If you have bad credit you’ve probably been hit with many credit repair offers. Some of these companies make totally outrageous claims in what they can do to repair your credit like, “We can remove bankruptcies, judgments, liens, and bad loans from your credit file forever!” or “We can erase your bad credit — 100% guaranteed.” These are the con artists. Legitimate debt repair companies make claims that are much less extreme like, “We’ll fix your credit reports and increase your credit score,” We’ll clean up your credit history,” or “ We can remove errors from your credit reports.”
The less outlandish claims are basically true. But what these credit repair companies don’t want you to know is that there is really nothing they can do that you couldn’t do yourself and for free instead of paying like $89.95 a month.
Get your credit reports
The first step in DIY credit repair is to get your credit reports from the three credit reporting bureaus – TransUnion, Experian and Equifax. While these reports can be difficult to read it’s important to go over them very carefully looking for errors. What would be an error? It could be a debt listed as a default with a company you don’t recognize. It could be a judgment you never had. Or it could be something as simple as an account you never had.
If you find errors in your reports you’re not alone. The FTC (Federal Trade Commission) released a report two years ago that one in five consumers have errors in their credit reports that could be negatively affecting their credit scores.
If you do find inaccurate items
If you do find errors you need to dispute them with the appropriate credit bureau. All three of the bureaus have forms on their website for this specific purpose. However, experts say it’s best to write a letter with whatever documentation you have to prove your claim and send it registered and return receipt requested (be sure to keep a copy for your file). Once the bureau receives your letter it will send it on to the organization that provided the information, along with the documentation your provided, and ask that it verify the information it had provided. That company then has 30 days to respond. If it doesn’t or if it can’t verify the information then the credit bureau must, by law, remove the item from all your credit reports.
What else you could do
Despite what some credit repair companies might want you to believe there is no way to get bad information removed from your credit reports that is accurate. However, there are some things you can do that would help.
For one thing you could get current on accounts that are past due but have not yet been charged off. A charge-off is one of the very worst things that can happen to your credit. As a general rule a lender won’t charge off your debt until you’re more than 180 days behind. If you have accounts that are delinquent but less than 180 days past due you can save them from being charged off by paying the total past due amount. Be aware of the fact that the further behind you are the more it will cost you to get caught up. You might want to contact your creditors and ask what you could do to get current. In some cases a creditor may be willing to waive some of the late penalties or spread your past due balance over a few payments. The important thing is to let the creditor know you’re anxious to avoid a charge off but that you need some help.
Accounts that have been charged off
About the only thing you can do with an debt that has been charged off is to pay it, as you are still responsible for it. If you’re serious about credit repair you must pay your charged off debts. If you pay the debt in full it will be reported to the credit bureaus that the account has been paid and your balance is zero. Unfortunately, the status of the debt as charged off will stay in your credit reports for seven years. As an alternative to this you could try to settle the charged-off debt for less than your balance. In some cases, the lender will agree to settle with you and then cancel or forgive the rest of the debt.
If an account has gone to collection
Your lender may decide to send your account to a collection agency after it’s been charged off or if you’ve fallen several months behind. You will then need to deal with a debt collector. Your approach should be similar to that for charge-off. You will need to either pay off the debt or try to settle it for less than the balance due. In many cases lenders will batch together a bunch of debts and sell them to a collection agency literally for pennies on the dollar. This leaves a lot of room for negotiation. For example, you might offer to settle the debt for 30% of what you owe. The collector probably won’t agree to this but with some back and forth you might be able to settle the debt for 50% of its balance.