Credit and Debt Help

Should I Try to Fix My Credit Myself

Admin — Tue, 01 Dec 2009 02:45:23 +0000

In today’s tough economic times, with the epidemic of job losses, foreclosures, credit card defaults, and bankruptcies, a growing number of people are finding that their credit is in need of improvement. Unfortunately, many of these people don’t feel that they can afford to get professional credit repair help, and they have no idea how to go about fixing their credit themselves. Consequently, a lot of them will end up doing nothing, resigning themselves to the closed doors and added costs of having poor credit. But you don’t have to be one of those people!

Making the effort to repair your credit now could save you literally thousands of dollars in the coming years through lower interest rates on mortgages, car loans, and credit cards. It should not be a question of whether or not you will repair your credit. The only real question is should you hire someone to do it for you, or should you do it yourself?

A key benefit of using a credit repair company–assuming that you retain a legitimate, reputable one–is that they should know exactly what to do to restore your credit. Because you should be able to count on them to do all that can be done to rescue your credit, you would not have to worry about learning the intricacies of fixing your credit yourself. On the other hand, the major drawback of using a professional company is that they can be very expensive. Depending on the company’s rates, you could spend hundreds or even thousands of dollars over a two- to three-year period. The other major drawback of using a professional credit repair company is that so many of them are scams. You have to do very careful research before signing up with any of them.

Probably the biggest advantage of repairing your own credit is that you can avoid having to pay hundreds, or maybe thousands, of dollars to a repair company. The money you would save by fixing your own credit could be used to pay down some of your debts. Most experts agree that a credit repair company cannot do anything for you that you could not do yourself, if you know how. The major drawback of repairing your credit yourself is that you will have to take the time and make the effort to educate yourself on credit repair. If you don’t educate yourself, your efforts to improve your credit are likely to be much less effective. You should be able to obtain a good book on credit improvement from your local library or bookstore. There are also some excellent do-it-yourself guides that you can purchase for an amount less than the initial set up fee charged by many professional repair companies.

There are valid arguments on both sides of the question of whether you should repair your own credit or hire a company to do it, but there is no one right answer. Each person has to make his/her own decision.

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How the Credit CARD of 2009 Will Save You Money

Admin — Tue, 17 Nov 2009 00:20:16 +0000

The Credit CARD Act of 2009 is being welcomed by many consumer advocates because it establishes a number of new regulations that will protect consumers from some of the unsavory practices of the credit card industry. There are a number of different ways in which the protections provided by this new law will save consumers money, and in this article I will describe three of those ways.

First of all, one major benefit of this legislation is that it will eliminate the practice known as “universal default.” A universal default provision basically allows the card issuers to raise your interest rate if they find that you have been more than 30 days late on any of your payments to any of your creditors. A critical point here is that the card issuer can raise your interest rate even if all of your payments on that particular card have been made on time. Because they don’t understand (or don’t read) the fine print in their credit card terms and conditions, most consumers are not even aware of the existence of this provision until they are informed that their interest rate is being increased, sometimes doubling or tripling, and perhaps getting as high as 29.99 percent. To make matters worse, these consumers may find themselves stuck with this higher interest rate for years, unless they are able to pay off their entire balance or transfer it to a different card. The outlawing of universal default will undoubtedly save many consumers hundreds of dollars in interest each year.

Second, the new regulations regarding over limit fees will also save some consumers a lot of money. Presently, over limit fees are a big moneymaker for banks and credit card companies. Although consumer should know and remain aware of their credit limit, there are still a large number who sometimes make multiple credit card charges before they even realize that they have exceeded their credit limit. Presently, for each one of these charges, the card issuers can smack the consumer with an over limit fee ($39 is pretty typical). So, if a person makes five over limit transactions, he/she will find themselves facing up to $195 just in over limit fees, even though the total amount of the five purchases might have been only $50 or $60. Once the Credit CARD Act goes into effect in February 2010, consumers can no longer be charged any over limit fees unless they choose to opt in to overdraft protection. And those who opt in cannot be charged more than one over limit fee per billing cycle, even if they make multiple over limit transactions. Consumers who choose not to opt-in will simply not be allowed to exceed their credit limit, but in this writer’s opinion, that is not necessarily a bad thing.

A third way in which the new law will save consumers money is through requiring credit card issuers to change the way in which payments are applied to existing balances. Consumers will sometimes find themselves carrying credit card balances for which they are being charged different interest rates. This can occur when you make some purchases at a low promotional interest rate and other purchases at the regular interest rate. Or, part of your balance could be from taking cash advances for which you are usually charged a higher rate of interest. Currently, when you carry balances that are being charged different interest rates, the credit card companies apply your payment first to the lower interest rate balance and then to the higher interest rate balance. This means that 1) you will pay off your lower rate balances first, 2) you end up taking longer to pay off the higher interest balances, and 3) the credit card company makes more money as a result. The Credit CARD Act will require that any amount paid above the monthly minimum payment must first be applied to the highest interest rate balance. This requirement will enable consumers to pay off their higher interest balances sooner and thereby save money.

Three Ways to Get a Handle on Credit Card Debt

Admin — Tue, 10 Nov 2009 03:02:06 +0000

Credit cards are a wonderful convenience because they offer us the freedom to buy something now and pay for it later. Unfortunately, many people use them to buy more than they can actually afford, and before they realize it, all the different purchases have snowballed into a massive amount of debt. If you are one of the many people trapped under a mountain of credit card debt, don’t panic. There are several simple things you can do to get a better handle on and eventually overcome your credit card debt.

Step 1: Immediately curb your credit card spending. Once you recognize that your credit card debt is out of control, it would not be wise to continue adding to the problem by making additional charges. Instead, you need to firmly resolve to not use your card(s) again—except in case of a real emergency—until you have paid off your balance(s) completely or until you have reduced it to a predetermined amount. Alternatively, if you don’t want to sacrifice the convenience of paying for things by credit card, then you will need to commit yourself to paying off all of your new purchases each month so that your credit card balance does not continue to increase.

Step 2: Increase your monthly payments. One of the best ways to decrease your credit card debt more rapidly is to increase, if you can, the amount you pay towards your credit card bill each month. The ideal situation would be to not carry over any balance at all, but if you’re overly burdened with credit card debt, that probably isn’t a viable option. Paying only the minimum payment is what often lands many people in debt trouble. Not only will it stretch your payments out over many years, if not decades, it will also mean that you’ll end up paying hundreds and hundreds of dollars extra in interest. Whenever possible, put in some extra money along with what you’re already paying. Even if you can pay only $20 extra each month, it can go a long way in reducing the total amount of interest that you end up paying.

Step 3: Contact your creditors. If after developing your budget, you find that you simply do not have enough income to cover your monthly living expenses and all of your debt payment obligations, then you should consider contacting your creditors immediately. Tell them why things are difficult for you, and try to work out some type of modified payment plan that reduces your payments to a more manageable level. Creditors understand that if you file bankruptcy, they may get little, if any, of what you owe them, so most of them will be willing to work with you. They may agree to lower the interest rate that you’re paying, the minimum monthly payment, or both! Sometimes they will even forgive a portion of your debt. Don’t wait until your accounts have been turned over to a collection agency. When that happens, your credit will be hurt even more.

There are, of course, other effective steps you can take to gain control of your credit card debt, but any remedy must begin with you first acknowledging that the debt is a problem and then committing yourself to a serious course of action to address it. Credit card debt is something many people all over the country are facing right now, so you’re certainly not alone! For most people, getting rid of this debt will not happen overnight, but if you develop a sensible plan and stick to it, you can start reducing your debt steadily and surely.

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The Credit CARD Act of 2009: Good News for Consumers

Admin — Mon, 02 Nov 2009 16:33:47 +0000

In May of 2009, the U.S. Congress passed the Credit Card Accountability, Responsibility and Disclosure (or Credit CARD) Act. While certainly not everything that consumer advocates have wanted, this new law offers a number of valuable safeguards for credit card users. In this article I will briefly highlight several key components of this important consumer protection legislation. Restrictions on Interest Rate Increases This new law will prohibit credit card companies from raising your interest rate on your existing balances unless you are 60 days late with a payment. (Currently, your interest rate can be raised if you are late with even one payment.) Additionally, if your payment is more than 60 days late and the default interest rate kicks in, the card issuer must lower the rate back to the original rate after you have made six consecutive months of on-time payments. This means that even if you do get behind on your payments and become subject to a high default interest rate, you will now have the opportunity and the right to get your lower rate back. Another new restriction relates to promotional interest rates, which now must remain in place for at least six months before they can be increased. Furthermore, according to the new regulations, the regular interest rate on a credit card cannot be increased during the first 12 months. New Limitations on Various Fees The new law also places a number of limitations on various types of credit card fees, most notably on over limit fees. Under the new regulations you will not be subject to over limit fees unless you agree to “opt in” and allow over limit transactions on your account. If you choose not to allow them, then any transaction that would put you over your credit limit would simply be denied. Additionally, card companies will no longer be able to charge consumers for making payments by phone or over the Internet (but they can impose a fee on consumers who want expedited payments). How Payments Are Applied Good news for consumers is that the new legislation requires that any amount a consumer pays above his/her monthly minimum payment must first be applied to the highest interest rate balance. Presently, most credit card companies apply payments first to the lowest rate balances and then to the higher rate balances, a practice which costs consumers more money. Special Restrictions for Consumers under Age 21 One somewhat controversial portion of this legislation is the portion which restricts credit card access for those under 21 years of age. Consumers under 21 would be able to get a credit card only if they can prove they have “independent means” to repay the debts they incur, or if they can get a co-signer aged 21 or older. While the intention of this provision is to protect younger consumers, there are some who question this particular approach to doing so. The preceding are just a few of the changes that the Credit CARD Act will bring about. Most of the new regulations are scheduled to take effect in February 2010, but there are currently some efforts under way to change the effective date to December 2009.

How to Monitor Your Credit Report: The Advantages and Disadvantages of Three Different Strategies

Admin — Mon, 26 Oct 2009 14:33:34 +0000

Although there seems to be much greater awareness now about the importance of checking our credit reports periodically, many people still aren’t sure about exactly how to monitor their credit. In this article, I will identify three different ways in which consumers can monitor their credit, and I will also discuss the advantages and disadvantages of each of these three ways.

The first credit-monitoring strategy would be to request all three of your credit reports at the same time. As you are probably aware, you can get a free copy of your credit report each year from each of the three major credit bureaus. (You can claim your free reports by logging on to annualcreditreport.com, which is the official web site supported by the credit bureaus.) The key advantage of getting your three credit reports all at the same time is that you can directly compare them for inaccuracies and inconsistencies. Another advantage of this approach is that you can monitor your credit for free. Also, this approach involves a minimum amount of time, as you would be requesting and then reviewing your reports only once each year. The main disadvantage of this approach, however, is that you will not be eligible for another free credit report for 12 months. Thus, it would be a full year before your next opportunity to identify any inaccuracies or suspicious activity on your report. If you wanted to check your credit a second time during that year (which you most definitely should do), you would have to pay for your three reports. Another disadvantage of this approach is that the free credit reports do not typically include your credit (or FICO) score. The three major credit bureaus will be happy to sell you that piece of information, of course, as will any number of other web sites.

The second strategy would be to order one of your free credit reports every four months. The key advantage of this strategy is that it would allow you to monitor your credit report throughout the entire year, and again, yhou can do so for free. Additionally, you would have the opportunity to identify any changes or new information on your credit report at four-month intervals, rather than only once a year as in the first strategy. The main disadvantage of this strategy is that you would not be able to immediately compare all three reports at the same time. This means that it might be four or eight months before you recognize any discrepancy between the reports from the different bureaus. A second disadvantage is that this strategy would require you to remember to request your credit reports at three different times each year.

The third strategy is to have your credit report monitored for you by subscribing to one of the many credit-monitoring services. The primary advantage of this strategy is that these services will monitor your credit for you at all three credit bureaus. This is ideal for individuals who do not have the time or the inclination to do so themselves. Another advantage is that these services monitor your credit on a daily basis and alert you about any inaccuracies or unauthorized activity. In this regard they offer superior protection against identity theft, as you could be notified almost immediately of fraudulent activity. The key disadvantage of this strategy is that you will have to pay anywhere from $60 to $180 per year for this service. A second disadvantage is that different companies provide different levels and quality of service. Therefore, it is advisable to shop around and compare various services that are available before signing up for any of them.

Clearly, each of these three methods of monitoring your credit has its own unique advantages and disadvantages. Each consumer must decide for him- or herself which of the three methods is most agreeable to them. What is most important, though, is that you do monitor your credit regularly.

Why You Should Monitor Your Credit Report on a Regular Basis

Admin — Mon, 19 Oct 2009 12:57:03 +0000

Are you monitoring your credit on a regular basis? If not, then you should be. There are two main reasons why it is so important that you do so.

First of all, regular monitoring is advisable in order to ensure the accuracy of your credit report. The information contained in your report can directly affect many different aspects of your life. For example, it can determine whether or not you are approved for a car or home loan, what interest rate you’ll be charged on your loans, how much you’ll pay for insurance, whether or not a landlord will rent his/her property to you, and even whether or not an employer will choose to hire you. You should not assume that all of the information in your credit report is accurate. According to a 2004 study, nearly 80% of all credit reports contain errors, and about 25% of these errors actually impact the credit score. Given the tremendous importance of your credit report, you would be wise to do what you can to ensure that the information contained in it is as accurate as possible. By regularly reviewing your credit reports for inaccuracies, you’ll be able to bring them to the attention of the various credit bureaus and have them corrected.

Secondly, regular credit monitoring is an absolutely essential tool in the battle against the rising tide of identity theft. It is estimated that up to 10 million Americans are victims of identity theft every year, and for many of these victims, it can take years and lots of hard work to set their records straight. People who regularly monitor their credit can identify suspicious activity early and can then take action immediately to stop a potential identity thief in his or her tracks. On the other hand, if you don’t monitor your credit regularly, an identity thief could do a tremendous amount of damage to your credit before you ever realize that anything is wrong. Therefore, monitoring your credit is extremely important because the sooner you become aware of suspicious activity on your credit report, the sooner you can take corrective action and the better your chances of limiting the damage. (Understand, though, that credit monitoring is only ONE defense against identity theft; there are a number of other steps you can take to protect yourself–but that is the subject for another article!)

As important as credit scores are in many aspects of our daily lives, it is surprising that millions of Americans do not monitor their credit regularly, and many have never even seen a copy of their credit report. Don’t be one of those people who never even think about their credit until there is a serious problem with it. Be proactive by monitoring your credit regularly. A good credit rating is one of your most precious financial assets.

How to Improve Your Credit Score: Common Myths and Misconceptions

Admin — Tue, 13 Oct 2009 03:20:27 +0000

By Art Garmon, Ph.D.

Because credit scores have become such an integral part of our financial lives, it is important that we understand what they’re all about. Unfortunately, however, one survey has revealed that there are many Americans who don’t really understand credit scores or how they work. In this article I will attempt to address some of the most common myths and misconceptions about how to improve your credit score.

1. Each credit bureau has its own formula for computing credit scores. When you get your credit scores from the three different credit bureaus, you will normally see that each of them will vary somewhat, sometimes by as much as 50 points. This variation leads some people to conclude that the different bureaus must be computing their credit scores differently. In actuality, however, the three bureaus use the same formula. What accounts for the differences that you observe are the fact that your files at the different bureaus each contain slightly different information about you. This could occur because some creditors may report your information to only one credit bureau, while other creditors may choose to report only to a different bureau.

2. Shopping around for the best loan will lower your credit score. This actually can happen, but only under certain circumstances. Credit bureaus recognize that when consumers seek financing for a major purchase, they will often want to shop around for the best loan rate. Therefore, the bureaus usually do not penalize you for this unless the flurry of credit inquiries continues beyond about 2-3 weeks. After that period it is possible your credit score will be affected. Likewise, if you are shopping around for different types of loans (e.g., mortgage, car, and personal loans) all at the same time, your credit score is likely to be negatively affected.

3. If you dispute negative items on your credit report, the credit bureau has to remove them. This is another partially true statement. The credit bureaus are required to remove inaccurate information from your credit report. However, if the information that you are disputing is accurate, then they do not have to remove it, no matter how damaging it might be to your credit. For this reason, if you want to remove negative items on your credit report, you will need to be able to substantiate that the information is inaccurate.

4. Paying off your current debt is a the fastest way to raise your credit score. Contrary to what a lot of people seem to believe this, this is not true. Your credit rating is determined more by your past payment performance than it is by the current amount of your debt. While you can certainly help your credit score by paying down your current debt, you won’t see much immediate benefit if you have an established history of making late payments. In this case, the best way to have an effect on your credit score is to begin establishing a new, positive payment history, but doing so will take some time, obviously.

5. Closing old credit accounts will improve your credit score. Closing old credit accounts will usually not help your credit score; in fact, it is more likely to actually lower your score. One of the factors that credit bureaus look at is the ratio of all your outstanding balances to the total amount of credit you have available. Ideally you want that ratio to be 30% or less, meaning that you are using only 30% of your available credit. Choosing to close a couple of your old credit accounts could increase your ratio considerably, depending on how much available credit you had on those accounts.

6. A credit repair company can erase my bad credit and/or raise my credit score within 1-2 months. Despite what credit repair companies might claim in their advertisements, the reality is that there isn’t much these companies can do for you that you can’t do for yourself, once you educate yourself. If you would prefer to have someone else do the work for you and if you don’t mind paying for it, then working with a reputable credit repair company may be a good idea. However, if you think they have some secret techniques that will clean up your credit like magic, then you’ll be wasting your money. Additionally, many credit repair companies are little more than thinly-disguised scams, so be sure to do your research before hiring a particular company.

These are some of the most common myths and misconceptions about how to improve your credit score, and they illustrate how what you don’t know can hurt you. Given the great importance of credit scores in our society today, I encourage everyone to educate themselves in this area.There is a lot of good information available about how to improve and protect your credit.

Do I Need to Fix My Credit?

Admin — Tue, 06 Oct 2009 03:17:18 +0000

How do you know whether or not you need credit repair? Well, if your applications for loans and credit cards are being turned down repeatedly, then obviously your credit needs fixing. For many people, though, the need for repairing their credit is much less obvious.

Credit scores range between 300 and 850, with the national average score being about 680. A score of 720 or above is considered excellent credit and usually will qualify you for the best loan terms. Individuals with scores in the 600s will still be able to get loans and credit cards, and so many of them will be inclined to think that their credit is all right.

What these people generally tend to overlook, though, is the fact that they will almost certainly have to pay higher interest rates because their credit scores are not high enough to secure them the best available rates. The higher rates that they have to pay will mean higher monthly payments, and each year they will end up paying hundreds, if not thousands, of dollars more in interest than individuals with excellent credit. Plus, people with lower credit scores are also more likely to be turned down for an apartment, to pay higher insurance rates, and maybe even have a harder time landing a job.

Unfortunately, many people mistakenly assume that credit repair is only for people with really bad credit. That is definitely not true. If you have a credit score that is under 720, then you can probably benefit from doing some credit repair. The further you are below the 720 mark, the more you would likely benefit from fixing your credit. Investing the time and the effort to repair your credit should pay off, not only in saving you money, but also in opening up opportunities that might otherwise be closed to you.

Your credit score affects many different areas of your life, so it is definitely to your benefit to do what you can to repair it and then keep it as high as possible.

Do It Yourself Debt Settlement - A Viable Alternative to Debt Settlement Companies Or Bankruptcy

Admin — Mon, 28 Sep 2009 19:14:11 +0000

By Ian Stanton

Do It Yourself Debt Settlement also known as Self Help Debt Settlement is a viable alternative to resolving your debt. The dirty little secret Debt Settlement Companies do not want you to know is: They charge you thousands of dollars for a service that you can accomplish yourself. Hiring a debt settlement company is like hiring someone to tie your shoes.

If you are like millions of Americans, you are searching for solutions to your financial problem. With an unemployment rate of 9.7 percent as of June 2009, many economists are concerned that the current trend could have catastrophic implications on the economy as a whole.

The State by State unemployment rates are even more disturbing. As of May 2009 twelve States have unemployment rates that exceed 10 percent. Of the twelve States four have unemployment that exceeds 12 percent. These States South Carolina and Rhode Island with 12.1 percent, Oregon with 12.4 percent and of course Michigan with an astounding 14.1 percent unemployment is clearly suffering the most.

The above statistics are not good news for the average consumer who is already experiencing financial difficulties. The outlook through the remainder of 2009 and early 2010 does not look encouraging either. In stating this, if you are already considering debt settlement, the question arises; how do I start negotiating with my creditors directly?

The first step to Self Help Debt Settlement is to research the entire process. There are a myriad of websites devoted to the process of debt negotiation. Most of these websites (In the interest of full disclosure, our website as well) are attempting to sell you something. The majority of these websites provide you with information that was gathered from the internet. Individuals can find all of this information on the internet with just a little research.

The next step is to gather all of your monthly bills together and establish a monthly budget. Make a list of your necessary monthly expenses to include your mortgage or rent, car payments, utilities, Insurance, gasoline, food and other household bills. Take this amount and multiply that sum by 1.2; this will give you an additional 20 percent cushion for unexpected expenses or emergencies. The difference between your total household income and the previously calculated amount is your monthly settlement budget.Start setting this amount aside as your settlement fund, as this fund accumulates use this as your benchmark for amounts you offer your creditors.

At this point you need to make an unyielding commitment to the process. It is essential that you understand that your creditors, in almost every case, will not even discuss settlements if you are currently paying them. Once you stop paying your creditors, the debt settlement process begins. The creditor is going to start escalating their collection processes in an attempt to mitigate their financial losses. Your creditors will start calling you to bring your account current. Do not avoid these phone calls; these calls are your opportunities to advise your creditors of your intentions and initiate the negotiation process.

When you are negotiating settlements with your creditors it is always in your best interest to offer settlements in one lump sum payments. If you have access to immediate cash, this is the best time to use it. Creditors are also experiencing financial difficulties in these trying economic times. If you decide to utilize investments (401k, Stocks, Bonds, IRA’s and like investments) to settle your debt, seek the guidance of an experienced accountant first. The question you should ask any accountant is: Will I save money in the long term by utilizing these funds. Remember, your investments at best are generating 10 -12 percent interest. Your creditors are most likely charging you 2 - 2.5 times this amount in interest on your outstanding balance.

Now that way we have described the basics, is it any wonder why Debt Settlement Companies are flooding the airwaves (both television and radio) with their commercials. These Settlement companies are preying on your fears and lack of knowledge with commercials that make it sound like they are doing something special. The fact is (as several State Attorney Generals have recently stated) several settlement companies are making promises they cannot, or never intended to keep just to separate you from your money.

The Debt Settlement Industry utilizes the basic method described earlier in this article to settle the majority of debts. The majority of these settlement companies make consumers believe that they utilize “secret programs your creditors don’t want you to know about”. This and other like minded statements could not be further from the truth.

Debt Settlement Companies make claims that if you make them monthly payments your debt will be resolved with in 24, 36 or 48 months. The payment amount seems to be reasonable to most people. A basic rule of thumb should apply to the above: If it seems too good to be true, it probably is! What the debt settlement companies forget to advise their clients (or hide it in the fine print of the contract), is that they take the first several payments to cover their sign up fees.

Most people who enroll with Debt Settlement Companies are under the assumption that the creditors have working relationships with the Debt Settlement Company. This is a false assumption; in point of fact, they have an adversarial relationship at best. This adversarial relationship impedes as well as prolongs the debt negotiation process.

If you have read this article up to this point, you are clearly interested in settling or negotiating your debt. By now you have already started researching how the process of debt settlement works. We would like invite you to visit our website http://www.2settlemydebt.com for more information on our services. We have developed a self help debt settlement module that is Patent Pending as to the method utilized. We provide secure internet access to “user specific databases” and preformatted letters that assist individuals in negotiating directly with their creditors. The website also provides the users to choose either debt reduction or debt settlement programs.

Ian Stanton

Director of Marketing

B-EZ Enterprises

(480) 278-3717

email media@2settlemydebt.com

website http://www.2settlemydebt.com

Article Source: http://EzineArticles.com/?expert=Ian_Stanton
http://EzineArticles.com/?Do-it-Yourself-Debt-Settlement—A-Viable-Alternative-to-Debt-Settlement-Companies-Or-Bankruptcy&id=2597581

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Credit Repair: the Time for Action

Admin — Mon, 21 Sep 2009 17:31:44 +0000

Jump In With Both Feet

The moment you make the decision to start the credit repair process you will feel great; empowered, light, and hopeful. For many people it is a hard step. There may be uncomfortable emotions associated with past credit issues, and revisiting old events can be difficult. But there is nothing more rewarding than regaining control over your life. How do you feel? We suggest you jump in with both feet. You’ll be glad you did.

Knowledge is Power

The first step in the credit repair process is taking inventory. You must get copies of all three of your credit reports. Did you know that each credit bureau reports a different mix of account information? Some creditors report to all three bureaus, others report to only one or two. You need to examine all three of your credit reports to get a complete picture as you begin the credit repair process.

Clean Up Your Credit

A truly effective credit repair and restoration plan may include catching up on past due accounts, evaluating collections to determine if they should be paid, negotiated, or ignored, contacting creditors to discuss rehabilitation options, and more. But before you take any of these steps you should make an effort to identify and remove errors on your credit reports. Finding and removing errors on your reports is an important and powerful step in the credit repair process. It may also be the most difficult.

Spotting Errors

An often-quoted statistic from the National Association of State PIRGs (Public Interest Research Groups) states that 79% of all credit reports contain errors. It is also a fact that people with legitimate credit problems are considerably more likely to have errors on their reports. This is because late payments, charge offs, and collections trigger activity such as re-coding of accounts for special handling, and sale or assignment to outside parties for collection. These procedures dramatically increase the likelihood of errors. Credit reporting errors translate into higher interest rates on every dollar you borrow, and many of these errors are hard to spot. Doing the job halfway should not be an option. If you do not feel comfortable tracking down errors on your report you should hire a credit repair professional.

A Disturbing Cycle

The fact that errors are most likely to appear on the reports of those with past credit issues is one of the most problematic phenomena in the credit repair world. On one hand it creates significant barriers for those who can afford it the least; it is difficult enough to regain control over your life after a period of financial stress without the system placing extra obstacles in your path. It is also damaging in a more subtle and insidious way. People with credit issues often feel reticent about the credit repair effort. The emotional discomfort following a period of financial stress makes a critical examination of their credit reports difficult. As a result they live for years with innumerable errors on their credit reports. These errors reduce their scores, cost them money in the form of higher interest rates, and place unnecessary ongoing strain on their budget. But there is good news. Awareness leads to action, and a focused credit repair effort can turn things around quickly.

Rebuilding Your Credit

Another important step in the credit repair process, which is often neglected after a period of financial strain, is the rebuilding of credit. The overall content of your credit report will determine your FICO scores, the scores lenders use in underwriting loan applications and determining the interest rate you will pay. To build your FICO scores it is essential to have current open accounts in good standing on your report. Many people avoid opening new accounts due to fear of denial. This is a mistake. You can work for months to repair your credit, but if you are left without a measurable, current, history of on-time payments your FICO score will go nowhere. Secured credit cards are the perfect credit repair tool. Secured cards require a small savings deposit, and will typically provide a credit line equal to that deposit. These cards are designed for people with credit issues, so you don’t have to worry about being denied, and most importantly they will provide the track record the credit-scoring model is looking for.

Developing a Budget

Credit repair requires effort. You will want to insure your efforts continue to pay off well into the future. It is important to make payments on time, incur only manageable debt, and build savings to cushion your budget in the case of unforeseen events. A thoughtful examination of your costs versus your obligations is a perfect complement to the hard work you put into your credit repair. A budget does not have to mean hardship. In fact, you will soon see that it is quite liberating. The effort you put into understanding your finances will give you the information you need to make good decisions in your life, maintain your great credit, build savings, and ultimately allow you to build real personal wealth.

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