Credit Repair: An Important First Step

It can happen to the best of us. Less than perfect credit happens for a variety of reasons: the loss of a job or extended illness, overzealous use of credit cards, divorce, or letting bills fall by the way-side.

Whatever the reason, there are steps you can take to restore your credit and give banks confidence about your credit worthiness. It’s hard work, but you can rebuild a tarnished credit rating.

Set a goal for you and your family. Explain why it is important to economize and why it takes the effort of the entire family to chip in. The end result of owning a home is well worth giving up a few meals out.

There are many reputable credit counselors out there with your best interest in mind, but do your homework. Organizations that offer “easy” debt consolidation or offer to repair your credit for a fee need to be carefully researched. Unfortunately, these companies don't have any special tricks and the truth of the matter is improving your credit score is not easy. If you feel that you cannot tackle this on your own, look for help from someone like the National Federation for Credit Counseling for help. They are a large network of non-profit organizations with certified counselors trained to get you back on the right track.

Here are some ways to get started:

Lock your cards away: Don’t close the account, at least not yet. If you have damaged your credit, you might have trouble getting new credit cards. Just stop using them. Your first goal is to repair your credit rating and get out of debt.

Figure out where you stand: No one likes to focus on budgets and money in– money out, but it is especially important to know and change your habits if your income is less than your debt. Coming to terms with your situation is a first step in making a plan.

Devise the plan: If you are going to clear up your credit rating, start paying your bills on time. This means making your minimum payments on time every time, especially if you have been late in the past.

Negotiate with your creditors: Many creditors will negotiate terms will you if you are having trouble paying bills. Good candidates are gasoline companies, utility companies, hospitals and doctors. Write a letter to these creditors describing your problem, apologizing for the late payments and requesting a reduced payment schedule. Make sure that it is an amount you can afford and then try hard to stick to the revised plan. They have made a good faith arrangement with you to pay them back and may only be willing to negotiate once. Most creditors are willing to do this to ensure that they get repaid and they appreciate customers being up-front about their situation. Most would prefer to handle it in-house rather than having to use a collection agency.

Make sure you document any conversation you have with the lenders and ask for the new agreement in writing or at least get the names of the individuals you spoke with.

If accounts have been turned over to a collection agency, you will most likely have to negotiate with the agency since the lender has passed it on to them. The rules are the same when negotiating payment; be polite and accommodating but don’t offer any more information than you need. If possible don’t give out work addresses or phone numbers since collection agencies can be relentless in their pursuit and may ultimately harm your working environment if you are getting too many phone calls. Again, get new agreements in writing and document all conversations you have with names of contacts and dates.

Make sure your credit report is accurate: Make sure that all good credit is reported. Creditors are not required to report information to a credit bureau, but you can ask. You are also entitled to add information such as explanations to your report. Ask that older derogatory information be removed. After seven to ten years, most items, even a bankruptcy, can be removed.

Know your FICO score? Remember, Plattsburgh Housing Outlet offers a FREE copy of your credit report, along with basic credit repair advice, with no obligation.

Wells Fargo Home Mortgage also offers a free credit counseling service, the Wells Fargo HomeBuyers Club.® They help resolve credit issues through a self-help program, assist with budgeting and education. Call Joe and Mary Magnano, our local construction specialists, at 866-993-2746 for more information on the program.

Go online to www.automaticmillionairecredit.com, and listen to an audio format of “How to fix your credit score- and improve it in 60 days or less.

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