one creditor and you would be paying less money in financing.

Be aware of the methods that are used if you do opt for debt consolidation. There are a few methods that will actually hurt your credit score. Also be sure that it’s a legitimate company that you’re working with. If not they may be charging you an arm and a leg without you even knowing it; they can be sneaky. To avoid being scammed read up on debt consolidation and know exactly what to expect.

Bankruptcy is seen to some as an option for credit repair. Some people are so deep in debt that they could never pay it off and choose to file for bankruptcy. Don’t see this as a solution or as credit repair. When you file for bankruptcy, if you’re approved, all of your debt is removed.

But that’s not the end of it. A bankruptcy looks very bad on your credit report; and it stays on there for 7-10 years. This means that nobody is going to want to lend money to you for a very long time. Anyone who looks into your credit will see your irresponsibility and see that you didn’t own up and pay it off.

It looks better to have debt that you’re doing everything you can to pay off than to have old debt that was never and will never be paid off.

When you decide to work on repairing your credit make sure and take all the pros and cons into account. What works best for one person may not be the best option for another.

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Payday loans are fairly simple.  A person can take proof of employment and a bank account statement to a payday loan company and then write a check, which is post-dated.  So although the person may write the check on the 11th, the check is dated for the 15th or whenever payday is.  The check isn’t written for the amount borrowed either, since fees are taken directly from this check too.  So if a person borrows $200, they may likely wind up writing the check for $240, if not more.  The person leaves with the $200, then when payday rolls around the check is deposited, meaning the borrower just spent $40 to borrow $200 for a few days.  The interest rates for these sorts of loans are so outrageously high that the company does not even advertise them; instead they simply have flat rates for certain amounts. 

What a vicious cycle this can become! If the borrower isn’t utilizing these services out of sheer desperation and is instead using it to finance a fun weekend out, then this makes the process all the more ludicrous.  Payday loan companies capitalize on consumers who don’t think ahead to the next payday. 

When attempting to fix a credit history, these sorts of loans are doubly foolish.  If a consumer is making an earnest effort to correct past financial mistakes then they will likely have a solid budget in place, which they follow consistently.  A budget, which makes room for a small emergency savings, will alleviate the need for a payday loan. 

Fixing a credit history is less about fixing past mistakes than it is about refraining from creating new ones.  There needs to be an unyielding change of behavior, which eliminates foolish financial activities.  Fixing prior credit problems does not do much good if the consumer is simply going to march out and get into another financial pickle.  This is not the time to pay ridiculously high interest rates and fees to borrow money.  In fact, this probably isn’t the time to borrow money at all.

So what happens in the event of a bona fide financial emergency? There are many other resources, which can be utilized before forking over a check to a payday loan company.  Is there something you can sell? Is there another job you can take on temporarily? Are there agencies that will offer you a low-interest loan based on your need? There are people out there willing to help, you just have to find them.

Take heed: you can’t avoid paying a payday loan company.  Giving the company a check granted them access to your checking account numbers, and many payday loan companies have policies in place which allow them to dip into customers’ checking accounts to not only retrieve the amount of the check but any late fees which have accrued.  Late fees from payday loan companies, by the way, are not insignificant.  Be prepared to be completely shocked by the money withdrawn by the loan company.  All this can be avoided, of course, by simply avoiding these types of loans.

Yes, payday loans are no-nos when fixing your credit, but the same can be said for people who are not fixing their credit.  It is best to steer clear of payday loans if there is to be any hope for your financial well being. Don’t allow yourself to be swindled by payday loan companies who are out to separate you from your hard earned cash.  Having a rainy day fund is a big step towards being prepared and not needing the assistance of these sorts of companies. 

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People want to repair their credit for various reasons.  Many folks simply make mistakes early on in life, wracking up credit card debt and not making timely payments.  Others have bona fide tragedies occur in their lives that thrust their finances into an upheaval.  Whatever reason causes the bills to go unpaid and consequently the credit report to turn sour, oftentimes the people who wind up with lousy scores are good people who simply got caught up in bad situations.  They eventually ready themselves to correct their mistakes and repair their credit because they recognize that the best interest rates go to people with excellent credit.  Insurers also look at credit ratings before extending policies, and even potential employers have the right to take a gander at credit reports before offering employment.  A horrible credit rating does not paint the picture of an ideal employee. 

It comes as a surprise to many people that even the smallest detail can wind up on a credit report.  One late payment two years ago will still be noted on a report for a few more years, and will affect the credit score as well.  Accounts which have become more than thirty days delinquent make for big dings on credit reports, and the interesting fact surrounding this is that even if the account is brought current the report will still reflect the fact that it was once delinquent for some time.  Consequently, it is easy to see that credit repair is much more than merely paying bills that have become past due.

Sometimes credit reports are laced with inaccuracies; there are so many consumers out there that it’s simply impossible for the credit reporting agencies to maintain an error-free database.  Some errors occur when social security numbers are mixed up, and once in a while similar names can merge credit reports. 

In other instances, what would otherwise be a perfect credit score is wrought with errors due to fraud or identity theft.  It is not unheard of for a consumer to apply for credit and then be turned down, much to the consumer’s surprise, based on credit scores.  The consumer then looks into his or her credit and realizes someone has been using his or her social security number to obtain credit without the consumer’s knowledge or consent.  Errors like this can take years to correct, as the burden of proof sits primarily on the consumer to show fraud.

So how can a person repair their credit? First of all, stay far away from credit repair companies.  These companies do nothing more than get items removed from a credit report temporarily by reporting them as inaccurate.  The items wind up right back on the credit report eventually, so these sorts of services are a waste of money in addition to being unethical. 

Get a copy of your credit report and scan it for errors.  If something appears to be erroneous report the problem to the credit-reporting agency immediately.  They will initiate an investigation and if the items are indeed incorrect they will be removed, thereby increasing your credit score.  For items that are not in error, the single best thing you can do is to pay them.  Every delinquent account has a level of severity, which determines its effect on a credit score.  For example, being thirty days late is not as bad as allowing the debt to be charged-off by the creditor.  Even after items are charged-off, meaning the company has essentially given up hope of ever receiving payment, they will still take payment and report the debt accordingly on the report.  Fix errors, and pay your bills.  It isn’t rocket science, but it can take some time.  The end result, though, is certainly worth it. 

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Tell the consumer reporting company, in writing; what information you think is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report that you dispute, state the facts and explain why you dispute the information, and request that the information be deleted or corrected. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, return receipt requested, so you can document what the consumer reporting company received. Keep copies of your dispute letter and enclosures.

Consumer reporting companies must investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all the relevant data you provide about the inaccuracy to the organization that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate, review the relevant information, and report the results back to the consumer reporting company. If the information provider finds the disputed information is inaccurate, it must notify all three nationwide consumer-reporting companies so they can correct the information in your file.

When the investigation is complete, the consumer reporting company must give you the written results and a free copy of your report if the dispute results in a change. (This free report does not count as your annual free report under the FACT Act.) If an item is changed or deleted, the consumer reporting company cannot put the disputed information back in your file unless the information provider verifies that the information is, indeed, accurate and complete. The consumer reporting company also must send you written notice that includes the name, address, and phone number of the information provider.

If you request, the consumer reporting company must send notices of any correction to anyone who received your report in the past six months. A corrected copy of your report can be sent to anyone who received a copy during the past two years for employment purposes.

If an investigation doesn’t resolve your dispute with the consumer reporting company, you can ask that a statement of the dispute be included in your file and in future reports. You also can ask the consumer reporting company to provide your statement to anyone who received a copy of your report in the recent past. Expect to pay a fee for this service.

Tell the creditor or other information provider, in writing, that you dispute an item. Be sure to include copies (NOT originals) of documents that support your position. Many providers specify an address for disputes. If the provider reports the item to a consumer reporting company, it must include a notice of your dispute. And if you are correct – that is, if the information is found to be inaccurate – the information provider may not report it again.

When negative information in your report is accurate, only the passage of time can assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

Your credit file may not reflect all your credit accounts. Most national department store and all-purpose bank credit card accounts are included in your file, but not all. Some travel, entertainment, gasoline card companies, local retailers, and credit unions are among those that usually aren’t included.

If you’ve been told that you were denied credit because of an “insufficient credit file” or “no credit file” and you have accounts with creditors that don’t appear in your credit file, ask the consumer reporting companies to add this information to future reports. Although they are not required to do so, many consumer-reporting companies will add verifiable accounts for a fee. However, if these creditors do not generally report to the consumer reporting company, the added items will not be updated in your file.

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Everything that is in a credit report is the responsibility of the individual to make sure it is correct. It does not matter if it is a mistake on the part of the consumer-reporting agency, or the account holder’s fault. The way they look at it is that it is an individual’s responsibility to maintain all information on accounts, and correct it if it is wrong. Many are very surprised to find out that all credit reporting agencies (CRA) will sell their information to companies that want the information, but in the mean time have bought other statistical data many companies too. They resell the information back to them and a credit formula is born. That is one reason that a credit score will fluctuate from day to day.

In a dispute process the individual is allowed by law to get a free copy of a report if they are denied anything from credit to employment. However a lot of credit agencies do not tell them of that right. However, it must be done in 60 days, or the free report is denied. Also, just because you are on welfare or unemployed a free copy must be provided at least one time per year. Some states like Georgia require agencies to give them twice a year to anyone that requests it. If any individual believes that fraud is part of the problem, such as identify tampering, the report is supposed to be given free. The national reporting agencies of Experian, Equifax and Trans Union are required by law to give out to anyone that requests it a copy of a credit report one time per year too.

The Fair Credit Reporting Act the reporting consumer agency and the company that buys information from them, are to correct any discrepancies in a file, but the individual that is questioning the information in the reports must initiate the dispute process. Complaining to a credit reporting agency like Experian or a local state agency will not do any good. They are just the messenger of the information collect from companies that buy information from other sources, such as banks or other lending institutions. Screaming at them to correct it will not change a thing. Again, the individual must make a formal complaint with the information provider.

Another thing that the big three do not say is that names, phone numbers and complete address must be given when disputing information. Also, requests can be made to a consumer reporting company that if anyone if a dispute is changed or deleted from the credit information then any business or individual that has denied services must be informed of the favorable results. If a denial of employment is in the last two years, then they must be given notice, if based on credit worthiness. Also, if a dispute on any claim that is not resolved, which includes charge-offs or settlements, then a request can be made to include a statement about the evidence. All requests from any outside source should be able to see the valid evidence and information. This will help others determine the unique situation, and hopefully it will not affect any services or employment for the future.

Cleaning up credit is an easy process once the rules are clear about what responsibilities are of the individual, and what the major national credit reporting agencies roles are, and the information that they sell to consumer reporting groups are. There are a lot more loop holes and benefits that can be gained to get credit clean, and if the process is looked at as one as a yearly routine, and a long term benefit for credit health, then it is a routine worth knowing about.

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Debt settlement is when you make an agreement with the lender to only pay a certain amount of the debt.  The amount that you pay is negotiated between you and the lender.  This amount is usually the amount that you would have paid on the debt if you had not been charged interest.  The lender may extend you the opportunity to pay the debt in three payments or as a lump sum payment.

Sounds good, right?  The lender offers you the opportunity to pay a lower price for the debt and your credit is completely restored.  Contrary to what many people believe, this isn’t exactly how debt settlement works.  The creditor will update your credit report to reflect that you have paid the account and also include that you paid less than the amount that was initially agreed.  When you make credit applications in the future, creditors will see this information as a sign that they will not make any money if they extend credit to you.

Even though debt settlement is slightly better than a charged off account, it is still not the best option.  It will continue to show up as a negative account on your credit report which will, in turn, affect your overall credit score.

There are different stages of account listings that the credit may choose to apply to your account.  Some of these are worse than others.  After debt settlement, most creditors will list your account as “Paid Charge-Off” or “Paid Was Late”.  When the creditor puts this listing on your account, it is almost just as bad as not paying the account at all.

Another options for account listing is “Settled”.  While it is not as bad as Paid-Off, Settled is still harmful as you can continue to be denied for credit because of this fact.

“Paid” is one of best account listings that you can receive after a debt settlement.  This listing does not have any negative or positive implications on your credit report or score.  However, if a Paid status is accompanied by other information such as “Paid Repossession” or “Collection”, it will have negative affects.

Debt settlement isn’t as good for your credit report as you first may think.  Even though you no longer have to worry about letters and phone calls from collectors, your credit report will continue to contain negative information.  In addition, your purchasing power will be greatly limited with this information on your credit report.  You could end up spending more money in utility deposits and interest rates.  In some cases you could be denied for applications that are made on the basis of credit, this includes employment and leases.

The key to using debt settlement is working something out with the creditor that will help your credit report.  Prior to make a settlement offer with the creditor ask for the item to be deleted from your credit report.  Many creditors will agree to this, as they do not have any reason to keep the information on your credit report once they have been paid.  In some cases, creditors will not agree to delete the information from your credit report.  If this happens, negotiate for an account listing that will not negatively affect your credit.  For example, a “Paid” only listing will not hurt your credit.

When you make an agreement with the creditor make sure to get all terms of the agreement in writing.  This includes the amount you pay as well as the negotiated credit listing.

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Anytime you make an application that includes your social security number there is a risk that a credit inquiry will be performed.  So what do these inquiries mean for your credit?  There are some kinds of inquiries that count toward your credit score and there are some that don’t.

The only inquiries that count toward your credit score are those in which you apply for new credit.  This includes application for an auto loan, credit card, or mortgage.  When you make these kinds of applications, you give the lender the authorization to receive a copy of your credit report.

There are also inquiries that do not count against your credit score.  These kinds of inquiries include requests that you make for your own credit report, checks made by businesses that offer goods or services, or inquiries made by a business that you already have credit with.  If a potential employer makes an inquiry this does not count toward your credit score.

Many people are confused into thinking that all inquiries that are included in their credit reports count toward their score.  This is not true.  Only the kinds of inquiries listed above count toward your credit score, even though they are listed on your credit report.

The credit score is calculated using several pieces of information from your credit report.  This includes the number of delinquent accounts, the amount owed on these accounts, the length of credit history, the amount of new credit applications, and the types of credit that you are using.  Credit inquiries fall under the “new credit applications” category and only accounts for 10% of the total credit score.  This is only a small percentage of the total score.  Credit inquiries, when they affect your credit score, can only hurt you a few points.

Inquiries will hurt your credit score in different ways depending on your credit situation, if they even hurt at all.  There are some factors that can cause inquiries to hurt your credit score worse than others.  For example, if you only have a small number of accounts, a short credit history, or delinquent information on your credit report even just one inquiry can cause your credit score to fall a few points.  On the other hand, an inquiry might not have an affect to your credit, if your credit is clean.

When you are applying for a new credit card, you give the creditor permission to check your credit report.  If this inquiry has any affect on your credit at all, it will only be small.  However, if you apply for several credit cards in a relatively short amount of time, this will cause your credit score to drop a few points or more.  When you apply for multiple credit cards, this places multiple inquiries on your credit report.  Lenders associate these requests with risk and are less likely to extend you credit.

Unlike credit card inquiries, multiple auto loan or mortgage inquiries within a short period of time do not affect your credit score.  The developers of the credit score knew that many people shop around for better rates on car loans and mortgages.  For this reason, these inquiries do not take affect until thirty days after the rate shopping period.

There are a lot of factors that come into play when credit inquiries are being made.  You can request a copy of your credit report and score prior to shopping for loans and credit cards.  This will give you a better idea of your financial situation and can help decrease the number of inquiries that are made.

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A legal right exists to know what are in all credit reports if an action has been taken that has denied a service. For example, if an application for credit approval on a credit card has been denied, or if valuable insurances like car or dental is denied, then there is a right to know. It is absolute that the name, address and even the phone number of the credit reporting agency that gave out the information on an individual must be given in a timely manner. Another legal issue is that any credit reporting agency that provided information about an individual must freely give out the credit report when requested. There is a time limit on which a request can be made though, which is 60 days from the date of inspection by another. Also, that is why it is so valuable to keep up to date on a credit report, especially if bad credit is a problem.

Another right of the Fair Credit Reporting Act is that there is a legal right to dispute information with an investigation within 30 days of complaint. All information must be turned over to the listed credit agency that gave the information to the credit-reporting agency. A report from the financial institution that gave the report must be given to all local and nation wide credit reporting agencies too. A written report will be given to anyone requesting the information of the investigation, and a copy of any changes made to it. Even if there is no change, a copy of any rebuttal should be sent to the credit-reporting agency. Remember though if a resolution is concluded, or a dispute is sent then it is permissible to have it included in a summary of the report to all credit agencies listed.

A credit-reporting agency by law must get rid of incorrect information, or any that cannot be substantiated, within 30 days of request too. Credit reporting agencies cannot put back in any dispute claim unless the lending institution later verifies it. A written notice must give all the information necessary to check out the new notice, like name, address and phone number of the new claimant. This is done to protect the consumer, and because information is often delayed in reporting, like a new account is taken over by another company, it protects them too.  Credit agencies may not report to a reporting agency of a bad credit mark unless a summary of the dispute is included. If it is proven that any error is a fact, the law guarantees that the reporting of information must stop all together. 

Along with information that is outdated that cannot be included with a credit reporting agency is a file may be limited. Not any Joe can come along and request information about personal files. Entities must be approved by the Fair Credit Reporting Act to gain access, like banks, employer or landlord among others. Medical information is limited too. Only written permission is granted to others for information on medical information. The Fair Credit Reporting Act allows for anyone to take his or her name off of lists for offers about credit or insurance. It is different if a personal request is made to an agency for information, but it cannot be from one that is unsolicited. Contact information must be included like for removal from the list of offers. Federal law states that removals must be good for two years, and filling out forms can make a permanent removal request from the credit-reporting agency, which must be honored. Know the law so it will work to keep a credit fair and just for all involved.

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