Credit, is basically the concept of allowing you to spend money that you do not yet have. For many people this can become a problem over time. Whether through loss of income, medical issues, unexpected expenses or just plain mismanagement, bad credit has become an epidemic. Unlike some diseases however, this one has a cure.
Banks, car dealers, insurance companies, mortgage companies and even employers are looking at individual credit ratings to determine the worthiness of the consumer or prospective employee. Decisions about you are being made based on your credit history. Is your credit history less than satisfactory? Do you have bad credit? You can start improving your credit immediately. This brief article will provide some tools and information to help repair your credit, and improve your overall credit rating.
First, some common misconceptions about your credit history:
If you think that creditors can only report credit history for seven years, I am sad to say you are mistaken.
They can report your credit record for certain types of debt for seven years from the last date of activity. The last time you made a payment on the account is the most common point from which the seven years starts. And, there are several instances where the seven years does not apply:
Bankruptcy information may be reported for 10 years.
Credit information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
Credit information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.
Default information concerning U.S. Government insured or guaranteed student loans can be reported for seven years after certain guarantor actions.
Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.
If you have a debt that is no longer being reported on your credit history, and you get a collection call, make sure the company agrees, in writing, to refrain from reporting the activity to the credit bureaus before making any payment. If they do not agree, do not pay, as this will show as activity and the clock can then start over. Most companies will agree to remove the reported debt or account altogether upon payment of an agreed restitution.
Some people think that once a debt is written off by the creditor, they will no longer receive collection calls or letters. This is not the case, bad debt is big business.
An account is written off as a bad debt when the time allowed for payment is expired (usually six months in arrears for most companies). Third party collection companies buy these debts and attempt collection for decades after the debt was originally written off. They pay pennies on the dollar for these accounts, so any money they make back is profit, and they work hard to get it.
You do not always have to pay the full amount for any debt that is written off.
Good news here, most of these companies, and third party collection organizations, will accept a fraction of what the original debt was in order to clear the account. This is an important tool for bargaining the repair of your credit record and rebuilding your credit score.
You can get a free copy of your credit report every 12 months.
According to the Federal Trade Commission, “The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies ‘” Equifax, Experian, and TransUnion ‘” to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.”
You can request a copy of your credit report by filling out the FTC form obtained here, and mailing it to:
Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281
The Federal Trade Commission warns consumers to be very careful about who they request a copy of their credit history from. Many web sites and organizations exist that charge a fee, or may even be fraudulent.
Repairing Accurately Reported Information
If your credit history has some negative entries, and they are legitimately being reported, you will need to make contact with the creditor, or reporting organization. Explain to them what you are trying to do and they will be more than happy to work with you in your effort to repair your credit. Remember, even if your debt is written off, this is their opportunity to recover a portion of the debt. Most will be willing to remove the negative reporting in exchange for payment. And, frequently, the payment will be a fraction of the actual debt.
The most important thing you can do to get started is obtain a copy of your report and make a list of the entries that you want to address. Decide what you can and cannot afford to do and go from there. Be very cautious about debt consolidation programs or debt management agencies. Many of these are businesses that make a profit from you. Consult the Better Business Bureau and refer to the FTC web site to get more information on these agencies.
Repairing Incorrectly Reported Information
If, upon reviewing your credit report, you find something is being reported incorrectly, there will be some clear steps to take included with the report itself, or you can reference the helpful instructions at the FTC web site here.
Don’t be shy about it, it’s your rating!
Many people are hesitant to attempt repair of their credit due to embarrassment. You should never be ashamed to work on this part of your financial well-being. After spending almost 20 years in the credit industry, I can assure you that this type of situation happens to a wide spectrum of people at all ages and walks of life. Everyone deserves the opportunity to correct the past. Once you have improved your credit rating, your confidence will improve and it will affect other aspects of your life.
The Federal Trade Commission
Fair Credit Reporting Act (FCRA)
And 18 Years of Professional Experience in Retail Credit
Disclaimer: The opinions and information outlined in this article are solely that of the author. No guarantees are explicit or implied, and this article is meant for informational purposes only.