The promises are inspiring: “Fix your credit fast.” “Remove negative items from your credit report.” “We can cure even the worst credit.” The lure of a better financial tomorrow obtained by removing dings from a credit report is enough to make a lot of folks fork over thousands of dollars to qualify for that stylish new car or beautiful dream home. Yes, the credit repair companies make promises, but are they promises they intend to keep?
The Truth Behind the Curtain
Most credit repair companies operate under the same business model as the wizard in “The Wizard of Oz.” In other words: “Pay no attention to that man behind the curtain.” Certainly not all credit repair companies are bad firms looking to take advantage of those with credit challenges. Regardless of the promises, however, credit repair companies’ claim to fame often lies in repairing credit reports damaged by an identity theft. Indeed, these are the easiest cases to fix and result in the biggest change. It’s smart marketing. If you were a credit repair company, you would do the same. Even with the staggering number of identity theft cases, Americans who justly earned their poor credit (and there are many) cannot often be helped as a result of a few letters and disputes as credit repair organizations often promise.
Credit repair (real credit repair) is not cheap and these companies know this. They will push the lowest possible price for a basic credit repair service and then convince consumers to buy the “up-sells.” After a review of a credit report, a repair agent will candidly talk to a consumer about how he needs this product or that service – for an additional fee, of course. When all is said and done, credit repair companies net thousands and consumers fork it over, despite less than stellar results.
So, how do you fix bad credit? It isn’t easy, but fixing imperfect credit doesn’t need to arrive at the hand of promise-heavy credit repair companies that simply cannot deliver.
Order a copy of your credit report. Visit www.annualcreditreport.com and lay claim to a totally free copy of your credit report from each of the three major credit reporting bureaus. Review the information and create a tracking system for all negative entries like late or missed payments, collections, and judgments. I suggest a spreadsheet.
Dispute What Isn’t Yours – With Everyone
Send an online dispute to the credit reporting agencies for items that genuinely do not belong to you. Take the initiative to dispute these items with the creditor as well. Write a fact-based overview of why the bill is not yours and include any corresponding proof. This is the only way to permanently eliminate negative entries on a credit report. Responding only to the credit bureaus is not effective. Working the system and trying to get away with a debt you know you owe won’t work either.
Settle Bad Debt
If you earned your poor credit, it’s time to fess up. Contact the collection agencies or creditors you owe and attempt to settle the debt for pennies on the dollar if they agreed to acknowledge the debt as paid in full on your credit report. Once you have paid off the bad debts, you can begin the steps to rehabilitating your credit.
Fixing credit is not an easy and overnight task. It takes time, patience, money, and effort, but it is something you can do on your own. Don’t spend thousands of dollars on credit repair agencies. Do it yourself and make sure it’s done right.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you’d like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
More from this contributor:
The Top 5 Ways to Improve Your Credit
First Person: The Problem with Credit and Society
Debunking the Top 5 Credit Myths