On the positive side, however, the bankruptcy is a clear time or "line in the sand", from which the debtor can begin to rebuild. With open unresolved charge offs there is no such point in time where rebuilding can start. Open unresolved charge offs remaining glaring poor credit cavities on ones credit report.
To convert this concept into terminology in the medical or financial industry, the first step is to "stop the bleeding". Many people look at their financial picture and think they must cure the entire situation in one huge step. Most times this is neither something an individual with limited resources has the ability to do nor something anyone with unlimited resources could achieve. The debt and credit resolution process takes several steps. One does not go to a hospital with a gaping wound and expect to walk out perfectly cured the same evening. In the first step the doctor stops the bleeding then, as we will see, there must be time for healing of the wound itself followed by an inevitable scar and perhaps in time fading of the scar itself or cosmetic surgery.
With the negative events resolved and the worst over with, damage assessment comes next. In order to recover from bad credit and reclaim one's good credit a careful evaluation of the credit must take place. In the United States, three major credit-reporting agencies control the credit reporting business. Each agency maintains its own records on each individual. The most comprehensive method of reviewing one's credit therefore requires reviewing the reports from all three bureaus, which is often referred to as a tri-merge report. The debtor can order a tri-merge report on-line from any of the major credit bureaus such as Experian or Equifax at a cost of approximately $39.00. For a smaller investment of under $16.00 an individual can view report of a single credit bureau. Learn more about credit scores and find links to get your credit score at the Credit Score FAQ. Throughout the country each zip code has one of the credit reporting agencies designated as the "preferred agency". It makes sense then if you only plan to obtain a single credit report you should get it from the preferred agency for your area code. I've prepared a table of the zip codes throughout the country and the corresponding preferred agency as well as a listing of which states mandate customers may view their credit reports annually for free. Links to each of the credit bureaus can be found on the state table site. To better understand how good or bad your credit has become and communicate the situation with potential lenders, consultants or attorneys obtaining your numerical credit scores may be helpful even if it costs a bit more. For those wondering about either the "Free credit reports" you see on TV, or the free credit reports the goverment says you can see once a year: I suggest avoiding the first because you need to sign up for a $12 per month service you likely do not need in order to get the "Free" credit report, and the second does not reveal credit scores. For the people rebuilding their credit who know for a fact they have bad credit and just need an accurate copy of their credit report to know the exact entries the goverment mandated report works fine. You can learn how to get that in our free credit improvement guide.
Many of those unfamiliar with credit reports share a mistaken belief that credit reports display a near perfect accuracy. In reality errors on a credit report occur with alarming frequency. Reporting agencies rarely verify or cross check information unless they have a specific reason to do so. Therefore it becomes the obligation of each individual to verify the accuracy of their own credit report and begin the process of correcting inaccuracies of the credit report. Inaccuracies on a credit report may take several forms including reporting of credit information on items which were never associated with the individual in question, items which may be related to an individual but are reported improperly or items which may be attributed to the individual but should no longer be reported on a credit report. Important personal items are often miss-reported as well including ones address, social security number and employment history. Everyone should check these personal items as well when reviewing the accuracy of the credit report. Federal law sets the limit on reporting items of negative credit at 7 years except the case of Chapter 7 bankruptcy where the limit extends to 10 years. Part of credit rebuilding means making sure not only that all items on your credit report are true, but that even accurate data must have taken place recently enough that it properly belongs on the credit report.
If one discovers inaccuracies on their credit report responsibility lies with the individual to begin the corrections process. Letters must be written explaining exactly what the problem is and the remedy they feel warranted. Especially when dealing with inaccuracies individuals must remember that each credit reporting agency maintains its own database of information. Therefore one agency might report an item properly while others report it improperly and vise versa. Furthermore, if a common inaccuracy exists with multiple reporting agencies the repair process must take place with each agency reporting the item inaccurately individually. In many cases this means to remove an item that has made its way onto each bureaus agency report, an individual must write three sets of letters and follow the process through with all three different agencies in order to be sure an item comes off from the reports. Once notified of a problem an agency will contact the creditor or reporter of the item in question and seek a response regarding the accuracy of the item. Under the Federal Fair Credit Reporting Act if the agencies do not receive a reasonable proper response within 30 days they are obligated to follow your directives on proper treatment of the item. Should a proper response be received the bureau may well request more information on why you believe your position be the correct one. Many people advocate dealing with only one item per correspondence. To extend this out given earlier facts that each item must be dealt with individually with each agency, a hypothetical result for someone with ten erroneous items could mean initiating 30 sets of correspondence to correct the problem. Once you find you have completed this task follow up once again or check the report again. Just because a letter has been written and a creditor has not responded within a given time frame does not mean that the agency will remove the report without further follow up and an additional correspondence. On the other hand keep in mind changes may take a month or more to appear on a report. While the process for proper credit reporting is in place, assuring accuracy of your own credit report rests with you. This particular part of credit rebuilding is where most people wish they had professional credit repair help, but for those who just need an extra hand and can not afford that, we help you through the process in our credit help guide.
Improving ones credit score is one of the few areas of life where doing nothing can be tremendously productive. Once the items causing negative impact on the credit report have ended, the simple passing of time does wonders for one's credit score. While the advantage of improving your score with the passing of time comes in the form of non-existent effort, the disadvantage comes in that time must take its own course. Even those with the best of credit cannot buy more time or speed the passing of time. Generally the date used to trigger the passing of time in this context starts with the date of the last activity of the account. Interpretation and misuse of this rule accounts for many reporting errors. For example if a person last made a payment on a charge card in 1995 and in 1999 a new entity buys the account and begins to report it the new entity the credit reporting bureaus may treat the initial reporting as the date of the new entity. But in reality the date of the last activity of the debtor's point of view came in 1995 with the last payment. "Last activity" for purposes of credit reporting means the debtor's last activity, otherwise by re-selling accounts or re-generating some new phantom activity the creditors reporting can be extended in perpetuity. To maintain the accuracy of records that should be dropped from account through passage of time, usually seven years as I referred to earlier, individuals should know the exact date of the last activity and have records for proof. For those well into their 7 year period, beware of debt collectors attempting to make you send very small payments. In some cases a little payment means almost nothing in terms of your overall debt, but that small payment can reset the 7 year clock to zero.
I cannot stress enough the importance of staying out of trouble as a credit-rebuilding tool. Even doing nothing can help a bad credit report, but repeating poor credit habits can make things much worse. Creditors can be somewhat understanding of a bad credit incident, if corrected. This can be particularly true when the bad credit originated with problems outside of the debtors control such as emergency medical bills. Repeated bad credit behavior indicates a problem with deeper roots and looks to be a stronger indication that future credit worthiness looks shaky. If you want your credit to improve, be perfect with your new credit, as well as old credit where accounts remain open.
To accelerate the rebuilding process try to have at least three active credit lines open, and be perfect with them. Car loans or mortgages count if you still make payments, as well as old credit cards if they can still be used. If you need to obtain new credit store cards or gas cards can be easier to obtain than major credit cards. Other ways to improve credit score fast include making sure not to allow the credit lines you already have to max out or get even up to half of their credit limit.
If even those fall beyond reach any one can be accepted for secured credit cards. Make sure when taking a new credit for rebuilding purposes that the creditor reports to the major credit agencies. Not all creditors submit information to the credit bureaus, and almost no debit card or check card issuers or prepaid credit cards do, even ones with a MasterCard or Visa logo. Use the credit you have obtained and make your payments on time (did I mention I can't stress this enough). On time means never being 30 days late. At fifteen days you may pay a late fee, but late items must hit 30 days overdue before they will be reported. Using credit does not mean abusing it, you need not run the card up to its limit. On the other hand, leaving the card in your wallet will not help rebuild your credit as much as positive usage. For more on secured credit cards read the secured credit card FAQs. For those rebuilding credit who have no accounts and no way to get any, I would suggest getting three secured credit cards, they can be that strong as a credit rebuilding tool and are that easy to obtain.
One does not have to look far to discover companies claiming they can repair your credit for you. Some of these companies will legitimately help to repair erroneous items on your report others fall into the category of con artists and crooks. This evil group starts off with the out right thieves - companies, which offer the world, take your money and do nothing. Avoid these by checking references including organizations such as the Better Business Bureau when applicable, question how long they have been in business and pay attention to what they're telling you. If their claims sound to good to be true you may wish to be on the defensive. When possible attempt to verify answers they have given you with independent sources. Ask how much time credit repair takes. No one telling you credit repair happens instantly should be trusted.
Some organizations claim they will issue you a new social security number or create a completely new credit profile for you. Organizations of this type fall into one or two categories, those who are scam artists and liars and those who are operating illegally. Even if an entity some how could create a new credit profile for you such an action would be completely improper under the law. I personally recommend that any organizations making claims of new social security numbers or new credit profiles be avoided. Some credit repairs organizations do follow the rules and understand the system. Even with those who are attacking items on a credit report using the proper procedures can sometimes go too far. Either at the request of the debtor or the suggestion of the credit repair agency some companies will wage a war with the credit bureaus concerning legitimate items in the hopes that the creditor either ignores the correspondence or gives up on the paperwork required with the result that legitimate bad credit items end up removed. I personally would advise anyone considering such an endeavor that attempting to remove proper items can constitute fraud and avoid any such actions.
No one needs to allow a bad credit report to hang over their head. Some people may feel comfortable working with credit report issues on their own while others will need help from books, web sites, professionals or you may wish to try our own free credit repair and credit rebuilding step-by-step guide. Only ignoring the situation or falling victim to a scam would be bad approaches. Individuals must decide based on their own knowledge and skills what works best for them. In any case, within a year or two of concentrated effort, even the worst bad credit can improve to very high levels. In the mean time, many bad credit loan options exist. Bad credit need not put your entire life on hold in either the short run or the long run.
Lifestyle | Real Property and Other
Hard Assets | Foreclosure | Cash, Stocks, IRAs
and Other Soft Assets | Secured
vs. Unsecured Creditors | Credit
Debt Workout Mortgages & Secured Debt | Credit Card & Unsecured Debt | Bankruptcy | Do Nothing | Deed in Lieu of Foreclosure | Do Nothing Home Forclosure | Pay Creditors in Full | Debt Consolidation Loan | Non-Profit Credit Counseling | Credit Card Balance Transfer
Debt Consolidation / Debt Settlement Program - Consolidate your credit card and unsecured personal debt with a program to settle balances for 30-50 cents on the dollar. Make monthly payments toward the total settlement over a period of years. Free initial consultation. Learn more and see if your situation fits the program online.A Guide to Borrowing Money with Bad Credit - Including informational articles on obtaining a home mortgage, auto loan, credit card or unsecured personal loan.
Credit Repair and Credit Rebuilding -Credit repair and credit rebuilding article. Topics include how to repair your credit and warnings about credit repair scams. Links to other credit repair sites and professional credit repair services plus my own Free Guide to Help Repair and Rebuild your Credit Report. For more credit help try 14 Do's and Don'ts To Raise A Score Fast or the Credit Score FAQ.
Who to pay when you can't pay everyone - An article addressing cash allocation for debtors.
How to Get money when you need money - Examines WHEN you really NEED money and how to get money even with bad credit for an emegency or financial crisis.
Stop Home Foreclosure Help - Articles to better understand the foreclsoure process and how to avoid a foreclosure including an interactive tool to analyze your own situation and point you in the right direction to keep your home, a list of various ways to halt a foreclosure, a list of 10 mistakes to avoid when facing foreclosure and foreclosure myths.
Personal Home Budget Analysis - An interactive tool to learn where your money REALLY goes. Input your income and expenses, the program will automatically determine if you have accounted for all you have spent. When you have discovered all your expenses you will be know the details of any overspending. Use this information to help plan and keep a monthly budget or change spending to avoid further debt or bankruptcy.
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