Credit Repair 101

Credit is determined by reporting from creditors to 3 major credit bureaus: Experian, Equifax, and Transunion. Since credit reports effect a person's ability to obtain credit, purchase, and even get hired for certain jobs, the credit bureaus are regulated by the government. These regulations require the credit bureaus to treat consumers fairly and report only factual information that can be proven.

Since creditors and the credit bureaus sometimes make mistakes it is the consumer's responsibility to make sure they correct them. It is important to check your credit report regularly to monitor for possible mistakes or even identity theft.

Credit is effected positively by creditors reporting that you have been paying on time every month. It is also effected positively if you have lines of credit that have larger percentages of available credit every month. Longer positive history with certain accounts also raises credit. Some people believe that maxing out a credit card every month and paying it off at the end of the month is building good credit. The truth is that maxing out credit cards or using large percents of available credit every month is damaging to a person's credit report. Lenders/credit companies and the credit bureaus actually see this as negative because it makes it seem as if the consumer needs to max out his/her credit cards every month to afford his/her lifestyle.

Credit is effected negatively by creditors reporting late payments, charge-offs, collections, bankruptcy, foreclosure, and multiple inquiries over lengthy periods of time. If a creditor reports late payments it shows the credit bureau and all the lenders/creditors that you fail to make payments on time. This can be very devastating to a person's credit report and is almost impossible to get removed. A collection is when multiple late payments/non-payment force the creditor to cancel the use of the line of credit and begin only to try collecting the debt. A charge-off is when the debt collector sells the debt or writes off the bad debt basically giving up on ever collecting the debt. Some creditors will eventually sell the debt for pennies on the dollar to another collection company. Selling the debt renews the collection process and reporting process. The new collection company can begin reporting the collection to the credit bureaus along with the original creditor doing double the damage. Bankruptcy and foreclosure can also haunt a person's credit report for years. A common misconception about inquiries is that every time your credit report is pulled it damages your credit. It can damage your credit if you have your credit pulled by multiple companies, spread out over a period of time. The main reason why inquiries hurt a person's credit report is because multiple inquiries over the span of a month or so look to the credit bureaus and lenders as if that person has been applying for multiple loans or lines of credit and is either being turned down or opening multiple new accounts.

Writing letters to the 3 major credit bureaus demanding they remove specific false information within 30 days or legal action will be taken is one of the best ways to get mistakes or even old collections that have been reported against you removed from your report. Having an estoppel letter written by a lawyer will stop the creditor from being able to sell the debt and keep multiple companies from being able to report the same debt.

Once all of the negative that letters can get removed has been removed it is time to begin finding out what to do with the rest of the negative information. Some companies will negotiate to settle the debt for a percentage of what was originally owed. Others may file a judgement against you in court. A judgement can only be released by the creditor that filed the judgement against you and may prevent you from purchasing a home or even selling your home.

Every credit report is different. Some are easy to repair and may only take a few weeks to repair, some are more difficult and may take years. Some people think that their credit is worse than it actually is. You never know until you have it pulled and a copy given to you.

Even though all this can be done by an individual, it is essential to seek the help of an experienced professional to make sure that every necessary step in the credit repair process is carried out correctly. Especially if that individual is looking to restore his/her credit in order to make a home purchase in the future. Only a mortgage/credit repair professional knows what is needed in the everchanging financial markets to get financed and credit is only a small part of that equation. So make sre to enlist the help of an experienced professional in order to avoid getting lost in the maze that is credit repair.

Click on this link for a free credit report and a free credit consultation.