If you have had the misfortune to be in a position where you credit rating has had to be impaired, where you have in effect become a bad credit risk for lenders you have two main options. You can repair your bad credit rating or you can look to bad credit lenders in order to raise any funds necessary, or possibly circumstance may mean that you have to undertake both.
Bad Credit Repair
Repairing bad credit can seem like a daunting task, but it doesn’t have to be. With six simple steps, you can build a better credit score.
The first step in repairing bad credit is ordering your credit report. According to the Fair Credit Reporting Act, you’re entitled to one free report a year from each of the three consumer reporting companies. Since the companies (Equifax, Experian, and TransUnion) can provide different information, you should request a report from all three. Making the request is easy. Simply call the toll-free number (1-877-322-8228), visit the annualcreditreport.com website, or complete the Annual Credit Report Request Form and mail it in.
The second step in repairing your bad credit score is analyzing your credit reports. Make a list with three categories: past-due accounts, incorrect information, and maxed-out credit. Put each item that needs repair into the proper category.
Step three is tackling past-due accounts. Get current on bills that you’ve fallen behind on, and pay off debts that have gone to collection. Debt collectors will work with you to arrange payments and are often willing to remove bad credit reports once you’ve cleared your debt.
The fourth step is correcting false and out-of-date information. By law, you have the right to dispute any incorrect information on your credit report.
To dispute mistakes, contact the consumer reporting company. In writing, detail the information that you believe is false. State the reason you’re disputing the bad credit report, and be sure to include copies of any documentation that supports your claim. It is also helpful to include a copy of your report with the items you’re disputing highlighted. Be sure to keep a copy of your letter. You may also want to send it by certified mail so that you can document its receipt.
The Federal Trade Commission suggests that you also inform the creditor when you dispute an item. The creditor must include a notice of your dispute if it reports that item to a consumer reporting company. If the disputed item is found to be inaccurate, the creditor will be unable to report it in the future.
Consumer reporting companies must, by law, investigate any dispute within 30 days unless the dispute is deemed frivolous. They’ll send the results of their investigation to you in writing, along with a copy of your credit report should an item be removed or changed.
Once you have cleared up any false or inaccurate information, it’s time to clear your report of information that is out-of-date. Under the Fair Credit Reporting Act, consumer reporting agencies cannot include negative information beyond a certain time limit. While this is often seven or ten years, the time can vary depending on the type of debt and the state in which you live. It’s important to verify that the disputed item is outdated. Check your state and local laws to be sure.
The fifth step is to pay off maxed-out credit. If you have credit cards that are at or over their limits, pay a little extra on them each month. Once you’ve gotten them beneath their limits, continue paying a little each month until you’ve paid them off completely.
The sixth and final step is building new credit. Apply for a secured credit card. A secured card is guaranteed by your savings account or a deposit, so you don’t have to worry about your application being denied. By using one responsibly, you will build a new, positive credit history.
You can get bad credit help from many sources, some of whom you will have to pay, some who will provide you with advice and guidance free, but in essence the above six steps are the same whomsoever you are and in whatever bad credit circumstances you find yourself. Work through you credit issues as documented and you should experience some real benefit.
Bad Credit Loans
There are any number of bad credit lenders in the marketplace all of whom are looking for your business. However, the nature of bad credit lending is that it is expensive, can be short term and will in almost all cases require substantial security to be provided by yourself, especially in the case of very bad credit loans.
The best advice would be to shop around, make sure that you fully understand the terms on which the lending is provided, make sure that you pledge as security only something that you can afford to be without if you get into further credit trouble, and generally make sure that you do not commit to borrowing if you are not sure that you can afford to keep up the repayments on the debt.
Remember, if you find yourself talking to bad credit lenders who appear to be of the less reputable variety then you should reconsider whether or not borrowing the money is a sensible move in the first place. If they are the only organizations who will lend you money you are probably in a position where the best advice would be to seek proper debt management advice. Don’t get yourself into even worse trouble. Seek help.