5 Important Steps To Follow In A Bad Credit Situation

What to do when you have bad credit and need help

Look For A Creditor With Lenient Requirements

First of all you should understand that having bad credit does not necessarily mean that you are going to be turned down by all creditors for a loan application or any form of credit needed. Different creditors have different guidelines for underwriting an application for credit. Some may be more tolerant of credit report fallacies than others. Some creditors may also be willing to take a more personal interest and do a manual evaluation of your financial details. For example, your credit score might have suffered because of some credit mistakes and late payments or unpaid bills in the past. However, a creditor who is willing to do manual underwriting for your application will be willing to look at your other documents such as a recent bill payment history, salary receipts, other financial details etc. that prove that you are now in a better financial condition than you were a few months back. While all these things may not yet have had the chance to affect your credit score, they may be enough to prove to the creditor or the lender that you are now qualified to take on a further loan. If so if this is your situation where you believe you are responsible and capable of taking on credit but similar outlook is not reflected by your credit file, it may be worthwhile to contact the creditors to discuss your credit worthiness with them.

Reach a Repayment Plan Agreement With the Lender

Another fashion in which a creditor can help you is by the agreeing to a repayment plan with you. You can keep track of your bills and come to an agreement with the creditor as to how you can repay that debt by making small payments on a changed and modified the payment schedule.

Contact a Credit Counseling Organization

For people who have a problem with sticking to financial budget or do not see any possible way in which they can handle their current debts within their current income, contacting a credit counseling organization might be a good idea. You can find several government approved credit counseling organizations who are nonprofit and will work with you to solve your credit and financial problems. However, as was the case with credit repair services, you should watch out for the so-called non-profit credit counseling organizations as well. Some of them may claim to be nonprofit but can charge you hundreds and thousands of dollars in fees. They can do this by either charging you hidden fees or by pressurizing you to make so-called voluntary contributions that will only add it.

Enrolling In a Debt Management Plan

Some credit counseling services will only offer one solution all your credit problems and that is entering in to a debt management plan with them. They will help you consolidate and pay off your debt to but only because they are being compensated by the creditors through a commission paid as a percentage of debt that gets re-paid. Many of these credit counseling services have a working and profitable relationships with the creditors. This does not mean that entering in to a debt management plan is a bad thing. Sometimes the nature and the seriousness of a consumer’s debt problem requires that he enters in to a debt management plan. But a business that offers this solution on a “one solution fits all” principle, is probably not looking at your individual personal needs and circumstances. It is more intent on earning a commission from the creditors.

It is a fact that a majority of consumers have benefited from the credit advice and budgeting service remitted by a legitimate non-profit credit counseling service. Even better, these services are generally offered for free by a legitimate non-profit credit counseling outfit.

Find A Legitimate Non-Profit Credit Counseling Organization

If needed legitimate nonprofit organizations and specifically the government approved credit counseling organizations can offer you free seminars, information and advice that will help you tackle your credit repair problems. A credit repair counseling can help you out initially by creating a budget for you based on the financial information that you get them. They will discuss your financial situation in great detail with you so as to make a workable budget that would allow use to pay off your existing debt.

A state-by-state list of government approved credit counseling organizations is available at www.USDOJ.GOV/USD which is the website of the US trustee program. The US trustee program is the organization within the US Department of Justice that supervises bankruptcy cases and trustees. This list gives you approved credit counseling organizations authorized to give you credit counseling before you file for bankruptcy relief.

According to the law you’re required to get credit counseling from a government approved organizations within six months of filing for bankruptcy. A genuine credit counseling organizations will have free counseling to help you. They have certified and trained counselors in the areas of consumer credit and debt and who can further help you in managing your financial situation. An initial counseling session can happen over telephones or even e-mail. An initial counseling session typically last for one hour. In order to ensure that you are meeting with a legitimate and approved credit counseling organization, it is better to arrange a meeting on a face-to-face basis.

Most credit counselors offer services through local offices, Internet and on the telephone. You can find physical offices for credit counseling services located in universities, military bases, credit unions, among housing authorities and branches of the US operated extension service. All the places are likely to operate nonprofit credit counseling programs. Your financial institution such as your bank, local consumer protection agency and friends and family are also a good sources for reference for a legitimate and genuine credit counseling organization.

How To Deal With Adverse But Accurate Information on Credit File

How Long Does Adverse Information and Account Stay On the Credit File

If the negative information on your credit report is accurate, it will only be removed with the passage of time. Most of the credit delinquencies on various credit accounts such as loans, credit cards etc. stay on the credit report for a period of seven years from the date of occurrence. The date of occurrence is usually when you first became late on the account. This period of time for which a certain item can be reported on your credit file when it is a negative item is different for different kinds of information. As already mentioned it is seven years for most credit accounts but for something like bankruptcy it can be up to 10 years.

The statue of limitations also plays a part. Typically an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.

Removing Negative Accounts Even Though They Are Correct

It is possible sometimes to remove adverse information from your credit report that is accurate. You can have unpaid debt and collection accounts removed if you can negotiate with the creditor or the collection agency to stop reporting it for a settlement payment. Read more about removing collection accounts from a credit report.

Other accounts can also be removed by disputing provided you can prove some discrepancy in their reporting.

Criminal Records Can Be Reported On A Credit Report

It is commonly believed that criminal convictions are not reported on a credit report. This is mostly true. A credit report is not supposed to contain information about anything else other than matter is pertaining to credit. They are not supposed to contain information about your religion, as, race, salary, personal sets and your criminal record. However, criminal convictions can be included in your credit report if they are a part of public records. The credit reporting agency does collect information from public records such as bankruptcies, judgments passed against you in matters of credit.

If criminal conviction is included on your credit report then there is no time limit till then it can stay on your credit report. Criminal convictions, information reported in response to your application for a job that pays more than $75,000 in a year, information reported because you’ve applied for more than $150,000 worth of credit or life insurance are all items that can be reported indefinitely on your credit report.

For information gathered from public records there is nothing much you can do. They will fall off when they have to.

The Credit Repair Organizations Act

Since we have discussed credit repair services earlier on in this post, you should know that the credit repair organizations act requires all credit for services to give you a copy of the consumer credit file rights under state and federal law before you sign on the contract. They have to give you a contract in written that clearly explains your rights and their obligation as well as a complete and clear explanation of what services they are going to provide you. Read all these documents carefully before you sign.

Things that a Credit Repair Service cannot do under the law:

  • Make any false claims about the services or list any service that is illegal or something that they do not intend to do.
  • Ask you to pay the money before they have actually completed the promised services.
  • Perform any service on your behalf until they have your signature on a written contract and have completed a three-day waiting period. This three-day waiting duration is the time during which you can rescind the contract without paying any fee even though you have signed on it.

Before you sign a contract with a credit repair service make sure that it fulfills the following conditions.

  • It should include the complete payment terms for all services and the total cost. The credit repair service cannot overcharge you or include hidden fees in the total later on. All expenses and charges must be clearly explained in the contract.
  • A detailed description of all the services that a credit repair service will perform. The duration that it will take to achieve the result.
  • The guarantee that the company offers should also be put down on the contract in written otherwise.
  • The contract should have the complete business name, business address and contact information for the credit repair company.

4 Steps For Fixing Your Own Bad Credit

How to help yourself when it comes to fixing your credit

You should know and understand that there are a lot of things that you can do yourself in order to fix your credit. A lot of things that a credit repair service may offer to do for you, you can do yourself.

File a Dispute with the Credit Reporting Agency

One of the first rights that you are given as a consumer to fix your credit is to be able to dispute any information that you think is inaccurate or wrong in your credit report.Most of the times, when you order your annual and personal credit report from the credit bureaus, you will receive some sort of a means to dispute any information that you do not agree with. If you order your credit report online, then there will be a section on the website where you can dispute wrong information on out any credit account or personal details. Similarly, when you request your credit reports through mail, there will be a dispute form attached to the report. You can simply fill out this dispute form and send it back to the credit reporting agency.

This dispute form is rather concise and simple to fill out. However, you are also free to write your own dispute letter. When you order a credit report you’ll be provided with a complete address to where you can send a dispute letter. You should make it a point to include your complete name, address and identify each information in your credit report that you do not agree with. It is also a good idea to include a copy of the credit report that you are referring to and circle the items that you do not agree with. List the reasons why the information is wrong. Keep the reasons concise and to the point. It is also advised that you send a letter by certified mail and return receipt requested so that you know that the document has been is received by the credit reporting bureau. Any proof that you can include with the dispute letters such as copy of your bills, payments or settlement agreed once should be included.


Sample Dispute Letter

The format of a dispute letter is simple. You can see a sample template for a credit report dispute letter here.

How The Credit Bureaus Complete Dispute Procedure

Whichever method you choose to file a dispute with the credit reporting agency, the credit bureau is obliged and required by the federal law to investigate your claim and respond to you within 30 days. In some situations this period can go up to 45 days which is also acceptable. The one situation where a consumer reporting agency can refuse to investigate your claim is when it considers the dispute to be frivolous. This usually happens after the initial investigation shows the information that you are disputing to be accurate. Repeatedly sending the same query and same dispute will result in the consumer Bureau writing back a letter to you telling you that it is no longer going to entertain the same request from you again because it considers your request to be frivolous. However, on receiving your claim, the credit bureau is required to forward all relevant data to the source of information which is usually the creditor that provided and reported that particular credit account. The information provider or the creditor is required to investigate and review the information once it receives this notification from the credit reporting agency and report back the results of its findings. If the information that you have disputed is proved to be inaccurate or needs to be changed in any way, if the consumer reporting companies are then required to update it in your credit file.

On completion of the investigation, whether the information was changed or not changed that is whether your dispute resulted in change in your credit report in your favor or not, the consumer reporting agency must inform you in writing. If a credit account is changed or deleted the consumer reporting company is not permitted to put the same information back in your credit file. However, if the source of the information that is your creditor verifies that the information is accurate and complete, the account will be continued to be reported on your credit report as usual. The credit bureau is also required to send you the name, address and phone number of the creditor in question.

Asking Credit Bureaus to Send Updated Credit Reports

There are also a couple of things that you can require a credit agency to do in case the disputes you have filed results in any change in your credit report. You can ask the credit bureaus to send notices to anyone who has received your credit report in the past six months as well as asking that a corrected copy of your report be send to anyone who has received a copy in the past two years for employment purposes.

Adding a Consumer Dispute Statement to Your Credit File

In case the investigation of your dispute does not result in a change that you requested on your credit file, you have the right to put a statement of dispute on your credit report. This statement of dispute is provided to any further creditors or people who pull your credit report in the future. This consumer statement of dispute tells future creditors that there is information on your credit report which you believe to be inaccurate even though the dispute filed by you to the credit bureaus has not necessarily proved so. You can ask the credit reporting agency to provide a statement to anyone who has received a your copy of your credit report in the recent past. However, this is a service that you are likely to be required to pay for.

Dispute Incorrect Information Directly with the Creditor

Another things that you can do to resolve inaccurate and adverse information on your credit report is to write to the creditor or the information provider yourself to dispute that item. Till sometime back, the only way to dispute an entry on a credit report was to write for the credit reporting bureaus. However, now the law provides that you can dispute the same information with the creditor directly. The dispute letter that you send is similar to the template addition to the credit bureaus. Certain creditors may provide a special address to file disputes as well. Sometimes filing a dispute directly with the source of information is helpful because certain claims and queries on your part can get lost in communication between the credit bureaus and the creditor. When you write directly to the creditor and explain what the problem is, you may be able to explain it more clearly why you are disputing the information. When you file a dispute with the creditor, it must report the dispute to the credit reporting company when it reports the item in the next cycle. Once again, if the creditor finds their dispute to be correct and he sees that the information needs to be changed, the corrected data must be reported to the credit reporting agency. Any inaccurate information that needs to be corrected may not be reported again by the creditor.


Your Federal Right For Fixing Your Own Credit

What are your rights when it comes to fixing your credit

No one can really remove negative information on your credit report that is accurate. As long as the creditor can prove that the information is correct, the information is going to stay on your credit file even though it is negative. However, you do have certain rights in order to take adequate efforts to fix your credit report and deal with any negative and the derogatory information that you believe should not be there. You have the right to file a dispute with the credit bureaus whenever you find any information on your credit file that you do not agree with. The filing of dispute with the credit bureaus is a completely free process and does not cost you anything. The credit bureaus on the other hand are required by the federal law to investigate any claim made by you concerning inaccuracy of information on your credit file. Technically speaking, anything that a credit repair service can do legally, you can do for yourself at little or no cost.

Your rights for fixing your own credit.

  • You can access your own free credit report from each of the main nationwide consumer reporting agencies which are the facts, trans union and the experience. They are required to provide you with a free copy of your and all credit to once every 12 months when you ask for it. The 3 credit bureaus maintain a common and central website along with a toll-free number as well as a mailing address for people to request their annual credit report. In order to access it online, go to the website of www.annualcreditreport.com. In order to access it over phone or through mail, call 1-877-322-8228 or send a credit report request form and mail it to: 

    Annual Credit Report Request Service, P.O. Box 105281, Atlanta, G8 30348-5281.

    You can use the form at the bottom of this post or get it directly from the Federal Trade Commission website at http://www.ftc.gov/bcp/edu/resources/forms/requestformfinal.pdf. You should understand at this point that in order to access your free annual credit report as given to you as your right under the federal law, you should not contact the three credit bureaus separately and individually. These free annual credit reports are only available on the website of annualcreditreport.com. If you contact the credit bureaus separately you might end up enough for all of their credit reports which can cost as much as $10.5.
  • Another right that you have regarding fixing your own credit is that you are also entitled to a free credit report if a company takes adverse action against you like rejecting your application for credit, insurance or employment. You have to ask for a report within 60 days of receiving notice of the adverse action. The notice will give you the name, address and phone number of the consumer credit reporting company whose credit report was used to evaluate your application. You are also entitled to a free credit report once in a year if you are employment and plan to look for a job in the next 60 days, if you are on welfare or if your credit report is inaccurate because of fraud, including identity theft.
  • You have a right fix your own credit report by disputing any mistakes of items that you do not agree with. Until a few years back, you could only file a dispute with the credit reporting agencies. However now under the fair credit reporting act, you can file a dispute with both the credit bureaus and the information provider whose is usually the creditors such as the credit card company, a bank etc. You can send the same letter of dispute to both the creditor and they are equally responsible and required by the law to correct or at least investigate the information you have a problem with. Sometimes it is more helpful to file a dispute with the creditor directly as you are able to provide more details yourself regarding the information when it is incorrect as compared to when a credit bureau contacts the creditor after having received your dispute. If the mistake lies with the recording of information by the creditor, a creditor might simply respond to the credit bureau by checking the records he already has. Receiving a dispute from you directly and documents to prove your claim might force him to double-check those records.

How and Why To Stay Away From Credit Repair Scams


How to spot and steer clear of Credit Repair scams.

You may quite easily be led to believe that in order to repair poor credit you need the help of external agencies, or credit repair services that specialize in doing this work. If you think this, you are probably not to be blamed because you probably have seen many advertisements in newspapers, on television and on the Internet that make claims like:

  • offering to remove all your credit problems without much of a hassle.
  • remove bankruptcies, judgments, bad loans from your credit file forever.
  • erasing your bad credit history with a 100% guarantee.
  • Some of them go as far as to suggest creating a new identity in a legal way so as to wipe out all your bad credit history.

If you come across such claims, the first thing to understand is that these are probably all scams. The Federal Trade Commission posts its information on a website that says that attorneys at nation’s consumer protection agencies have never come across a legitimate credit repair operation that can make those claims. The truth is that there is no quick fix to fixing your bad credit history and reinstating your credit worthiness. Damage to a credit rating does not happen overnight. It takes usually a series of decisions over a long period of time before your credit rating is damaged enough for you to be affected adversely. Similarly in order to improve your credit rating and fix your credit report legitimately, it will take a certain length of time along with a dedicated effort to stick to a personal debt repayment plan. Having a plan to repay the debt is important because at the end of the day, you will realize that unpaid debt is the single most important reason why your credit rating has been damaged.

How to recognize a credit repair scam

It is not all that difficult to identify a credit repair operation that is a scam. You just have to think clearly and not get taken by false promises in your desperation to make your credit report healthy quick and fast so as to be able to get a car loan, home mortgage or even a job.

The truth is that credit repair scams are known for targeting the desperate consumers who cannot wait to repair their credit and are likely to take resorts to even unclear and dubious means just to be able to qualify for a certain loan because they need it urgently.

The companies that make tall claims and promises cannot repair your credit report by using tactics that they promote simply because they are illegal. The first thing to understand is that no one can remove accurate negative information from your credit if it can be sustained and justified by the creditor or the source of information. Removing information that is accurate on a credit report becomes possible in some cases when the creditor cannot provide ample proof of the debt to the credit reporting agencies in response to a dispute.

You may end up paying them hundreds of thousands of dollars in fees and you will be left for the same credit report. In some instances there has been a temporary effect on a credit score of a person but it has jumped right back to the original bad score after a short period of time.

The credit reporting systems and the credit score calculation models are smart enough to recognize certain practices and set methods which makes them somewhat foolproof with tampering. So in spite of the false promises that a credit to their service may make you, it will probably be the not be able to do you much good by and in fact can cause your credit worthiness and your credit report even more long-term damage.

But these are a few telltale signs as to how you can tell when a credit report offer is a scam.

  • Under the credit repair organizations act, credit repair companies cannot require you to pay until they have completed the services and fulfilled the promises that they made regarding fixing your credit report. If a company wants you to pay beforehand, it is likely to be a scam.
  • The credit repair service does not tell you of your rights and what you can do for yourself such as your right to get your own free annual credit report once a year from each credit bureau as well as in other circumstances such as when have been denied for credit, looking for employment etc.
  • Watch out if the credit repair service recommends that you do not contact any of the three major national credit bureaus which are Trans Union, Equifax and Experian directly on your own. You have every right to do so.
  • The credit repair company makes an unlikely promise that it is going to get rid of all negative information in your credit file even if that information is accurate and current. This is illegal and impossible to do unless the creditor or the source of information can no longer provide proof of that account.
  • If a company suggest that you try to invent a new credit identity and then a new credit report by applying for an employer identification number to use instead of your Social Security number, be extremely wary because this is tantamount to committing fraud and is punishable by a fine and is considered to be a felony.
  • The company suggests that you dispute all information your credit report even if it is accurate or correct. This is an unfair practice that should be frowned upon according to the fair credit reporting principles.

Following the advice of credit repair service that is quite obviously a scam could land you in a lot of legal trouble. If you follow the legal advice and inadvertently end up committing fraud, you can be charged and prosecuted. It is a federal crime to lie on a loan or credit application, to mis-represent your Social Security number, to obtain an employer identification number from the Internal Revenue Service under false pretenses all of which can result in you being charged and prosecuted for mail or wire fraud if you use the mail, telephone or the Internet to apply for credit and provide false information.