Important Information on Repairing
Bad Credit History
In recent years, more people than ever before have
found themselves deeply in debt with no remedy in sight.
For many of those people, filing bankruptsy seems the
only answer. In the majority of cases, however, this
is not the case. With some careful planning, skilled
help and patience, people can repair their credit.
The first step toward repairing credit is to find out
exactly what is owed and to whom. Current copies of
credit reports should be obtained from all the major
credit bureaus. Free copies of these reports are available
if credit has been denied recently, usually within thirty
to sixty days. If any inaccurate information is shown
on any any of the reports, this information should be
disputed. This action may be initiated by telephone
but it is better to do this in writing for documentation.
bureaus must investigate disputes promptly, normally
within thirty ydays. If this time passes and no correspondence
or other communication is received, the credit bureau
should be contacted again, both by telephone and in
Often credit bureaus will update files and not notify
the individual. If this has happened, request a copy
of the updated report. Credit bureaus usually furnish
updated copies. Be persistent until the inaccurate
information is removed. It may have a great bearing
on future creditworthiness.
After incorrect information has been removed, repeat
the process with each credit bureau that carries the
inaccurate information. This is necessary since the
credit bureaus operate independently and changing records
with one will have no bearing on the files at another
Here are some of the most disputed credit report items:
- outdated information, usually over seven years old
- inaccurate personal information
- credit information that belongs to somene else (This
is quite common.)
If a large number of credit inquiries appear in the
file, request that the credit bureau merge multiple
inquiries from the same source. This will help future
credit ratings since an excessive number of inquiries
is seen as derogatory.
Always keep credit information current by obtaining
copies of credit records at least once yearly after
resolving problems. This will also act as an alert to
any credit fraud that may be occuring.
After obtaining a credit file and starting the dispute
process, evaluate your financial situation. If you find
that you are unable to make at least the minimum payment
on outstnading accounts, immediatley contact creditors.
Many will appreciate your willingness to pay and will
attempt to help set up plans for payument. Do not make
promises which cannot be kept. A small payment is preferable
to a large payment that never arrives. Sometimes this
contact can be enough to reduce payments and forestall
more severe measures. If not, a more serious step must
This next step is to consult a credit
counseling agency. These organizations are invaluable
in solving financial problems. They are staffed with
trained individuals experienced in the credit field.
Do not confuse these agencies with the commercial "credit
repair" companies who claim that, for a fee, they
will wipe your credit slate clean. Don't be fooled.
There is no legal way to do this. Any procedures they
might use are available to you free of charge.
A counselor at a credit counseling
agency will take all the information concerning
your financial situation, evaluate it and decide the
best strategy to use in solving your problem. You will
be asked to abide by certain rules while receiving services.
These rules may include closing charge accounts and
canceling credit cards or paying your bills through
the agency. It is to your advantage to abide by the
rules as these agencies are perfectly safe. They are
non-profit and will not ask you to pay for their services.
Although the repayment period may be long, do not accept
offers of credit while receiving services from these
organizations since this will only delay the process
and could possibly result in you being refused further
Here are some suggestions for maintaining good credit
after the credit repair period is over:
- Live within your means. Do not return to the bad
financial habits that resulted in credit problems
the first time.
- Create a budget. Know where all your money is going.
Small purchases can add up and make it difficult to
meet important obligations. Keep records of all money
spent for one month. This detailed record will show
where spending cuts need to be made. It will also
alert you to any spending problems.
- Plan for financial emergencies by depositing a fixed
amount of income to a special "emergency"
account. Do this as if paying another monthly bill.
This money will insure that emergencies such as illness
or loss of job do not catch you totally unprepared.
Try to accumulate enough in the fund to pay bills
for at least six months.
- Finally, make a conscious effort to be "money
smart". This will be a lifelong task but will
eliminate the chance of falling back into the bad
credit trap of the past.