Before taking any action on how you will tackle your bad credit problem, it is a good thing to consider the various options available to you.

Your situation is unique. Credit repair does not work for all. Sorry, but this is just the truth. Whoever tells you otherwise would be lying. Here are some options to consider:

1. Do nothing: Yes, this could be the best option for someone deeply in debt, who has an already strained budget, and just does not want to take the bankruptcy route. I did this for years, and though collectors were driving me nuts, I had to just brave it out until my situation improved. I actually had to stop picking up phone calls from unfamiliar numbers, which caused me to also lose some opportunities that might have helped.

Caveat: This option is for someone who is “judgment proof”. This is someone who is a liability even to sue as the chance of collecting is next to zero.

2. Find ways to earn extra cash. Yes, there are ways to earn some extra cash for those who look around and are not scared to do some work, or don’t consider some things as beneath them. For instance, women who have a room to spare in their homes can run a child daycare. Or they can take in overnight, children of parents who have to work at night. If you’re good with computers you can teach, for a fee, non-computer-literate people learn how to use a computer, or offer computer maintenance services. The possibilities are endless.

3. Sell an asset: My sister had to sell off her beloved shiny almost new SUV and buy a used Sedan. She almost cried (I think she did in private), but the option was best for her under the circumstances. Today, she is glad she did. If she had not, she would still be deeply in debt, and with an old SUV. Weigh your options. Selling off your home may be hard to take, but it is better than to get cash back (if you’re lucky) from foreclosure.

4. Home Equity: For older home owners, you can use your home equity to pay off some (or all) of your most crippling debts. Again, weigh your options carefully as you don’t want to lose your home (and perhaps still be in debt).

5. Debt Consolidation: A professional debt consolidator could help you by negotiating with your creditors on your behalf, for more comfortable. A good debt consolidator will also help you come up with a budget that allows a bearable or comfortable lifestyle.

Note: Debt consolidation is considered more or less like bankruptcy by some creditors. The difference is that it does not wreak havoc on your credit for ten years. Also, you will be required to close your revolving accounts – which will hurt your credit initially – as well as make a pledge not to establish new lines of credit until your debts are paid off.

Warning: Some debt consolidation companies are scam.

6. Negotiate: You can negotiate with your creditors and/or debt collectors for lower monthly payments or a lower lump sum. Some creditors will be happy to be receiving something than nothing at all. This is perhaps the best option as you can also negotiate non-reporting or removal of adverse information as part of the bargain. Note that lower monthly payments might not be indefinite. Most creditors, especially of open/active accounts, will insist on a specific time span, after which the payments will return to normal.

Also be aware that if any part of your debt is written off, it may be considered income and therefore taxable.

This option is best for those whose credit situation is not already in the intensive care unit, so to speak.

7. Chapter 7 Bankruptcy: Filing for bankruptcy is an option, however a hard one to take. A chapter 7 bankruptcy allows you to wipe out your debt and start over. It is also the most devastating to your credit file. This requires you to give up most your assets.

Since October 2005, it is much more difficult (almost impossible) to file for a Chapter 7 Bankruptcy as congress passed what I consider draconian and anti-consumer laws, in the name of The Bankruptcy Abuse Prevention Act. More on this in a future post.

8. Chapter 13 Bankruptcy: This is also referred to as the wage-earners bankruptcy. It allows you to pay back what you can over time (usually 3 to 5 years), while you get to keep most or your assets.

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Fact: Credit bureaus don’t give a damn about you. Surprised? Well, let me explain.

Credit bureaus are businesses. They are in business to make money. They care for their clients, who pay fees that keep them bureaus in business. And you are not one of those clients.

Credit reporting agencies (another term for the darned bureaus), make the bulk of their money by collecting your information (name, address etc.), and selling it to lenders and other interest parties.

You, the consumer, are somewhere at the bottom of their interests (if anywhere at all). When they deal with you, they lose money. Every time you ask for a free credit report, every time you dispute an entry on your report, they lose money by having to pay someone to look into your file (or to pull it out for that matter).

If you attempt to get a credit report online, you’ll be coerced into accepting an arbitration agreement that is – you guessed it – totally against you. I say “coerced” because it is a do or else thing. That is, accept or you don’t get your report.

Among the items you’re supposed to agree upon is that (1) that any disputes shall be settled by an arbitrator (so you can’t sue their bums in court) (2) that you will avail yourself to a hearing venue to be decided by the arbitrator (if you live in North Dakota you may be required to travel to Florida and (3) that their liability is limited to cost of the report (so you could end up getting 15 bucks for your troubles).

In my opinion, arbitration clauses should be outlawed, or at least the consumer should be protected from abuse of such clauses by corporates. After all, bankruptcy abuse laws were introduced, ostensibly, to curtail abuse by consumers. Maybe we too should get “arbitration clauses abuse” laws or something like that.

By the way, I think bankruptcy laws as they stand are anti-consumer, but that’s a post for another day.

At the time of writing this post, if you tried to find out the cost of purchasing your credit report at the bureau websites you wouldn’t be able to find it. How convenient.
 
You see, the reason, I suppose, is that they want you to get your free annual report, as it gives them an extra 15 days to investigate a dispute if you get a free report, as opposed to 30 days if you purchase one. And, once you get that free report, you have to wait a full year to get another.

Side note: Experian and TransUnion do have 3 Bureau reports that you can purchase online, but you’ll be subjected to their one-sided agreement. Experian provides a form that you can use to fax in your request, but this too has a clause that binds you to “additional terms and conditions provided in the service materials that I will receive, including limitations on Equifax’s liability” (partial quote).

All the three bureaus redirect you to annualcreditreport.com website to obtain your free annual report. Once there you will, of course, be required to accept the arbitration agreement as well as other conditions.

The credit bureaus have also been known to change addresses frequently. It is believed that this is in an effort to throw consumers off, so as not to have to deal with too many disputes.

The credit bureaus don’t want you to know your rights. Try looking for thorn-on-their-side words such as “verification” “statute of limitations” and “validation” and you will come up with very scanty information if any.

An educated consumer is what the bureaus really love to hate. And you, my friend, are about to become just that. Keep reading this blog.

You’ve seen the ads on TV, print media, and online. They make fantastic promises, such as wipe out your debt and make your credit report as clean as a bleached bone. How true (or realistic) are they?

Well, just read the following news story that was featured recenttly on NBC10 news:

PHILADELPHIA — A local woman said a Philadelphia company promised to resurrect her bad credit, but instead left her buried in even more debt.

So, the NBC 10 Investigators contacted the company that promises a line of credit to anyone, no matter what their circumstances may be.

“But how do you approve a dead man?” asked NBC 10 investigative reporter Harry Hairston.

Read full story

Avoid credit repair scams! Most experts agree that the best repair is self repair. Discover tricks and strategies: Get a free self credit repair special report now.

The first step in beginning to repair your credit is to accept that you do have a problem. You taken that step or you’d not be reading this.

The second step is to get a copy of your credit report from each of the three major reporting bureaus. You obviously need recent copies as new entries must have been entered since you last checked (if you did).

No creditor or lender – apart from mortgage companies – will give you a copy or your report. Most won’t even let you see it. And even if they did, it would most probably be from one bureau not all three.

Needless to say, you will have to obtain the reports yourself. This is where people make two critical mistakes.

The first mistake is people make is to get a free credit report. You see, bureaus have managed to get included in the laws a technicality that increases the time requirement for reinvestigation from 30 days to 45 days when you get a free report. This is to your disadvantage, as the shorter the time the better.

If you have already obtained a free report, you should get a paid one.

The second mistake is to obtain credit reports online from either annualcreditreport.com, freecreditreport.com or the bureaus. Firstly, if you do this you’ll be required accept an arbitration agreement, which reduces the bureau’s liability to the cost of the report.

Secondly, you’ll also have to accept that arbitration can take place at any city/geographical area decided by the arbitrator. This means that you could be living in Maine and be required to attend an arbitration hearing in California!

In summary: Avoid free credit reports and avoid obtaining them online unless it’s extremely urgent.

Credit repair, remove negative items fast… you’ve probably heard it all. But can it be done? Can anyone remove negative items from your credit report? Well, read on to find out.

First consider this. There are three major credit reporting agencies in the US. This makes the removal process three times as hard. Removing bad (referred to as adverse) information from one bureaus files means you might still have two to go. I use the word “might” here because some creditors do not report to all the three bureaus.

Secondly, even if you somehow succeeded in removing negative items from one credit bureau’s report, creditors can still re-report them and you’re back to square one.

And just how can they remove the bad items? Of course, breaking into the bureaus computers is illegal and I have a hunch that it is a felony that could send you to prison for a very long time.

To cut a long story short, no one can remove negative information from your credit file. But don’t give up, it can be done.

You can fix bad credit, but it doesn’t take a day. And it’s not a walk in the park either. It takes time and effort. You see, while no one can actually remove bad credit information from your file, there are tips and tricks that you can use and have it removed.

You see, there are two parties (or three if count collectors), that can legally remove (or add) information from your credit file; creditors (also known as furnishers) and the bureaus themselves. By using the Fair Credit Reporting Act (FCRA) to your favor, you can actually clean your file of bad or adverse information.

The same tricks that credit repair clinics charge you hefty (and sometimes recurring) fees for, you can apply yourself with equal or better results. Why pay when you can do it yourself?

Indeed, most credit experts agree that the best repair is self credit repair. And it costs you nothing but your own time and effort.

One trick that credit repair clinic will try to sell you on is a debt settlement plan. This is a completely unethical approach to debt repayment. It involves letting your debt get so old that the creditor and/or collector often lose hope of ever getting paid, therefore willing to accept a fraction of the original debt.

There are several drawbacks to this. One is that it can cause serious damage to your credit for years to come. Though the clinic will promise to negotiate for removal of the bad information, this is not a guarantee. And you will suffer from having bad credit meanwhile.

Secondly, this technique could potentially cause tax problems for you, as the amount of debt forgiven is automatically considered taxable income. And those guys at IRS just don’t go away.

To repeat, the best credit repair is self credit repair. There are ways to negotiate with your creditors and collectors to remove negative items from your file, as well as many other tips and tricks which unfortunately are beyond the scope of this article. Keep watching this blog.

Discover tips and tricks to repair your credit and remove negative items fast. Check out: Credit Repair Bible

Though a little humbling, accepting that you have a bad credit problem is the most important step towards beginning repair work. Yes, it is work.

The next step is seeking help. This is where most people go wrong, often making a bad situation worse.

You see, due to the desperate nature of having bad credit, most people often fall for scam credit repair clinics and services. Such services will charge exorbitant fees – off people who are already in financial trouble – and then fail to deliver on their often grandiose promises.

Let me tell you right off, no one can make your credit problems disappear. No one can delete your credit files off credit reporting bureau files. And if you know such a person, I want his address ;-).

There are ways to very quickly – almost immediately – raise your credit score. But how fast depends on your individual situation. There is no “one size fits all”.

The first and most obvious thing is to start paying your bills on time. This will not only help your score down the road, but also avoid negating your very efforts of restoring your credit. Also, a big chunk of your credit score (35 percent) is based on this one aspect. That is huge.

Next, you need a basic understanding of the credit scoring system. Don’t worry, it’s not rocket science. You can use this knowledge to almost manipulate some of the algorithms to your advantage. How?

You see, another big chunk of your score (30 percent) is based on your debt to limit ratio. You can raise your credit score very fast simply by reducing your debt to about 30 percent of limit: that means $300 if your limit is $1000. If you are maxed out on your credit card(s), which almost always the case for people with a bad credit problem, this could give your score a much-needed jump.

You can lower your debt to limit ratio in several ways:

1. Pay down your debt(s). Stop charging your credit cards until you reach 30 percent of limit, and try to maintain that as much as possible. Depending on your financial situation, this could take some time.

2. If you still a somewhat good relationship with your bank, ask them to raise your limit. Note that they will run your credit, which will cause a slight ding due to the enquiry. Not the best option if you suspect they will decline.

3. Do some juggling. If you have several credit cards, transfer funds from one (or more) that has high debt to limit ratio to one with lowest, but try not to go over 30 percent on the one being transferred to.

The above information is but a tip of the iceberg as far as resolving your bad credit problem is concerned. The full process is beyond the scope of one article, that’s why you should get a good credit repair kit, which shows you how to take bad information off your credit report.

Ps: Since you’ve read this far, I have a free gift for you. The Credit Secrets Mini-Book is only reserved for my newsletter subscriber, but it’s yours free right now for being a guest at my blog. Simply right-click on the link below and select “save as”, ”save target as” or “save link as”.

The Credit Secrets Mini-Book

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