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Credit Repair

Order your credit reports

Picture of a credit repairOrder your credit reports

Find out what the top three credit bureaus -- Equifax, TransUnion and Experian -- are saying about you. It's likely that they're all slightly different. Creditors don't have to report to all three credit bureaus, so they typically report to the credit bureau to which they also subscribe.

Remember, a bad report costs you money. So, it pays to be thorough! You can either complete the dispute form provided with your credit report or write a letter. Clearly identify each mistake and state why it's wrong. A recommendation is to send a photocopy of your credit report with the mistakes circled to the reporting credit bureau. Include copies of supporting documents.

Document, document, document. Keep copies and records of all the forms, letters and documentation that you send the credit bureaus, plus dates sent. The credit bureau must investigate any relevant dispute within 30 days of receiving your letter. Any item that is not verified as accurate by a creditor is removed.

If the credit bureau makes any changes to your credit file, they will send you the results and a free, updated copy of your credit report. Once a negative item is removed from your report, the credit bureau cannot put it back on unless a creditor verifies its accuracy and completeness -- and sends you written notice.

Solve and dissolve debt

If you're having difficulty making payments, be proactive. Call your creditors and negotiate to keep your accounts current and from being reported as delinquent or "bad debt". You can ask for reduced monthly payments, or even change due dates to balance out your monthly bills.

The same strategy can be used for fixed-loan payments. Remember, though, that this is a short-term strategy. You'll pay more interest to extend the repayment schedule, but it allows you to stay current and save your credit rating. Use the extra money to pay off debts one at a time, gradually increasing payments to other debts.

Deal with any collection accounts. Unpaid collections are worse than paid collections. You can negotiate a pay-off settlement that reduces your bill, plus demand that all derogatory remarks are removed from your credit report or at least reported as paid in full. Be sure to get verbal agreements in writing before sending off your payment.

Slowly close out unneeded or unused credit accounts. Most experts recommend carrying between two and four credit cards. But, be cautious when canceling because closing accounts can negatively impact your credit score, commonly called a FICO score. FICO considers the ratio of total debts to total available credit. A good rule of thumb is to keep your revolving debt to 50 percent of your available credit.

Remember that cutting up the card doesn't close out the account.

Other tips:
  • Close out your newest accounts so that you don't lose your longer credit history.
  • Close out accounts slowly over several months.
  • Verify that all accounts you've closed are reported as "closed by consumer" for the best report.
  • Even if creditors offer to raise credit limits, allow yourself only moderate credit limits.
  • Keep your balances low and avoid revolving balances.

Add stability to your credit file

You can also work to add positive information and show stability in your credit file. If you have really bad credit -- perhaps even filed bankruptcy -- don't let your credit status go dormant. The faster you begin to re-establish good credit, where you pay on time, every time, the faster you'll improve your credit score.

Build a solid credit history. Secured credit cards offer people with no credit and those repairing their credit this opportunity. Shop around for the best deal available, but limit your applications. Credit bureaus look at how many new accounts you've opened, and the number of "inquiries" for new accounts that are listed. A sudden flurry of "inquiries" results in a lower score, because many times consumers anticipating money problems increase their credit lines. Inquiries made by creditors wanting to make "prescreened" credit offers are not counted.

Lastly, open a savings account at your bank. This shows creditors that you are working to save and that you have reserves to repay debts.

Useful Numbers and Addresses

Federal Trade Commission consumer response center (877) 382-4357
Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
(800) 685-1111
Experian (formerly TRW)
P.O. Box 2104
Allen, TX 75013-0949
(888) 397-3742
Trans Union Corp.
760 W. Sproul Rd.
Springfield, PA 19064-0390
(800) 888-4213