Don't Let Bad Credit Kill Your American Dream!
Finding out that you have bad credit is never a fun thing, especially when your trying to buy a home. Too many potential home buyers simply give up on their dreams of owning a home when they find out that they have bad credit or no credit at all. This is disappointing because in most cases, fixing the bad credit is a short term process that can pay a lifetime dividend in return.
Having bad credit can cost you thousands of extra dollars per year if it goes unfixed due to the fact that several of the services you use every day are tied directly to your credit score. These services include insurance, cell phone service, utilities, and also the rate at which you can finance automobiles, homes, and other products. So, ignoring bad credit could end up costing you a lot more than it would cost to fix your bad credit in a very short period of time.
Obtaining a Copy of Your Credit Report
In order to turn bad credit into good credit we need to know where our starting point is. In order to determine that starting point we will need a copy of your credit report. Fortunately, you can get a free copy of your credit report every year from a website called http://www.annualcreditreport.com. You can click on that link or the button below in order to get started on requesting your free credit report.
We don't care about credit scores or credit monitoring at this point so don't pay for anything extra and decline all the extra offers. All we want is your credit report from each of the three credit bureaus; Equifax, TransUnion, and Experian. You will be asked several personal questions to verify your identity prior to getting access to your credit reports. Once you answer those questions you will get access to your reports and you can print them out for review.
Understanding Your Credit Report
Now that you have a copy of your credit reports from the three credit bureaus, we need to find out what its going to take to clean up your credit. The first thing we want to look for are the derogatory credit trade lines. These will be for any account that was paid over 30 days late, any collection accounts, and also any charge off accounts. You will want to circle all of the derogatory accounts on each credit report. When you have all of the derogatory accounts circled, you will want to go back and fill out the credit cleaning worksheet that can be accessed by clicking the button below.
The worksheet is really easy to use. All you have to do is look at each derogatory trade-line that you've previously circled and fill in the blanks with the appropriate information from the credit reports. This information includes the creditors name or the collection agency's name, the account number for this creditor or collection, the balance owed on the credit report, the date of last activity meaning the last time it was updated with the credit bureaus from the creditor, the creditors phone number, and then there is a spot for you to make notes when you call on these accounts.
You will more than likely have the same creditor reporting with all three credit bureaus so there is no need to write a duplicate account down if its already been recorded. So if the same collection account is reporting on TransUnion's report as well as Experian's report, only write it on the worksheet one time.
If you remember from before, I told you to record the date of last activity when you were writing down the account information on the Credit Cleaning Worksheet. This date is important because the older it is, the more likely the creditor will settle for less than the full balance owed when trying to clear it up.
Negotiating With Your Creditors
Unfortunately, now you have to deal with these creditors and in most cases that means paying them off. However, several creditors are willing to make deals especially on older debts. While there is no way to guarantee that your creditors will negotiate and lower the balance of what is owed to them, it's definitely worth a try as it can save you some serious money.
Now, in most cases if the date of last activity is over two years old, you will be able to settle the debt for 80 cents on the dollar or less. When negotiating a settlement, don't let the creditor know what you are willing to pay. Always start at 30 cents on the dollar and let them work you up from there. Let them know that you have several collection accounts but only enough money to settle a few of them and you're going to be working with the creditors that will give you the best deal.
Also, you want to make sure to ask if they can delete the derogatory trade-line from your credit report when they receive payment. As I stated before, this may or may not work, but it's well worth the try. You will also want to have the creditor send you confirmation in writing that the debt has been settled and you know longer owe a balance.
Once you handle your derogatory credit you will need to establish some good clean credit if you don't already have some existing accounts in good standing. Click the button below to learn how to establish a great new credit record.
Tracking Your Credit Score
Now that you have the credit report and you understand how to read it, we want to get a starting reference point and track the results. However, we don't want to pay for it and we don't want to get an unnecessary credit inquiry so we are going to use a free credit monitoring service called CreditKarma.com. They use what's called a "soft" credit pull which does not affect your credit score and they only work with one credit bureau, TransUnion.
CreditKarma.com allows consumers to obtain their TransUnion credit score for free and it also allows the consumer to track the TransUnion score. This credit score is considered a consumer credit score and it's a little bit different from a mortgage credit score you would get when trying to obtain a mortgage. Even though the score will be slightly different and it only tracks the TransUnion credit score, it's still very helpful because you can tell if the score goes up when you take action. If your TransUnion score goes up, there's a good chance your Equifax and Experian score went up as well.
Since this is a free service, CreditKarma.com has advertising partners that will send you offers for different credit cards and things like that. Simply ignore them and continue to monitor your credit score as you try to improve your credit. Make sure to write down the credit score when you start CreditKarma.com so you have a reference point. The goal is to have a 640 or higher credit score when trying to purchase a home so when you reach that point, it may be time to get pre-qualified.
Credit Repair Company's - Short Cut or NOT?
Credit Repair Company's work with people that are looking to remove negative credit reporting from their credit report. They use credit reporting laws and guidelines to give you an advantage in getting the negative items removed completely. If they are able to find and point out an inaccuracy to the credit bureaus, they are very successful in getting the negative items removed.
When it comes to credit reporting, everything must be accurate and reported properly. This can be a huge advantage when dealing with older debts that have been transferred from creditor to collector, as well as with more recent accounts in some cases. Credit Repair Company's, at least the good ones, know these guidelines and loop holes like the back of their hand and that is what makes them successful and able to charge money for their knowledge.
Credit Repair Company's can be very helpful and, in most cases, much quicker than trying to clean things up on your own. It can also be a bit cheaper than simply paying off your collections. Most Credit Repair Company's charge anywhere from $70 to $150 per month while they work on repairing your report. Some charge a one time fee but most of the reputable companies have switched to monthly so you can quit at any time if you aren't happy.
Over the years I've helped clients with credit repair myself as well as referred clients to a hand full of Credit Repair Company's. I no longer offer credit repair myself as I hate it and I've found that people are better at following directions when they have money invested in the solution. However, I do have one company that has consistently lived up to my expectations, as well as my clients, and that company is US Consumer Credit Restoration Association (USCCRA).
They offer a pretty thorough Triple Results Warranty that pretty much eliminates any risk of you losing your money on their services. You can learn more about USCCRA by clicking the button below.
Now, with all that being said, these companies cannot solve your credit issues without your help and interaction. You will need to provide them with the updated reports that get mailed to you from the credit bureaus as a result of the credit disputes they created and mailed on your behalf. If you can do that, which anyone can, then you may want to give it a shot.
Also, recognize that I am in no way claiming that a Credit Repair Company can repair your credit. Each person and scenario is different and results vary for a multitude of reasons.