If you have not made timely payments on all your loans and credit cards, you likely have bad credit. This may affect your ability to get new credit cards or loans, or it may affect the interest rate you have to pay. The good news is you can repair bad credit, either on your own or with the help of a reputable credit-counseling company.
Your rights
The first step in repairing bad credit is finding out your current credit score. The three national consumer credit-reporting companies—Experian, Equifax, and TransUnion—are required by law to provide you a free copy of your credit report annually.
You have the right to dispute any charges you think are inaccurate. Send a certified letter to the lender or credit-reporting company, enclosing copies of any evidence related to your claim. The reporting companies must investigate your claims, usually within 30 days, and provide written results. Write the creditor to inform them of the dispute as well.
If your credit report is accurate, it will take time to improve your credit rating. Negative credit information will remain on your report for 7 years, and bankruptcy information will be included for 10 years.
Avoiding scams
If you are looking to improve your credit, you have likely seen ads for credit-repair companies. Be wary, as the Federal Trade Commission (FTC) reports many of these offers are scams.
Know that a company cannot make false claims about what they can do, and they cannot charge you until they complete their work. They must provide you with a contract that spells out payment terms, how long their work will take, and what exactly they will do.
Watch out for credit-repair organizations that claim they can instantly fix bad credit or create a legal new identity for you. It is never legal to create a second identity for yourself, and legitimate credit repair will not happen overnight. Contact your state attorney general if you believe you've been a victim of a credit-repair scam.
Improving your credit
You can repair your credit on your own with a debt management plan. Contact your creditors to negotiate payment terms you can afford, then begin making regular payments to establish a good credit history. If you aren't able to create a budget and negotiate with creditors on your own, get help from a lawyer or a reputable credit counseling agency.
Only time and diligent repayment of your debts will improve your credit rating. Beware of companies that promise you instant results or require up-front fees. Know that anything a credit-repair company can do for you legally, you can do for yourself for free.
Additional resources:
Federal Trade Commission Credit Repair facts
Annual Credit Report Request Service
or call 1-877-322-8228
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