How to Repair Your Credit

Most people know what good credit means, and they know that having bad credit makes them ineligible for anything but the highest interest rates and worst terms. But bad credit affects other aspects of your life. Here are some important ones:

Ability to rent an apartment or house:
Most landlords are deeply concerned that potential tenants must show evidence of responsible behavior. People with bad credit may find that, even if they can afford to live in nice apartments, they cannot find landlords who will rent to them except in questionable neighborhoods.

Insurance:
Insurance companies may also request a credit report. A poor credit history is an indication to them of possible future losses. That could result in higher premiums, or just being turned down altogether by reputable insurers.

Prospective employers:
If a job involves cash handling, or responsibility for cash or other assets, there's a good chance a prospective employer will obtain credit reports on all applicants. This is perfectly legal, according to the Fair Credit Reporting Act, although, if bad credit plays even a small part in the decision not to hire someone, the employer is obliged to notify the applicant of that fact.

If this sounds like your situation, it should be clear that you need to do some damage control to get your credit back on track. But beware of those who offer to help.

What about companies that claim to repair credit? If somebody offers to "erase your bad debt" or "create a new credit identity" for you, run, don't walk away. The Federal Trade Commission (FTC) says that credit repair is one of the top four fraud scams in the United States, with over two million reported victims. Generally these credit repair scams charge you $300-400, and at best, they can only temporarily improve your credit. If you've been a victim of a credit repair scam, you can and should report it to the office of your state attorney general (AG). Many AG offices have toll-free hotlines. You can also register a complaint with the FTC by calling toll-free, 1-877-FTCHELP.

Credit repair is a do-it-yourself project. Nobody can legally remove accurate negative information from your credit history. But with diligence, you can work towards improving the picture. Be patient, it could take 8-12 months. If you have been turned down for credit, insurance, or employment within the last 60 days, you are entitled to a free copy of your credit report. If those denials were based on a report from a credit bureau, the company you applied to is obligated to give you contact information for that credit bureau.

If you find mistakes or outdated items on your credit bureau, dispute them in writing, along with supporting documentation.
Request a reinvestigation. If mistakes were found, ask that a corrected credit report be sent to anyone who received your report in the last six months. For employment, the corrected report should be sent to all employers who viewed it in the last two years.

You can also contact creditors directly in writing and ask them to review the negative mark on your credit.

If your credit problems are not simple errors and spending is still a problem, seek free financial counseling through the local college or consumer-counseling program.

Don't be tempted by offers of new credit that fill your mailbox. You may be flattered, but remember, anybody can get credit for a high enough price. New credit offers may seem like an answer, but the truth is, they are equivalent to poking new holes in an already sinking boat. If you're smart, you'll deposit those offers where they will do the most good… in the paper shredder.
There is no quick-fix for bad credit. But it doesn't last forever. With time and common sense you'll soon be on solid financial ground again.