Many credit repair companies offer to fix bad credit and create consumers a new credit identity. While there are real solutions to fixing credit they are not instant fixes. Some credit repair companies offer illegal methods to repair credit and are scams.
Identifying and Avoiding Scams:
The Federal Trade Commission thoroughly outlines how to identify a credit repair scam. Certain red flags to be aware of include credit repair companies asking for money before their services are completed or promising to get rid of all bad credit even if it is based on accurate and current information.
Legally, credit repair companies cannot demand payment until after they have completed their services. Companies that promise or encourage consumers to erase their credit report are actually advocating for fraud. Further, promises of “guaranteed credit repair” and companies that promise to “create a new credit identity” are also misleading consumers. Some companies even encourage creating a new credit identity by applying for an Employer Identification Number to then use instead of your Social Security number. This is considered fraud and is a prosecutable offense as is providing any false or misleading information on a credit application.
While you cannot erase accurate information from your credit report, you can slowly rebuild credit and take positive steps towards repairing bad credit.
Repairing Ruined Credit:
If your credit is bad because of credit report errors, you can dispute these errors and fix your credit. Under the Fair Credit Reporting Act you can request a free investigation into information in your credit report that you think is inaccurate or incomplete. To investigate a faulty claim on your credit report you need to write to the credit report company that wrote the report and explain your complaint. You should also include copies of any documents that support your case. The credit report company is then required to investigate any reasonable claim within 30 days.
If you have an accurate bad credit report, the only thing that will erase bad marks to your credit history is time. Most negative information can be reported for seven years, but bankruptcy can be reported for up to ten years. While negative items cannot be erased there are positive steps you can take to repair your credit score over time.
If you find yourself in debt, it is important to communicate with your creditors and see if you can work out a payment plan that you will be able to stick to. Avoiding creditors will only make your debt worse. Another important step in managing debt is creating and sticking to a budget based on your income and expenses. If you are not capable of making your own budget, there are credit counselors who can help.
Like any service, credit counseling while often legitimate and helpful, can also be fraudulent Make sure to research counselors and try to find one who you can meet with in person to avoid scams. Consider asking your lending institution for a counselor recommendation.
Consolidating your debt can also help improve your credit. If you own a home, taking out a second mortgage or getting an equity line of credit can help you gain credit, but they also mean putting your home at risk if you cannot pay in a timely fashion.
If you do not already have a credit card, you can improve your credit by getting one, but that is only if you are able to make timely payments. Paying your credit card bill on time will build credit. Avoiding payments or paying late will negatively impact your credit score. If you do have credit cards, paying down or paying off your credit cards will also improve your credit score.
If you have outstanding debt across multiple credit cards make sure you are making payments on all of them. Contact the credit card companies and work out a payment plan that allows you to regularly pay amounts towards all of your outstanding debts.
It is important to take responsibility of your debt and poor credit. Bad Credit will not go away instantly, but if you create a budget and realistic payment plan and follow it, you will be able to improve your credit over time.