Credit Repair

Suffering from poor credit? You are probably wondering what you need to do to repair your credit score. Do you need the help of a credit repair agency, or is this something you should do on your own? Credit repair is possible, but you must take careful steps to fix the problems you have and keep them from happening again.

Your credit score affects many things in your life. The most obvious is your ability to get a loan. If you have poor credit, you will not be able to get a good loan, if you can get one at all. However, a credit rating that is in need of repair can also affect your ability to get a job, since employers will sometimes look at your credit rating to determine if you are a responsible person.

Time Frame
Credit repair takes time. Any company that promises you instant repair to your credit score has something to hide, because it takes several months to raise your credit score significantly, unless there are errors on your report that you can fix. The length of time it will take to raise your score depends on what is harming it. For example, most bankruptcies and delinquent accounts can stay on your report for 7 years. Tax liens will stay on your account for 15 years. Inquiries will remain on the account for 2 years. You can counteract these negative items by adding positive accounts to your report, but it will take time for the positive to counteract the negative.

Misconceptions
Some people think that closing the credit cards that they are no longer using is the answer to quickly raise their credit score. This is not true, because one aspect of your credit score is your credit history. The longer you have had a particular item, the better it will affect your credit score. Closing too many cards that you have had for a long time can actually lower your credit rating a little bit. Instead, pay down the balance, but keep the card or account open.

Prevention/Solution
If you need to repair your credit score, start by making all of your balances current. Then pay down your balances as quickly as you can, but pay attention to how you are paying them. Pay each balance so that it is a third of the credit limit on that account. Accounts that have balances that are close to the credit limit will damage your score. Also, check your credit history for errors, and have them corrected if you find them.

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Approach credit repair companies with caution. Much of what they can do for your credit score you can do on your own. No company can improve your credit score magically. This takes work on your part, no matter who is helping you. If you do need to use a credit repair company, shop carefully to find one with reasonable fees. Also, make sure that the credit repair agency will help you learn how to manage your money so that you do not end up in credit trouble again in the future. To avoid a scam, so common in this new, growing industry, consider the following.

Step 1 - Check how long the company has been in business. Investigate its track record at your local Better Business Bureau or online. Although a short history isn't a sure-fire sign of a red flag, a new company has more going against it than a better established, older company.

Step 2 - Secure an initial free consultation. No company should object to giving an hour-long, obligation-free consultation.

Step 3 - Ask the consultant for legal advice on what you can do for yourself without hiring a credit repair company. The company should provide you information on what you can do for yourself.

Step 4 - Find out whether they want you to pay fees before they provide credit-repair services. Get up and walk out the door if they do. Under the Credit Repair Organizations Act, you're not required to pay a credit-repair company until it has delivered the services promised.

Step 5 - Be alert for requests to create a new credit identity. One common scam is to use a false Social Security number. Another common scam is to register as a business and obtain a new federal tax ID number that doesn't show any credit history.

Step 6 - Avoid suggestions to harass creditors or simply dispute negative entries into your credit history.  Remember the goal is to restore your credit rating.