How to fix credit legally

Update: After I originally wrote this post, I got my hands on a few copies of a good credit repair book. Click here to get a copy while I can still give them out.

I should have titled this the “10 Commandments of Credit Repair”, because I wanted to list the most important things to remember when you begin to take action on fixing your credit. I should know; years ago, I had bad credit. I was late on all my bills, I had collectors calling the house day and night, and forget about getting a credit card or a loan. I had multiple charge-offs and delinquent accounts. But that’s not the case today.

 

How did I fix my credit? I started by educating myself, by buying a couple of books on credit – this was before the days of the internet – and I had to learn some hard lessons along the way. So, yes, your bad credit can be cleaned up, because I did it.

 

One of the things about why people have bad credit is that many people have no idea how their credit record is maintained, they just know “it’s probably bad”. Many of us have had the feeling of trying to rent an apartment and sweating the credit check. But it doesn’t have to be that way.

 

After I pored through the books, called the credit agencies, negotiated with the creditors – all on my own – I could write a book myself. But I’m not a financial professional, so I’ll leave that to people more qualified. But what I can offer is no-B.S. information about your credit, credit repair, credit scams and getting it all straightened out, because I didn’t just read about it – I did it. I’ve always been a person to get things done for myself, and that knowledge is power, so the more knowledge I have about my situation, the more I can control my destiny. And I also want to help others who could learn from my experience.

 

There are a lot of “options” out there to repair your credit. I’m going to be reviewing books and products and judging them on the truth that I know instead of the hype that’s promised. People who are looking to have their credit repaired are often the target of con men, scam artists and liars. So, before I get into some of the options, let me give you my 10 Commandments of Credit Repair. Now, these are not extensive explanations, so if you want a more extensive resource to educate yourself on credit, check out The Credit Secrets Bible.

 

1. Never pay anyone to fix your credit.

 

It seems like a perfect solution to so many people; you pay some credit expert a fee, and they will legally ‘erase’ bad credit, giving you a squeaky clean history. Don’t believe it. These people are con men, and will either simply take your money and run (if you are lucky) or get you in real legal trouble. Some scams (and that’s just what they are, scams) are highly illegal and could land you in jail.

 

2. You should review your credit report at least once a year, and it won’t cost you a cent.

 

Don’t go to sites that advertise a free credit report, because those sites will require you to enroll in an annual service in order to get your ‘free’ credit report. But you can get your credit report for free, once a year, from the three major credit reporting bureaus. You can also get your credit report for free if you have been turned down for credit in the last 30 days.

 

3. Legitimate items cannot legally be removed from your credit report.

 

If you stiffed a rental company on rent, and it shows up on your credit report, guess what? It’s going to be on there for a while, seven years from when it was reported. Late on a credit card payment? Stays on your credit report. You cannot remove items that you legitimately owe without getting to some sort of settlement with the creditor or a credit collection agency. Now, if you have some false information on your report – say, someone two states away rented a car in your name and you never had anything to do with it – then that can be removed. Usually, all it takes is requesting verification of an item. The first time I pulled my credit report, it said I owed money on a car I’d never owned, and I had it removed immediately.

 

4. Always get everything in writing

 

If and when you settle with a creditor or collection agency, and the agreement is for the bad credit item to be removed from your report, get it in writing BEFORE you pay a cent. Once you pay, unless you have it in writing, there is no leverage for the creditor to actually follow through with contacting the credit agency. Many times people will pay off debts thinking they will have cleaned up the item and it stays on their report anyway.

 

5. Don’t let collection agencies harass you.

 

Collection agencies cannot, by law, call and harass you over your debts. They will try, and you need to educate yourself about your rights.

 

6. Always remember the Golden Rule of Lending: People always want to lend money to people who don’t need it.

 

If your goal is to build good credit so you can borrow money, you need to change your priorities. If you were loaning out money, you’d always look for people who had enough

money to pay you back, or at least earned enough to easily make the payments on the loan. The banks and lenders out there today are no different, and the only way to become a prime candidate for a lender is to start learning how to live without resorting to credit. While some people never go into debt, others use debt very sparingly.

 

7. Understand the true cost of debt.

 

If people had to pay the full sticker price for a new car, the dealer lots would be full of cars that were less than $10,000. People don’t look at car prices realistically, the look at the car payment. They don’t think about the fact that they are paying $25,000 or $40,000 for a hunk of metal that they will trade in less than a decade later; they see a $400 car payment. But people who buy things on credit – cars, furniture, clothes – pay so much more for things that it helps keep them poor.

 

8. Time and discipline are your greatest allies.

 

There are two basic rules to great credit: Never buy anything you can’t afford and time will improve your rating. Do this month after month, year after year and that’s it.

 

9. Revolving debt can do more damage to your credit score than any other kind of debt.

 

Revolving debt is debt that doesn’t require you to pay off part of the principle in payments, just all or part of the interest. What happens is that revolving debt is debt that almost never gets paid off, and the more of your available credit you have that is taken up with revolving debt, the worse your rating. In fact, most of the time, paying down revolving debt is the top thing you can do to improve your FICO score. Your FICO score is a cumulative score generated by Fair Isaac and it’s pretty much what lenders use to determine your credit worthiness. You can get your FICO score at MyFico.com.

 

10. Cash is king, and if you can’t afford it today…

Whenever you see one of those ‘No Interest or Payments For Two Years’ type of deals, stop yourself. Most people see those deals and think “I should have plenty of money in TWO YEARS!” Remember that if you can’t afford it today, right now, it’s just as unlikely that you can afford it in two years. You have to fight the urge to spend money you don’t have!

 

As I said before, if you want a more extensive resource to educate yourself on credit, check out The Credit Secrets Bible.