Can I Legally Repair My Credit?
One of the most frequent questions I dealt with as a Google Answers Researcher was "How do I fix my trashed credit?"
The answer is usually situational - although your first instinct might be to file for bankruptcy when you're in over your head, it's not always the best solution. Really, it's the solution of last resort.
What about the companies that tell you to create a new credit profile with a new SSN? NO! don't do that! It's illegal AND it doesn't work!
It IS possible to legally and completely repair your credit! It takes patience, time and a willingness to talk or write to your creditors - probably the hardest part of dealing with debt - but when you're done and the last derogatory marks have been amended or removed, the feeling of relief is one of the best feelings in the world.
Repairing Your Credit
First, sit down with all of your bills and work out a budget. Set aside what you need for rent, car payments, insurance and maintenance, utilities, groceries, etc, and determine how much you have left to throw at your debts. You'll need to stick to your budget very carefully while paying things off, so be certain to leave yourself a little wiggle room for emergencies.
Next, get your credit reports. Recent legislation requires that all three major credit reporting agencies provide you with one free copy of your credit report each year. Print out several copies of each bureau's report.
Get yourself settled in with a highlighter and a package of post-it notes, and go over each report carefully to check for inaccuracies. Highlight any you find and stick a post-it in that spot explaining why it is wrong (paid off, not yours, etc.). If you have receipts to back it up, attach a copy of the receipt.
To dispute incorrect information, compose a letter to each agency explaining which information is incorrect, and ask them to either verify the information or delete the listing. Enclose a copy of the report with the mistake circled, highlighted or otherwise clearly indicated, as well as copies of any supporting documents.
Also include in your request:
* First, middle, and last name (including Jr., Sr., III)
* Current address
* Previous addresses in the past two years, if any
* Social Security number
* Date of birth
* Current employer
* Phone number
* Signature
Next, go over each report and make a list of your "small" debts, and to whom they are owed. Rather than consolidate them, which will actually drag out the payment process your best choice is going to be to pay these off outright.
List them in order of priority and affordability. If you can spare only $100/month to pay these things off, start with your $100 debts first. Write to each creditor, enclose a check or money order for the amount you owe, and ask that they:
1) Report to the credit bureaus that the account has been "paid as agreed" and
2) Ask that they confirm in writing that they have done so, and that the debt has been satisfied.
Send these certified mail, return receipt requested, and hang on to the return receipt. You may need that receipt later if they "lose" your request (it does happen, so "CYA"!).
Most creditors are happy to do this for people who take the initiative in paying off their debts. It saves them costly collection activity, and shows that you're taking responsibility for past mistakes.
Once your little debts are out of the way, tackle the larger ones. If you've not already been sent to collections with your credit card debt, contact your card issuer to make payment arrangements. Most credit card companies are very happy to work out arrangements with their customers - they'd much rather have the debt paid off slowly than not get paid at all. Some companies will suspend interest, late and over-limit fees as part of the arrangement if you're up front with them about your situation and are willing to stick to a payment plan.
If you've already been sent to collections, you'll need to contact the agency holding your account to make arrangements. Most will accommodate you if you lay out a clear and reasonable payment plan. If you can offer a large chunk of money up front as a downpayment, with a schedule of $X/month thereafter, do so.
As with your small debts, ask the company to report your account as being "paid as agreed" while you're making your payments. Be certain to get your arrangements in writing and stick to them. That's absolutely vital! If you can arrange for the payment to be regularly debited from your checking or savings account, do so. It will be one less thing you have to worry about.
Once you've paid it off entirely, ask for a confirmation letter stating that it has been reported to the credit bureaus as "paid as agreed". Do this with *every* outstanding account you have, and be certain to get copies of your credit reports a few months later to confirm that the companies have stuck to the agreement. If they haven't, dispute the items with the reporting agency to get the information corrected.
One you've satisfied your debts and corrected any inaccurate information in your credit reports, you need to get some positive credit information in there to put you on the road to shiny clean credit.
In the meantime, be certain to pay any installment loans or credit card bills *on time*. If for any reason you cannot make a payment on time, contact the creditor *immediately* to let them know why and when you expect to pay.
You can have your credit repaired in as little as two years if you stick to your payment arrangements, without having to go through a costly and often ineffective middleman. Though most derogatory credit information can stay on your report for 7 years, your creditors may agree to delete your old account listings once you've satisfied your obligations. All you have to do is ask!
Also include in your request:
* First, middle, and last name (including Jr., Sr., III)
* Current address
* Previous addresses in the past two years, if any
* Social Security number
* Date of birth
* Current employer
* Phone number
* Signature
Next, go over each report and make a list of your "small" debts, and to whom they are owed. Rather than consolidate them, which will actually drag out the payment process your best choice is going to be to pay these off outright.
List them in order of priority and affordability. If you can spare only $100/month to pay these things off, start with your $100 debts first. Write to each creditor, enclose a check or money order for the amount you owe, and ask that they:
1) Report to the credit bureaus that the account has been "paid as agreed" and
2) Ask that they confirm in writing that they have done so, and that the debt has been satisfied.
Send these certified mail, return receipt requested, and hang on to the return receipt. You may need that receipt later if they "lose" your request (it does happen, so "CYA"!).
Most creditors are happy to do this for people who take the initiative in paying off their debts. It saves them costly collection activity, and shows that you're taking responsibility for past mistakes.
Once your little debts are out of the way, tackle the larger ones. If you've not already been sent to collections with your credit card debt, contact your card issuer to make payment arrangements. Most credit card companies are very happy to work out arrangements with their customers - they'd much rather have the debt paid off slowly than not get paid at all. Some companies will suspend interest, late and over-limit fees as part of the arrangement if you're up front with them about your situation and are willing to stick to a payment plan.
If you've already been sent to collections, you'll need to contact the agency holding your account to make arrangements. Most will accommodate you if you lay out a clear and reasonable payment plan. If you can offer a large chunk of money up front as a downpayment, with a schedule of $X/month thereafter, do so.
As with your small debts, ask the company to report your account as being "paid as agreed" while you're making your payments. Be certain to get your arrangements in writing and stick to them. That's absolutely vital! If you can arrange for the payment to be regularly debited from your checking or savings account, do so. It will be one less thing you have to worry about.
Once you've paid it off entirely, ask for a confirmation letter stating that it has been reported to the credit bureaus as "paid as agreed". Do this with *every* outstanding account you have, and be certain to get copies of your credit reports a few months later to confirm that the companies have stuck to the agreement. If they haven't, dispute the items with the reporting agency to get the information corrected.
One you've satisfied your debts and corrected any inaccurate information in your credit reports, you need to get some positive credit information in there to put you on the road to shiny clean credit.
In the meantime, be certain to pay any installment loans or credit card bills *on time*. If for any reason you cannot make a payment on time, contact the creditor *immediately* to let them know why and when you expect to pay.
You can have your credit repaired in as little as two years if you stick to your payment arrangements, without having to go through a costly and often ineffective middleman. Though most derogatory credit information can stay on your report for 7 years, your creditors may agree to delete your old account listings once you've satisfied your obligations. All you have to do is ask!
Free Consumer Credit Resources
There are a number of consumer resources available to help you, and unlike consolidation services, they're all free:
Building A Better Credit Record (Includes sample dispute letter)
Credit Repair: Self-Help May Be Best
Erasing Bad Credit - Audio Presentation from the FTC (Requires RealPlayer)
Credit and Your Consumer Rights
Know Your Credit Report
Answers I've Written About Credit
Length of Credit Reporting
I've even looked into UK credit issues:
Hang in there! Bad credit doesn't have to be forever - or even for seven years! You'll make it out of debt!
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