Improving a poor credit score requires a lot more than wishful thinking and a repentant heart. A solid plan and time are necessary to transform an ugly duckling report into a beautiful swan. This article by Darren Yates offers some practical pointers on how tackle this often daunting process. — DH

When you receive your credit report and credit score, the first step is deciding where you stand and where your main problems may lie:

• Have you defaulted on a loan, failed to pay taxes, or recently been reported to a debt collection agency?
• Do you have too much debt?
• Too many unpaid bills?
• Have you recently faced a major financial upset such as a bankruptcy?
• Have you simply not had credit long enough to establish good credit?
• Have you defaulted on a loan, failed to pay taxes, or recently been reported to a collection agency?

The problems that influence your credit problems should dictate how you decide to start to repair your credit score. As you read this article, make a note of those tips that apply to you and from there develop a checklist of things you can do to improve your credit situation.

When you take professional credit help, counselors will commonly work with you to help you develop a personal strategy that directly confronts your financial history and credit problems. This article allows you to develop a similar strategy on your own in your own time and at your own cost.

When developing your action plan, know where most of your credit score is coming from:

1. Credit history (can account for more than a third of your credit score). Whether or not you have been a good credit risk in the past is considered the best indicator of how you will react to debt in the future. For this reason, loan defaults, late payment, bankruptcies, unpaid taxes and other debt responsibilities will count against you the most.You can’t do much about your financial past now, but starting to pay your bills on time - starting today - can help boost your credit score in the future.
2. Current debts (can account for approximately a third of your credit score). If you have lots of current debt, it may indicate that you are stretching yourself thin financially and will have trouble paying back debts in the future. If you have a lot of money owing right now, especially if you’ve borrowed a lot recently, this fact will bring down your credit score. You an boost your credit score by paying down your debts as far as you can.
3. The length of time you’ve had credit (can account for up to 15% of your credit score). If you’ve not had credit accounts for very long, you may not have enough of a history to let lenders know whether you make a good credit risk. Not having had credit for a long time can affect your credit score. You can counter this by keeping your accounts open rather than closing them off as you pay them off.
4. Types of credit you have (can account for about one tenth of your credit score). Lenders like to see a mix of financial responsibilities that you handle well. Having bills that you pay as well as one or two types of loans can actually improve your credit score. Having at least one credit card that you manage well can also help your credit score.

As you can see, it’s only possible to estimate how much a certain area of your credit report affects your credit score. But, keeping these four areas in mind and making sure that each is addressed in your personal plan will go a long way towards making your personal credit repair plan comprehensive enough to boost your credit score effectively.

True or False: The only way to view your credit report is to purchase a copy from one of the three major credit reporting agencies (Equifax, Trans Union, or Experian).

FALSE. The three major credit-reporting agencies, Equifax, Trans Union, and Experian, are each required to provide consumers, upon request, a free copy of their credit report once every 12 months.

You have three options to obtain your free copy:

• Go to AnnualCreditReport.com
• Call (877) 322-8228
• Contact the Federal Trade Commission (FTC) to obtain a copy of the Annual Credit Report Request brochure. You can fill out the form on the back of the brochure and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
  • To request the brochure, you can contact the FTC by phone: at 1-877-FTC-HELP, or download the form at: www.annualcreditreport.com

Well, folks, there you have it. Another money myth dispelled. This happens to be an important money myth because many people never see their credit report for fear of the cost. This allows for errors that could be addressed to never see the light of day thus hurting the consumer for reasons they are not even aware.

So, if you haven’t seen your credit report in eight years or worse still, NEVER, please follow the above steps and order your free credit reports today.

For more information, visit CareOne Credit.

Contrary to what you might have heard, credit counseling probably won’t hurt your credit score. It used to, but about three years ago Fair Isaac discovered that people in debt-repayment plans were no more likely to default or go bankrupt than other consumers.

“Today the FICO score ignores any and all references in a credit report to credit counseling or debt management programs,” Watts said.

Those references to credit counseling, by the way, are typically removed from a credit report after a consumer has successfully completed a repayment plan. That means there’s no lasting reminder on your credit history.

That’s great news for consumers deliberating between debt consolidation vs bankruptcy. The logic here is simple: in a debt consolidation scenario, your debts aren’t being ‘expunged’, so to speak, but rather you are entering into a responsible payment arrangement in good faith with the goal being to repay your debt. Bankruptcy, on the other hand, does relieve you of most of your debts, but it ruins your credit for a long time afterwards and even destroys the good credit that you have earned on your credit reports. Certainly there are times when bankruptcy is the only option but it should always be that - ‘the only option’.

So, count this as a myth dispelled. The final verdict is that while debt consolidation does have an affect on your credit score temporarily, that effect corrects itself over time and, under all circumstances, is a better alternative than bankruptcy.

Read the full post Understanding Your Credit Score at Campus411.org.

On many points, the article makes sense and certainly, for those companies who basically claim to be able to give you a whole new credit ‘identity’, that is no more above board than creating a new identity to escape an arrest warrant. Specifically, the author points the following signs of trouble when dealing with so-called credit repair companiesCompanies that want you to pay for credit repair services before they provide any services.

• Companies that do not tell you your legal rights and what you can do for yourself for free
• Companies that recommend that you not contact a credit reporting company directly
• Companies that suggest that you try to invent a “new” credit identity - and then, a new credit report - by applying for an Employer Identification Number to use instead of your Social Security number
• Companies that advise you to dispute all information in your credit report or take any action that seems illegal, like creating a new credit identity. If you follow illegal advice and commit fraud, you may be subject to prosecution

It goes on to say that “you could be charged and prosecuted for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information. It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses.”, all of which is very, very true.

However, as someone who has actually used a credit repair company in the past, I have to say that there are some good ones who play by the rules and get good results. I signed up for Lexington Law in 2003 for about a year and during that time, they got my score from about 430 to 584 which was just good enough for me to be able to reestablish my credit with smaller lines of credit like gas cards, etc. As the article points out, Lexington Law and companies like them do little more than dispute erroneous information on your report, but for the time and process that it involves, I definitely felt it was worth the $30 bucks or so per month (at that time) to have them handle the seemingly endless cycle of disputes and corrections. Since then, my sister and a few friends have done the same with roughly the same results and roughly for the same reasons. They were just trying to get a slightly better score to be able to get a job or get a lower interest rate on a major purchase like a house or a car.

So, I had to weigh in on the whole credit repair issue because I think that with the right company, it can be helpful in raising your score. This, in turn, helps with debt reduction because the higher your score, the lower your interest rates. As for the many dubious companies out there who offer virtual credit MIRACLES, just use your common sense. No company can divorce you entirely from your financial past. Furthermore, the idea is not to vanish leaving your creditors holding the bag, but rather to learn how to become a more fiscally responsible person who is rewarded by sensible interest rates that make repayment of extended credit more manageable.

As with everything else in the money saving, debt reduction game, knowledge is power. So, you are encouraged to be well informed before entering into any arrangement to ‘clean’ your credit and just keep that old adage of ‘if it sounds to good to be true…’ in the back of your mind.

Read the entire article at the Federal Trade Commission.

Even the accounts that are current once you start the consolidation program should be expected to run late for at least a month or two. Depending on your creditors the situation may be even worse. This is due to the fact that some of them require at least three periods of payments through the agency to reconsider the account state. This implies that your account will show late or missed for at least four months.

This information remains consistent with the the adjustment curves of other methods of clearing up one’s credit such as credit repair, etc. where there is no instant gratification. Read the entire article at the American Chronicle.