5 steps to do-it-yourself credit repair

Here are 5 steps for improving your credit rating:

1. Order 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. Yes, 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.
Time and money is wasted, says Steve Rhode, president and co-founder of Myvesta.org, if you only order a report from one credit bureau. You can order a credit report from each bureau for free once a year through annualcreditreport.com.

If you've been denied credit, insurance or employment because of your credit report, you are entitled to a free copy of your report from the reporting agency. The company you applied to must supply the credit bureau's name, address and telephone number. You have 60 days after receiving the denial notice to request your copy.

2. Examine your reports carefully
Nearly every consumer has an error on at least one credit report from one of the major credit bureaus, says Rhode. Credit bureaus generate your report on information they receive from your creditors; they don't verify.

Keeping your credit report a true reflection of you is -- like it or not -- your job. Get ready to clean and polish. Carefully look for everything from typing errors, outdated and incomplete information to inaccurate account histories. You'll want to make a thorough list of items you dispute and why. Be meticulous.

Here's how to read and understand your credit report.

If the negative information in your report is true, only time and improved habits can change that. Late payments, such as credit cards, and charged-off accounts remain on your report for seven years; bankruptcies for 10. Most creditors, however, look for a pattern of payment rather than focusing on one-time or rare occurrences; so consistent on-time bill payments will improve those blemishes.
3. Double-D strategy -- dispute and document
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.

Sometimes it's necessary to contact your creditors to resolve mistakes. Bankrate's 7 steps to fixing your credit report will help you tackle the serious errors.

If the credit bureau makes any changes to your credit file, it 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.

4. Solve and dissolve debt
Now's the time to devise a spending plan that reduces your debt and sets you up to pay on time, every time.

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.

Check out Bankrate's 10 steps to paying off credit cards for more ideas.

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. Here's a step-by-step guide to smartly close out your 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.

5. Add stability to your credit file
You can also work to add positive information and show stability in your credit file.

You may have been denied credit because of an insufficient credit file, yet you have credit. Some creditors -- such as, travel, entertainment, gasoline card companies, local banks and credit unions -- may not report your credit history to the credit bureaus. You can try asking the credit grantors to report your account information and monthly payment history to a credit-reporting agency. Not all will do that. So, in the future, before opening a new account, ask if your on-time payments will be reported monthly to a credit-reporting agency, recommends Myvesta.org.

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," says Craig Watts, consumer affairs manager of the Fair Isaac Corp., "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.

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Identity Theft Protection

Compare Identity Theft Protection Services

Why Identity Theft Protection?
I. Identity theft is the fastest-growing financial crime in the U.S. and perhaps the fastest growing crime of any kind in the country.
II. In 2009, there were 11.1 million identity theft cases in the U.S., a $54 billion crime.
III. Opening new lines of credit is the most frequently occurring use for stolen identities.
Learn to Protect Your Identity Today.

Identity theft is skyrocketing in the United States; the FTC (Federal Trade Commission) reported that there were as many as 9 million American identity thefts each year, and this figure includes 400,000 children. Unfortunately, identity crime is still growing, and many identity theft cases aren't even realized for over 4 years, after the damage has been done.

How Do Identity Theft Protection Services Protect You?

Identity thieves are getting smarter. However, with constant monitoring of your credit and a proactive watch for suspicious activity, you can protect yourself from identity theft damages that can cost thousands of dollars and years to repair. Identity theft services work to monitor your credit and scan the Internet black markets for sales of your credit card information and other private documents. Different online theft protection services offer different levels of monitoring, so be sure to check out our reviews to see what each service has to offer.

What most identity theft companies do:

1. Fraud Alerts
2. Credit Card List, Offer List, and Junk Mail List Removal
3. Credit Reports and Monitoring
4. Database Monitoring
5. Guarantee in Restoring your Identity if Stolen
6. Identity Theft Insurance
7. Credit Card Monitoring
8. Lost Wallet Protection
9. Medical Identity Theft

What do identity protection services protect you from?

Identity thieves often try to open new accounts and take out loans under your name. This can severely hurt your credit, and this may result in loan rejections, and loss of employment. ID theft protection services help to prevent:

1. Unauthorized New Bank Accounts Opened Under Your Name
2. New Applications for Credit
3. Address Changes
4. Public Record Changes
5. Negative Marks On Your Credit

Which credit protection service should you choose?

We believe that each identity theft protection service has its own strengths and weaknesses. Some services offer features that others can’t. Some services offer better family plans, and some offer better individual plans. We’ve reviewed and compared each service for you on this website. We do make recommendations, however you still must check to make sure those features are what you are looking for.

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Bad Credit vs Good Credit

The Cost of Bad Credit

It’s common knowledge that bad credit scores are detrimental to obtaining loans. But if a loan can be obtained with bad credit, it won’t be issued at the same interest rate as to those with good credit records. For some, this may not be a cause for consideration. But it probably would be if it was understood just how costly bad credit can be. The problem for those with bad credit is that each lender sets down their requirements for issuing credit. Each lender will also make loans at different interest rates based on the exact credit score of the applicant. Therefore doing your research prior to applying for a loan may be quite enlightening.

In any case, however, good interest rates and bad credit scores are just not compatible with one another. If a credit applicant, for example, has a FICA score that is below 500, they will usually be turned down for standard vehicle loans. There are special loans that can be obtained. But these will possess relatively high interest rates and will have higher monthly payments attached to the loan. When all is said and done, the high risk loan recipient may actually end up paying thousands of dollars more than what the vehicle originally cost. In addition, there are other areas that require loans that will be affected as well.

High financing rates

Whether you are financing a car, a house or anything else requiring a loan, that loan works the same as any bank loan. The loan recipient agrees to pay off the loan in a specific amount of time through a specified monthly payment. But those who possess a bad credit score will usually be required to make a higher down payment. The interest rate will be much higher and, in many cases, some form of collateral will be needed to secure the loan in the first place. This not only makes obtaining the loan difficult and time consuming, but turns the loan payback into an expensive proposition.

Higher down payments

As mentioned earlier, a higher down payment will usually be required for those with bad credit scores. When a comparison is made to those with good credit scores, you may be looking at a 50% down payment for bad credit vs. 10 – 20% for good credit. That means for an auto loan of $15,000, for example, a person with good credit will put down approximately $1,500 to $2,000. A person with bad credit will need to come up with about $7,500. When you combine a high down payment with double digit interest rates, you can see how much extra is paid by the person with bad credit.

Bad vs. Good Credit Comparisons

To further illustrate the cost of lower credit scores, let’s take a look at an example involving two fictitious borrowers. One has an excellent credit score of 720, while the other borrower has a fair to poor FICO score of 650. In this example, each person is taking out a $20,000 (after down payment) loan that is set to be paid over 5 years (60 months).

FICO score of 720 pays 4% Interest Rate. Monthly payments are $368.33 for 60 months.

FICO score of 650 pays 18% Interest Rate. Monthly payments are $507.87 for 60 months.

The difference is $8672.40 in total payments! That’s a good amount of money. But it can get much worse. Let’s say that each individual is purchasing a house for $150,000.

FICO score of 720 pays 5% Annual Interest Rate. Monthly payments are $805.23

FICO score of 650 pays 10% Annual interest Rate. Monthly payments are $1,316.36

The difference is $184,006.90 in total payments! I’m sure you can see the short term effects of bad credit in these examples, but what about the long term effects?

Bad Credit’s Long Term Effects

In the above examples, it’s pretty easy to see how bad credit can affect someone when it comes to dollars and cents. But there’s more to the story than just higher monthly payments. If a person has to pay more, each month, out of their pocket then there is little left for other things. This may translate into a family vacation that can no longer be afforded due to a car purchase. Other family outings may also be out of the question. You see, bad credit doesn’t just affect a bank account or a wallet – it can affect a family’s quality of life. In some cases it will directly affect the amount that can be saved for a family emergency. Retirement savings are also at risk. This is the true cost of bad credit.

READ MORE - Bad Credit vs Good Credit

If You Need Help

Just because you have a poor credit report doesn’t mean you can’t get credit. Creditors set their own standards, and not all look at your credit history the same way. Some may look only at recent years to evaluate you for credit, and they may give you credit if your bill-paying history has improved. It may be worthwhile to contact creditors informally to discuss their credit standards.

If you’re not disciplined enough to create a workable budget and stick to it, to work out a repayment plan with your creditors, or to keep track of your mounting bills, you might consider contacting a credit counseling organization. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But remember that “nonprofit” status doesn’t guarantee free, affordable, or even legitimate services. In fact, some credit counseling organizations — even some that claim non-profit status — may charge high fees or hide their fees by pressuring consumers to make “voluntary” contributions that only cause more debt.

Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

If you are considering filing for bankruptcy, be aware that bankruptcy laws require that you get credit counseling from a government-approved organization within six months before you file for bankruptcy relief. You can find a state-by-state list of government-approved organizations at www.usdoj.gov/ust, the website of the U.S. Trustee Program. That’s the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Be wary of credit counseling organizations that say they are government-approved, but do not appear on the list of approved organizations.

Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and can help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions

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Basic Credit Repair Strategy

The basic strategy to repairing your credit is as follows:
Get and review your credit report.
Analyze your report.
Make a list of all items you consider to be questionable or negative. Clearly identify each item in your report you are disputing and explain why you are disputing this information.
Write a dispute letter to the credit bureaus.
Mail the letter to the credit bureaus. Make sure you send it registered or certified mail.
Document your efforts. Record when you sent your letters, and the results.
Wait for the bureaus to investigate your claims.
Analyze the results.
Repeat.
Specialized techniques. Was the item deleted or changed to your satisfaction? You may continue steps 1, 2 and 3 above until you feel the dispute is settled satisfactorily. Remember, there is no charge for a reinvestigation. If you don’t get the results you want, dispute the listing again.
Should I dispute personal information?
Use our free sample letters.
What if a removed a negative item and comes back on my credit report?
What if I get stuck and need help?
See Eduardo's results.
Feeling overwhelmed by this process and think you don't have the time? You do!That's all there is to it. Seems easy enough but you must have patience, because the credit bureaus are not always very cooperative. They make their money by providing credit reports to lenders not by fixing bad information in their databases.

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