Credit Repair Basics

Consumers with bad credit have two choices to select from once they decide to repair their credit. They can either go about repairing their credit on their own or they can use a credit repair service.

Repairing bad credit can be viewed as doing what it takes to improve the consumer's credit score. Credit scores less than 640 reflect a bad credit history. The consumer with a bad credit history will have a more difficult time acquiring loans and opening credit card accounts with a poor score.

Initiating the removal of negative or inaccurate information

Fortunately, consumers with bad credit can take advantage of a few simple strategies to repair their credit. To repair your credit, you need to remove as much negative information as possible. However, most of the information will remain on the report if it is accurate.

The first step a consumer needs to take is to get a copy of their credit report from a credit bureau or other financial agency in order to see what information is listed. Credit reports can be obtained from one of the three major credit bureaus, Experian, Equifax, and TransUnion, at no charge.

Questioning one of the national bureaus about information in your report is free and they must investigate if you have a valid complaint. The FCRA, Fair Credit Reporting Act, provides consumers with the right to challenge any information in their credit report that they believe to be inaccurate.

What can be removed and how?

Consumers can challenge the credit bureaus about the accuracy of items on their credit report. The credit bureau must contact the lender or initiator of the information in question to verify its validity. Information that is not validated, prior to the closing of the investigation, must be removed, along with any false information. Inaccurate data can be removed easily once it is checked for validity.

Out of date information can also be removed. For example, bankruptcies should be removed after ten years, and collection accounts, paid tax liens, late payments, and lawsuits should be removed after seven years. Any credit inquiries should be removed after two years. If the appropriate amount of time has passed, then negative information can be removed. Otherwise, it remains on the credit report.

Credit bureaus, which must follow the procedural guidelines set forth by the FCRA, have thirty days to investigate disputes made by consumers. Then the bureaus must update the report, inform the consumer of the results, and send the consumer a copy of the updated credit report. This process takes about sixty days total.

To improve your score:

• Pay your bills on time.
• Keep balances low since a high balance will have a negative impact.
• Don't carry unused credit - if you don't need it, don't get it.
• Check your report and verify the information on a regular basis.
• Remove inaccurate and out of date information.