Credit Repair - Understanding The Basics

What is Credit?

Credit means that you are using someone else's money topay for things. It also means that you are making a promiseto repay the money to the person or company that loaned youthe money.

Whenever a person applies for a loan, mortgage, a creditcard or for any other purpose for which he needs to borrowfunds from a lending agency, the agency will check thefinancial credit-worthiness of the person and based uponits assessment of the financial risk involved in the deal,the agency will decide upon the terms and conditions ofgranting credit. A positive assessment necessitates a soundfinancial background and a credit history with no badremarks.

What is Credit Repair?

'Credit repair' is a process in which consumers withunfavorable credit histories attempt to re-establish theircredit-worthiness. The process usually involves procuring acredit report from the rating agencies and then takingappropriate steps to address any apparent issues such aserrors, omissions, misinformation, misreporting ormisinterpretation. A consumer can then formally disputethose errors or issues which unjustly distort their financialhealthiness and credit-worthiness. Various laws andregulations designed to ensure legal and fair undertakingof the credit repair process can then be utilized toformally and legally start the credit repair process.

Consumers are entitled to a copy of their credit reportlegally, if they have been denied a credit card or loan andif the information provided on the report is inaccurate, aninvestigation relating to true facts is necessary for acredit repair.

Why Repair Credit?

A consumer's credit record significantly influences hisfuture purchasing power and his eligibility of availing anycredit facilities in the future. A good rating, or score,can insure a low interest rate and loans for longer termfor various purposes like credit card balances, car or homeloans. A poor rating makes a consumer vulnerable to financecompanies charging exorbitant interest rates and imposingvarious unnecessary repayment and loan terms. Consideringthe stakes and the consequences involved, it is absolutelyimperative for consumers to understand the importance ofrepairing their bad or low credit ratings.

The Safe and Legitimate Way to Repair Credit

Credit repair can only be achieved through financialdiscipline and hard work. Any easy way out of a poor credithistory is undoubtedly tempting, but it may lead to furtherfinancial difficulties in the future.

If a poor credit history is due to circumstances beyond aconsumer's control, and they are able to somewhat make amendsto their credit records after that time, then a creditor canbe requested to upgrade credit rating because of a sense ofcustomer loyalty.

Most creditors don't trust the customers defaulting ontheir debts, so it may be very difficult to obtain newcredit. But once a person is able to demonstrate continuingincome stability and prompt payment patterns, his situationcan improve in a period of two to three years. This way,even in the case of bankruptcy, a consumer is likely to beoffered charge and credit cards within a year or two ifmaintaining a steady income.

What is most important is evaluating the financialsituation. If one finds that they are unable to make at leastthe minimum payment on outstanding accounts, a contactshould be made with the creditors. Many creditors willappreciate the willingness to pay and are most likely tohelp set up plans for repayment. Avoid making promiseswhich cannot be kept as a small payment is preferable to alarge payment that never arrives. Sometimes a small contactcan be enough to reduce payments and forestall more severemeasures.

The next step is consulting a credit counseling agency.These organizations are staffed with trained individualsexperienced in the credit field. A distinction needs to bemade between these and the commercial "credit repair"companies who claim that, for a fee, they will undertakecredit repair.

No one can legally remove accurate and timely negativeinformation from a credit report. But the law does allowone to request a reinvestigation of information in their filethat may be inaccurate or incomplete. There is no chargefor this. Everything a credit repair clinic will do can bedone by a consumer themselves at little or no cost.

The most important factor in credit repair is recognizingthe legitimate and viable options available, recognizingwhat the scams are, and differentiating between the two. Apoor credit history can make it difficult to obtainadditional lines of credit making consumers fall prey tomany unethical programs that target consumers with less-than-perfect credit. There are no quick fixes in creditrepair. Common sense tells you that a third party doesn'tknow your credit history better than you. Throughcontacting credit bureaus, making your own corrections,consolidating your debts and budgeting, you can improveyour own score. You don't need to pay someone to fix it foryou. It's better to apply that money towards dischargingyour debt.

Summary

Understanding the basics of credit repair and knowing what exactly is needed in order to rebuild your credit history goes a long way to getting it resolved. However, you must be disciplined, find the right credit repair solution for you and not be tempted to fall back into debt.

Claire Bowes is a successful freelance writer and owner of http://www.uk-secured-loans-centre.co.uk where you will find further advice and information on all aspects of secured loans for debt consolidation, car loans and home improvement loans.

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Debt Relief Information:

Related Articles


The Road to Debt Relief
Living with debt is not something someone hopes for, but it happens and it usually becomes far more severe than it should before something is done to eliminate it. Once many individuals realize they have a problem with debt, they are too embarrassed to ask for help so they let themselves dive further into debt.
Debt Consolidation and Personal Finances: Learn the Truth!
An inability to manage credit, growing debt and bankruptcy are all major problems today. On an average day, over 8,000 people file bankruptcy in the United States alone.
Credit Counseling - Signs That You May Need Help
Credit counseling is a viable option for those who are feeling the stress of being overwhelmed by debt. Credit counseling primarily offers assistance with working out a credit and debt repayment plan for an individual to gain control of their finances by creating a structured budget for an individual to follow.
5 Ways to Get Out of Debt
It has been said that everyday more and more people in the world are getting into unsecured debt. Once reason for this is the relative ease in which credit card companies and banks are extending credit to their customers.
The Human Side - Debt Stress
In all the technical discussion you hear about credit card debt, the best ways to manage it and pay it off and all the rest, one thing goes largely ignored. Credit card debt is extremely stressful, and can have a very negative effect on your life, if you let it.
Debt Problems? You Can Negotiate With Your Creditors
It is always possible to negotiate with creditors - even if they have already taken you to court to get a judgment or to garnish your wages.Getting a creditor to reduce your monthly payment helps and does provide short-term relief.
Taking The Plunge Into Bankruptcy
Bankruptcy is one of the most difficult things a person has to do. The decision to file bankruptcy is a hard one.
Debt Reduction, a Necessary Endeavour
Massive debt is something many Americans face. Debt reduction is now becoming more and more of a necessity.
New Bankruptcy Law - Targeting the Wrong People?
Last April, President Bush enthusiastically signed into law the oddly-named Bankruptcy Abuse and Consumer Protection Act. This bill, representing the biggest overhaul of bankruptcy law in twenty-five years, was written in order to discourage "bankruptcy of convenience.
Dont Drown Your Debts, Manage Them!
Are you among the millions of people who have found themselves unable to make even the minimum payments on credit cards and other unsecured debts? If so, there is relief in sight. It is no longer necessary to keep paying constantly but never really make any progress towards reducing or eliminating your debts.
Five Hot Tips To Get Out Of Debt Forever
The financial and psychological burden of being in debt causes us and our families continuous emotional stress. That stress eats away at the quality of our lives and leaves us feeling powerless, angry, depressed and helpless.
4 Simple Ways to Solve Your Debt Burden
Getting BehindGetting behind on your debts owed can be a very frustrating and trying time for you and your family. Depending on how far behind you are, there are other repercussions, such as your credit rating, that will affect you further down the road.
Learn The 15 Debt Elimination Steps You Must Take Immediately!
What Everybody Needs To Know..
The Credit Card Debt Termination Scam
"Legally terminate credit card debt! You can be debt-free in 4-6 months!" Advertisements like this are for a new type of program that has spread via the Internet over the past few years. It's called "Credit Card Debt Termination," and victims are paying $1,000s for this bogus service.
How To Pay Credit Card Debt Off
If you are determined to pay credit card debt off you are making the best financial decision of your life. The reason credit card debt is so bad is because it carries such a high interest rate.
Solutions to Single Mothers in Debt
As a single mother, lets admit it, times get tough. You are fortunate enough to have your children that mean the world to you, but it doesn't come cheap.
The 5 Secrets to Getting Out of Debt Fast
As they stare down at a teetering pile of bills, so many consumers wonder how they racked up such a large debt. The answer boils down to simple mathematics.
Should You Join a CCCS - Consumer Credit Counseling Service for Debt Relief and Financial Freedom?
Do You Need to Join a CCCS - Consumer Credit Counseling Service?Are you in a "debt hell"? If you are unsure, ask yourself these questions:Do you have bill collectors calling you and home and at work, leaving annoying messages?Are you afraid to open the door in the morning because you are afraid that the Sheriff's office has left a court goody for you?When the phone rings, do you get butterflies in your stomach?If you answer the phone and it's a bill collector, when they ask for you, do you reply "He/She's not in right now", or even just pick up the phone and then hang it up without saying who is on the other end?Do you go for days on end without checking the mail because there are only bills there?When you finally do get the mail, do you just throw it in some random location for weeks or even months without ever opening it?Are you paying one credit card company's bill with another credit card?Are your credit cards riddled with over the credit limit and late fees?Do you only receive high interest credit card offers?Have you applied for credit cards or car loans and been told that you had been denied because of bad credit?Does your credit report show a lot of late payments, charge-offs, bad debt, 30 60 90 or 120 days late entries listed?Does filing bankruptcy seem like your only way out?If you related to at least two of those items, chances are you would benefit from a consumer credit counseling service.Believe me, I know what you are going through.
Credit Card Debt: How to Get Rid of It
This method is simple, but requires some discipline.First, you have to stop any new spending on your cards.
How to Protect Yourself: Debt Collections
So you are getting collection calls? You're desk is full of unpaid bills. You dread answering the phone.