Credit And Debt Management: Repairing Credit
  1. Credit And Debt Management: Introduction
  2. Credit And Debt Management: Credit Reports And Scores
  3. Credit And Debt Management: Building Credit From Scratch
  4. Credit And Debt Management: Repairing Credit
  5. Credit And Debt Management: Credit Cards
  6. Credit And Debt Management: Reducing Debt
  7. Credit And Debt Management: Debt Collection And Bankruptcy
  8. Credit And Debt Management: Credit Counseling
  9. Credit And Debt Management: Credit And Relationships
  10. Credit And Debt Management: Conclusion

Credit And Debt Management: Repairing Credit

by Cathy Pareto

Repairing your credit when mistakes or unfortunate events in your past have negatively impacted your credit score can be a slow and tedious process. Don't believe the hype of fast-credit-repair companies who claim to make your bad credit disappear - they won't. Accurate negative information on your credit report is there for a reason, and stays on your report for seven years, with the exception of chapter 7 bankruptcy, which lasts on your record for 10.

Getting rid of the bad credit in order to improve your credit score requires adding positive information to your credit history. Getting started might seem difficult, but you'll build momentum once you prove that you can handle credit responsibly. Rebuilding your credit means going through the same cycle as a new credit user. But take heed: to build new credit and improve your score, you must retrain yourself and modify your detrimental spending habits.

Some examples of poor spending habits include making purchases based on emotion or compulsion. Spending for the sake of spending, or "retail therapy", can be detrimental to your wealth. Before you spend your money, ask yourself if what you are buying is really necessary, or if it will just end up collecting dust in your closet. If you find that the item is more likely to be wasted than used, think twice about buying it. Learning to live more frugally will go a long way toward establishing a fiscally sound life. (Learn how to talk yourself out of buying things you can't afford in Nine Reasons To Say "No" To Credit.)

Repairing Credit After Identity Theft
Sometimes your credit report needs fixing when it's not even your fault. The internet has revolutionized how we live, many American consumers conduct business and manage personal financial affairs online. Consequently, identify theft has risen. It is highly recommended that consumers conduct their online transactions on encrypted internet connections and secure networks. But sometimes, even the most guarded of credit consumers can fall victim to identify theft.

Identity theft (also known as identity fraud) occurs when someone's personal information such as, Social Security number (SSN), driver's license number, name, address, employer info, account information, etc. is used without the authorization of that individual. Approximately 8.9 million victims a year are claimed by identity theft, according to personal finance guru Suze Orman.

Identify theft can be quite destructive, and you'll have to clean up the mess if you want to qualify for new credit. According to the Federal Trade Commission (FTC), some ways to prevent and overcome identity theft include the following:

  • Review your credit on a regular basis, either by ordering reports periodically or by signing up for a credit reporting service.
  • Place fraud alerts on your credit reports.
  • Consider closing any accounts that you think may have been subject to fraud.
  • File a complaint with the FTC.
  • File a report with your local police department.
If you do not have the time or discipline to do this yourself, consider hiring a credit repair company to do it for you. These companies typically review your credit report and find errors, discrepancies and any other inconsistencies, then begin the process of trying to remove bad credit from your report. Negative information can stay on your report for up to seven years, but creditors have the option to delete any of it immediately should it be proven inaccurate or incorrect. But frankly, credit repair companies are unable to do anything that you could not do yourself. (Learn more tips and techniques to rebuild a ruined credit rating in Five Keys To Unlocking A Better Credit Score.)

Review Your Reports Regularly
It is highly recommended that you review your credit report at least twice a year for accuracy, whether you're monitoring for identify theft or simply want to keep an eye out for reporting errors. Consumers are entitled to a free copy of their credit reports from each credit reporting agency at least once a year. Although the free reports do not include your credit score, which may be separately purchased, this is a cost-effective way to track your credit history. But take note that the only official site in which you can take advantage of this benefit is annualcreditreport.com. There are many other sites that lead you to believe you are getting a free report, but then automatically subscribe you to a paid credit reporting service.

Furthermore, everyone should get in the habit of shredding their account statements and any other documents containing personal information before throwing them in the trash. You'd be surprised by how easy it can be to steal an identity, and a small investment in a decent shredder can save you considerable grief.

Remember, it's much easier to take preventive action than reactive action. You don't want to be faced with unpleasant surprises when applying for credit.

Learn how to make sure there are no errors holding you back from obtaining a loan in Check Your Credit Report.

Credit And Debt Management: Credit Cards

  1. Credit And Debt Management: Introduction
  2. Credit And Debt Management: Credit Reports And Scores
  3. Credit And Debt Management: Building Credit From Scratch
  4. Credit And Debt Management: Repairing Credit
  5. Credit And Debt Management: Credit Cards
  6. Credit And Debt Management: Reducing Debt
  7. Credit And Debt Management: Debt Collection And Bankruptcy
  8. Credit And Debt Management: Credit Counseling
  9. Credit And Debt Management: Credit And Relationships
  10. Credit And Debt Management: Conclusion
RELATED TERMS
  1. Negative Information

    Data in a consumer’s credit report that lowers his or her credit ...
  2. Credit Mix

    The types of accounts that make up a consumer’s credit report. ...
  3. Credit Utilization Ratio

    An input used in determining a person's credit score. It is the ...
  4. Consumer Credit File

    A collection of data about an individual’s borrowing and repayment ...
  5. Credit Repair Organizations Act (CROA)

    A federal law passed in 1996 that requires companies offering ...
  6. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
RELATED FAQS
  1. How can I improve my credit score?

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  2. What is the difference between bad credit and no credit?

    The answer to this question will depend on what information (if any) is found on your credit report, such as any bankruptcy ... Read Answer >>
  3. Is it possible to have a credit limit that's too high?

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  4. How do I get my free credit report and score from each credit bureau?

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  5. What's more important to lenders, my credit score or my credit report?

    Find out why lenders care more about your credit report than your credit score and why you should care more about your credit ... Read Answer >>
  6. What are the best ways to rebuild my credit score quickly?

    Repair your credit score more quickly by talking to your lender, increasing the credit limit on your existing credit cards ... Read Answer >>

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