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Credit Repair: The Time For Action

Apr 14, 2008
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Credit repair can be a daunting task. You may have mixed feelings about past credit issues, concerns about confronting creditors, and uncertainty about the credit repair process. But taking action is essential. A nationally recognized credit repair expert offers his advice.

Jump in With Both Feet

The moment you make the decision to start the credit repair process you will feel great; empowered, light, and hopeful. For many people it is a hard step. There may be uncomfortable emotions associated with past credit issues, and revisiting old events can be difficult. But there is nothing more rewarding than regaining control over your life. How do you feel? We suggest you jump in with both feet. You'll be glad you did.

Knowledge is Power

The first step in the credit repair process is taking inventory. You must get copies of all three of your credit reports. Did you know that each credit bureau reports a different mix of account information? Some creditors report to all three bureaus, others report to only one or two. You need to examine all three of your credit reports to get a complete picture as you begin the credit repair process.

Clean Up Your Credit

A truly effective credit repair and restoration plan may include catching up on past due accounts, evaluating collections to determine if they should be paid, negotiated, or ignored, contacting creditors to discuss rehabilitation options, and more. But before you take any of these steps you should make an effort to identify and remove errors on your credit reports. Finding and removing errors on your reports is an important and powerful step in the credit repair process. It may also be the most difficult.

Spotting Errors

An often-quoted statistic from the National Association of State PIRGs (Public Interest Research Groups) states that 79% of all credit reports contain errors. It is also a fact that people with legitimate credit problems are considerably more likely to have errors on their reports. This is because late payments, charge offs, and collections trigger activity such as re-coding of accounts for special handling, and sale or assignment to outside parties for collection. These procedures dramatically increase the likelihood of errors. Credit reporting errors translate into higher interest rates on every dollar you borrow, and many of these errors are hard to spot. Doing the job halfway should not be an option. If you do not feel comfortable tracking down errors on your report you should hire a credit repair professional.

A Disturbing Cycle

The fact that errors are most likely to appear on the reports of those with past credit issues is one of the most problematic phenomena in the credit repair world. On one hand it creates significant barriers for those who can afford it the least; it is difficult enough to regain control over your life after a period of financial stress without the system placing extra obstacles in your path. It is also damaging in a more subtle and insidious way. People with credit issues often feel reticent about the credit repair effort. The emotional discomfort following a period of financial stress makes a critical examination of their credit reports difficult. As a result they live for years with innumerable errors on their credit reports. These errors reduce their scores, cost them money in the form of higher interest rates, and place unnecessary ongoing strain on their budget. But there is good news. Awareness leads to action, and a focused credit repair effort can turn things around quickly.

Rebuilding Your Credit

Another important step in the credit repair process, which is often neglected after a period of financial strain, is the rebuilding of credit. The overall content of your credit report will determine your FICO scores, the scores lenders use in underwriting loan applications and determining the interest rate you will pay. To build your FICO scores it is essential to have current open accounts in good standing on your report. Many people avoid opening new accounts due to fear of denial. This is a mistake. You can work for months to repair your credit, but if you are left without a measurable, current, history of on-time payments your FICO score will go nowhere. Secured credit cards are the perfect credit repair tool. Secured cards require a small savings deposit, and will typically provide a credit line equal to that deposit. These cards are designed for people with credit issues, so you don't have to worry about being denied, and most importantly they will provide the track record the credit-scoring model is looking for.

Developing a Budget

Credit repair requires effort. You will want to insure your efforts continue to pay off well into the future. It is important to make payments on time, incur only manageable debt, and build savings to cushion your budget in the case of unforeseen events. A thoughtful examination of your costs versus your obligations is a perfect complement to the hard work you put into your credit repair. A budget does not have to mean hardship. In fact, you will soon see that it is quite liberating. The effort you put into understanding your finances will give you the information you need to make good decisions in your life, maintain your great credit, build savings, and ultimately allow you to build real personal wealth.

Copyright 2007 James W. Kemish. All Content. All Rights Reserved.
About the Author
Jim Kemish, a nationally recognized credit repair expert, is the president of Sky Blue Credit, a leading credit repair business since 1989. Jim is also the president of Power Mortgage, a Florida mortgage company.
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