There are many credit repair alternatives that range from debt
consolidation to obtaining a secured credit card. You can even engage in more
than one alternative if you want to speed up the process. The ultimate reason
why you want to do this is because having good credit allows you to have a credit card, to obtain
car and house loans, and many other conveniences.
While you can live without good credit, a bad credit rating will
certainly affect you negatively throughout your life. Bad credit can
have a harmful effect on a number of things. If you have a bad credit,
then you may not be able to get a loan or a credit card on the terms
that are favorable to you. Moreover, it can even prevent you from
getting some jobs.
The key to your credit rating lies with a credit bureau. There are a
handful of credit bureaus in North America that handle both positive and
negative reports from creditors to create a credit report specific to
you. If you've missed payments with a creditor in the past, the creditor
will report this to credit bureaus, which will then make a note of it on
your credit report.
Top 7 Credit Repair Alternatives
If you have a poor credit history, you must take steps to engage in
credit repair. And since credit repair can be a slow process and
requires that you build a better credit rating over time, you may need
to choose one or more of the following alternatives.
Debt consolidation. It works by consolidating all of your
outstanding debts into one loan. Here you take out a loan from one
company, use that loan to pay the debts, and then make payments only on
that loan. Although you will owe the same amount of money, you could
lower your monthly payments by getting a longer term debt consolidation
loan.
Debt consolidation immediately puts you back on solid footing with your
creditors. Your creditors will report to credit reporting agencies that
you have cleared up your debts. This way can change your status with
creditors, from someone on bad terms with multiple creditors to someone
on good terms with a single creditor, very quickly:
Credit counseling. A
credit counselor will help you make the
long term plans and decisions for effective credit repair. Most good
credit counseling organizations will provide you with advice, workshops
and educational materials. They will help you learn to both make and
stick to a budget and provide you with one-on-one counseling to improve
your credit decisions.
If you engage in credit repair by using a councilor, your solutions will
be more long term, because you will be learning how to manage your
budget more effectively, and making permanent changes to your spending
habits.
Do it yourself. Another approach to credit repair is to do it
yourself, self debt consolidation. If you search online you'll find many sources, such as
government organizations or other trusted organization, offering step by
step advice.
To do this you need to first obtain your credit report from the bureau.
Once you have the report examine it closely, and challenge in writing
any errors on the report. If your report is error free, you will have to
obtain a secured credit card and use it regularly. In this manner you
will be able to slowly repair your credit rating.
Credit repair company. Are you tempted by one of the
credit repair services that offer to "fix bad credit" for a fee? Don't. For
most people they're not necessary. Although giving impression that
they're doing things you wouldn't normally be able to do on your behalf
they rarely do anything that you cannot do yourself.
The only time you should hire one is if they are able to perform
services you cannot do, or don't have time to do. And if you do decide
to use the services of a credit repair company, make sure you look over
all the paperwork and fine print provided. They're obligated to clearly
outline all fees and services as well as to render all promised services
before accepting any payment from you.
Contacting your creditors. If you've fallen behind on payments
the first thing you need to do before falling deeper into debt trouble
is to contact your creditor. Remember that the key to credit repair lies
in your credit history report, and the report depends on whether or not
your creditor reports you to the credit reporting agency.
In most cases your creditor will be open to discussing alternate payment
plans and solutions. The sooner you contact your creditors the lesser
the impact to your credit history. By contacting your creditors before
you experience a default on your payments, they are likely to be open to
discussing terms if you propose a realistic payment plan that you can
stick to it.
Secured credit card. If you have bad credit, you will be
turned down for any regular, unsecured credit card application. In this
situation a secured credit card can help. This card works by requiring
an initial deposit that is equal to your credit limit. For example, if
you make an initial deposit of $500, you will have a credit limit of
$500.
Once you have a secured credit card, you can engage in slow credit
repair by using it regularly, and making sure you make all payments on
time. If you don't take this step, your credit rating will remain in a
static state for years. But by obtaining a secured credit card and using
it responsibly, you will be able to reduce the 7 year wait period before
being offered credit again.
Collection agencies. When you begin to lapse in payments to a
creditor, the creditor will go though various steps in an attempt to
receive payment. After a serious of warnings, the creditor will sell
your debt to a collection agency, at a heavy discount. They will also
inform credit reporting agencies, and you will have the lowest possible
mark on your credit report.
So, you need to avoid credit repair at this "writing off" stage. But if
it's unavoidable you should contact your creditor -- not the collection
company -- as soon as possible after being contacted by a collection
agent to see if you can arrange to clear the debt with them. If your
creditor is unwilling to do this, you're stuck with the collection
agency.
Since your credit rating can't get any worse at this point, you may
offer to pay less than the full value of your debt immediately. In most
cases the collection agent will be motivated to close your file as soon
as possible to avoid the process getting dragged out. They will usually
be willing to accept a quick payment at a discount so they can move on.
