Credit Repair Guide

Free Credit Repair

Well, first let’s start with what credit repair is. “Credit repair” is a term most commonly used to describe a systematic process of improving ones credit scores by obtaining copies of the individual’s credit report, reviewing the credit report for errors and misleading information; then disputing the information with the credit bureaus. This is just a basic explanation of the process. While it can be very simple for some, it is much more complex and time consuming for others.

Most consumers with bad credit are searching for free credit repair. Regrettably, there are no services that I know of that will repair your credit for free so, if you are looking for “free credit repair” you will have to do it by yourself. There are also some reputable, inexpensive credit repair services available for consumers who just don’t have time to learn the credit repair process. But, doing it yourself has many advantages and I think that most people who learn about the credit game have better chances of not getting into credit trouble again.

When you are ready to start your free credit repair journey, I suggest starting at a credit repair forum or by reading a credit repair book. A credit repair forum is a discussion group of people teaching and learning credit repair. There’s tons of information online – just be careful – there is lots of misinformation online as well. Remember to always research your questions with different sources.

After spending hours and hours researching credit repair online, I’ve realized that credit repair has got to be one of the most misconstrued topics online. There are way too many people being mislead online. They don’t research the information they find and end up repeating it to others. And yes, some of them are even repeating the information on their websites. They are only trying to help, but instead usually end up really hurting other people financially. Please, please do not be one of those people.

This is why I suggest credit repair forums; usually when someone is wrong, there are plenty of professionals at the forums that will correct that person immediately.

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Credit Repair Companies

Unfortunately, credit repair companies have a pretty bad reputation in the credit repair industry. In fact, the credit repair industry itself has a bad reputation. Many people don’t even really know what credit repair is. Is credit repair even possible? Is credit repair legal? Yes and yes.

The first thing you should know about credit repair is that everything a credit repair company can do for you legally, you can do for yourself at little or no cost. It should also be known that you can file bankruptcy yourself. You can also repair your own car, change your own oil, clean your own carpet and paint your own house. Are you starting to see my point?

While you can definitely do certain things in life by yourself, it is sometimes better to hire a professional to do it. There will always be people who prefer to do it themselves and there is absolutely nothing wrong with that IF they are able to get the job done efficiently and effectively.

Credit repair is no different. If you know what you are doing, then you should absolutely do it yourself. If not, you have a few choices: Learn do it or hire a professional credit repair company to do it for you. If you chose the latter, be very careful to go with a reputable company. Do your research! Contact the Better Business Bureau to see if the company has any complaints about them.

Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised. By law, credit repair organizations must give you a copy of the “Consumer Credit File Rights Under State and Federal Law” before you sign a contract. They also must give you a written contract that spells out your rights and obligations. These laws were written to protect you from shady companies. Read these documents before you sign anything.

If you prefer to repair your credit by yourself, check out the solid advice given in the Credit Secrets Bible – by far the best book I have read about credit repair.

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Perform Credit Repair Yourself

Some credit repair companies make unbelievable offers to eliminate negative items from your credit report. They also claim that a better credit score will be reported in a short period. But most of them fail to deliver on thier promise and consumers end up losing their hard-earned money. Even the Federal Trade Commission (FTC) is skeptical, stating there are very few legitimate credit repair companies. Therefore, it makes sense to try improving your credit score yourself rather than risking money on the services provided by credit repair organizations.

What are the most common credit repair scams?

The credit repair industry is riddled with scams and rip-offs. Most common are over-charging borrowers against false promises of providing a better credit rating. The scams that occur most often are detailed below:

Temporary removal of negative items:

Some credit repair companies claim they have an intimate relationship with the credit bureaus and have back-door through the system. Meanwhile, they bombard the bureaus with disputes over the derogatory items and debts recorded in your credit report. These debts may disappear temporarily from your report once the bureau starts the investigation. However, to the surprise of most consumers, the original derogatory items and debts re-emerge after the next reporting cycle.

The credit repair company charges a fee for the temporary removal of negative items from your report. Moreover, the charge is usually demanded upfront, which goes against the Credit Repair Organizations Act.

Applying for a new credit report:

Another credit repair rip-off involves a company soliciting a way to create a new clean credit report. The company helps you apply for a new taxpayer’s identification number or Employer Identification Number (also known as EIN) in order to build a new credit history. This does not follow a legal process and the new report ultimately will carry the previous information, despite having a separate identification number.

Ensuring a clean report:

The biggest crooks are those credit repair companies who make you believe they can clean up your credit fast and help you get a mortgage or credit card through their channel partners. They typically demand a lot of money upfront in exchange for such services. In the end, these organizations are simply pretending to offer credit counseling or mortgage services and finally disappear. With all of the credit constraints returning in the mortgage complex, this is the most popular and most costly scam of all.

How can you prevent becoming a victim?

To avoid the trap all-together, you can complete the credit repair yourself. If you are still determined to seek outside council, please address the following items.

1. Verify the legitimacy and experience of the credit repair company. This can usually be done by asking for referral sources of satisfied clients.

2. Check with your state’s regulatory and better business bureau to determine if the company is in good standing.

3. Have the company provide a contract outlining what services are to be rendered and the amount and method of payment.

4. Contact a trusted mortgage broker that is skilled in analyzing credit reports to determine if the suggested course of action is reasonable.

5. Beware when a company solicits you for services. Referrals are usually the best way to select a reputable service company.

Consumers have certain rights under The Credit Repair Organization Act. An executed contract is required to begin any repair services. You have three days to cancel the contract without paying any charge. It is prohibited for a credit repair company to charge you until the agreed upon services have been completed.

If you feel you are a victim of a credit repair scam, you may report it to the local consumer affairs office or state Attorney General’s office. A complaint may also be filed with the FTC that ensures the future protection of consumers against fraud.

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Credit Repair – 5 Reasons Why You Should NOT Use A Credit-Repair Service!

Every day, consumers pay huge sums of money to credit-repair service companies that promise a quick credit fix in an effort to handle disputes, improve their ratings and get a good FICO score. And almost all of the time, they find that their money is completely wasted.

Having good credit can help you get much better interest rates for a car or home loan as you may know. A bad credit history can leave you stuck with loans that carry sky-high interest rates and bad terms that are tough to get out of. At times some of your bad credit can cost you a needed job.

The offers you find may seem attractive but ‘let the buyer beware’! Some legitimate credit-repair companies exist but many of the claims that you hear advertised are usually false and just a way to part you with your hard-earned money.

If you’re thinking about signing a contract with any credit-repair service you should at least know your rights. Please be aware of the following five reasons why you should not commit:

1. If the credit-repair company charges an upfront fee – do not commit. Under the federal Credit Repair Organizations Act – which was enacted to take care of deceptive and abusive credit repair business practices – it makes it illegal for companies to charge consumers BEFORE they perform any credit-repair services. So it’s against the law for credit-repair companies to seek payment from you until they have fully completed the repair services they have promised.

2. If the credit-repair company says it will, on your behalf, dispute information in your file, including items you know are correct, then beware. If the service’s plan is to lie, or dispute what you know to be accurate information then it’s not a reputable company. While YOU can dispute any information in your credit files that you think is incorrect, no credit-repair company has the right to remove any accurate, current information from anyone’s credit report.

And if the information in your file is totally correct good or bad, only the passage of time can reduce the impact of any negative information. Negative information such as late payments can stay in your credit file for as long as seven years. And a personal bankruptcy filing can take as ten years. Any negative information on your credit scores lessens as the years pass by.

3. Before you sign any contract, the company has to provide you with a free copy of the FTC’s “Consumer Credit File Rights Under State And Federal Law.” These guidelines clearly outline what the service can and cannot do.

4. The company may tell you they can get you a new credit identity by applying for an employer identification number, or EIN, from the IRS (Internal Revenue Service.) They may tell you that you can use this number instead of your Social Security number. But if you don’t own a business, then this isn’t a legitimate way to repair your personal credit history. And it’s a federal crime to get an EIN under false pretenses.

5. If the credit-repair service tells you not to directly contact any of the credit-reporting agencies or credit bureaus, you don’t want to hire them.

Simply put, you can easily clean up your credit report and repair your credit report history yourself. Everything a credit-repair company promises they can do that is legitimate, you can do yourself. You do not need a credit repair service. Many are unethical and will just take your money and run. Some will even charge you a monthly fee for ongoing credit repair.

With these tips you should be well-informed before making a decision about hiring any credit-repair service. You can easily get your business or personal annual credit report online free. Why not order and get your newest free credit report from Equifax, Experian or Trans Union, the 3 credit bureaus or reporting agencies, do a little research and fix your credit history yourself? It’s really not hard at all.

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Credit Repair: the Time for Action

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.

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.

Credit Repair: a New Professional

Change is Natural

Everything changes. No industry stands still. Henry Ford’s Model T was revolutionary, and opened the eyes of the world to new possibilities. But by today’s standards, the Model T, as important as it once was, has its place only in the past. Virtually every aspect of the early model automobile has been improved on, far beyond what Henry Ford could have imagined in his day.

The Changing Credit Repair Industry

The Internet has grown into a vibrant worldwide business community. In this environment competition thrives and new ideas come to life at amazing speed. New participants have entered the credit repair arena and brought fresh life to the business. Some older members have updated their methods; while others, perhaps top heavy with technology, continue to stand their ground even as the earth shifts beneath their feet.

The New Breed Appears

From this dynamic mix has appeared a new breed, the true credit repair professional. This new breed has a true mastery of the craft, and an impressive arsenal of tools capable of delivering results beyond the imagination of the early pioneers in the industry. Everything about the business is changing. And the changes involve you.

Credit and Your Life

There is nothing as important to your financial life as your credit. The content of your credit report, along with your credit scores, will determine the interest rate you pay on everything from your credit cards to your mortgage. The impact of your credit on your life can be staggering, and should not be taken lightly. The word is out.

The Problem of Errors

The three major credit bureaus maintain credit files on over 200 million Americans. A staggering amount of data moves through the credit reporting system. Errors are common and can translate into enormous costs for consumers; and yet, in a terrible percentage of cases these errors go unrecognized. This phenomenon is more damaging than you might think. Identifying errors on your report involves more than just spotting unfamiliar account information. The majority of credit report errors are compliance violations that you will not find without training.

FICO, A Lack of Understanding

Lenders base their underwriting decisions on the content of your credit report along with the numeric value of your FICO scores. These FICO scores have a major affect on your life, and yet few people have any knowledge of how they work. Here again, a lack of understanding results in a huge cost. A well-informed reshaping of your credit may have a dramatic impact on your credit scores. Even simple changes can bring major improvement, yet without proper information this potential remains untapped.

The Credit Repair Professional

The prevalence of credit reporting errors, coupled with a lack of understanding of FICO scores, result in a terrible cost to consumers, often having the greatest impact on those who can afford it the least. The credit repair professional provides an important, and often life changing, service by assisting in the identification and removal of credit reporting errors. In addition, a credit repair professional is a conduit for information about legal rights, rehabilitation opportunities, and credit restoration tools that can be employed to your benefit.

The Results You Need

The goal of a credit repair program is to improve your credit. Along with the skillful identification and removal of reporting errors, the process may include specific recommendations for building new credit, managing existing debt, rehabilitating defaulted obligations, and handling collectors. All of this must take place within the context of optimizing your credit scores. The credit repair professional operates in a fiduciary capacity and will utilize the widest range of tools to insure quick and lasting results.

Personal Service

You are unique, and so is your credit. There is no generic approach to credit repair that will do you justice. No credit repair software has the ability to spot the compliance errors on your credit report, or to determine the proper balance of accounts to optimize your credit scores, or to help you determine the right approach to take with an active collector. There is no one-dimensional credit repair program that will produce the results you deserve. True professional credit repair is about personal service. You cannot afford to settle for less.

What it Means to You

The credit repair professional will make sure that everything possible is done to help you reach your goals. The professional approach to credit repair can mean everything to you. Do you want real results? Do your want to see your scores improve? Do you want your credit to meet or exceed lenders requirements? Wait until you experience what a real professional can do for you!

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.

Credit Repair: Credit Score Secrets

FICO – More Than Meets the Eye

Fair Isaac and Company is the developer of the FICO score, the credit score used by most lenders today. The exact formula is not published, but Fair Isaac offers a breakdown of the categories of influence, and the relative importance of each. The breakdown is a helpful starting point for anyone in credit repair mode who wishes to optimize his or her scores, but it is only a starting point…

Credit Repair and the Logic of FICO

If you are in a credit repair program and aspire to optimize your credit scores it is handy to understand the logic behind the scenes. Fair Isaac is in the business of providing lenders with a measure of the risk they will incur in lending you money. Fair Isaac has spent years analyzing the implications of every measurable behavior and developed a formula to communicate risk with a single number. Here is a breakdown of the components of the FICO score along with some powerful tips you can apply to your own credit repair efforts.

Pay History

Your pay history makes up 35% of your score. Clear enough, but let’s take a moment to understand the implications. A late payment is an indication of financial stress. Financial stress translates into risk of default, and FICO communicates this risk to lenders by reducing your credit score. A lower credit score says, “don’t lend to this person.” But there is more involved. FICO weighs recent late payments more heavily than older late payments. A brand new late payment can send your credit score to a level that no lender will consider. On the other hand, anyone in credit repair mode should be happy to hear that the impact of a late payment fades quickly as time goes by.

Balances – Installment

Your account balances make up 30% of your score. Both installment and revolving accounts are considered. Let’s take a quick look at installment debt before discussing the far more important category of revolving debt. When installment debt, such as a car loan, appears on your credit report FICO sees it as an unknown and drops your score to warn lenders of the new risk. After a few months FICO acknowledges your ability to manage the payments and adjusts your score accordingly. Not a big credit repair concern.

Balances – Revolving

Revolving balances are tricky and may hinder or help your credit repair efforts more than you think. You can clean up your credit report, pay your bills on time, and still end up with a miserable credit score. FICO puts a huge emphasis on the relationship between your balance and your high credit limit. The latest FICO model acknowledges six balance-to-limit ratios: 20%, 40%, 60%, 80%, 100%, and the deadly over-100% category. The two lower tiers will increase your scores, the middle tier is neutral, 80% is bad, 100% is awful, and as for the deadly over-100% category – I think you get the message.

Credit Repair and Your Balances

People often get a credit card, and quickly use it to the limit. Sounds like fun! Unfortunately, a new account with a high balance is credit repair suicide. The new account warns FICO about unknown stress on your budget, and the high balance says that you are out of control. This may not be the case, but big brother is watching and he doesn’t like what he sees. But there is some good news too. If you take that same new account and keep the balance below 20% of your high credit limit for 6 months FICO will think you are fantastic and reward you accordingly. This is solid credit repair gold.

The Age of Accounts

This category makes up 15% of your score. There are a few credit repair angles here. There is nothing you can do about the age of installment debt; when it’s paid, it’s done. But revolving accounts are a different story. FICO loves old accounts as much as it worries about new ones. Many people start a credit repair effort and cut up their credit cards; a strategic error. Generally you would be advised to keep your accounts open. There are exceptions. If you have lots of established credit cards you should close the inactive ones. There is a bit of a balancing act; too many cards work against your score.

New Credit & Inquiries

This category weighs in at 10% of your score. If you are planning to apply for a mortgage or a car loan soon, or are in a credit repair program and watching your scores, you should minimize your credit activity. New accounts will reduce your score, and an inquiry is interpreted as the intent to open a new account, so FICO will downgrade you to warn prospective lenders that there may be trouble ahead.

Type and Mix of Credit

This is the final 10% of the calculation, and not much of a credit repair concern. FICO does not publish their idea of the optimal mix of credit, but if you really want to know what the perfect 850 credit score looks like, here you go! One mortgage over 5 years old, two car loans more than halfway through their life span, and five credit cards over five years old with balances under 20% of the high credit limit will take you to the summit!

Copyright © 2007 James W. Kemish. All Content. All Rights Reserved.