Fix your credit

Before we discuss how to fix your credit, a little background information is in order. The American economy has been in one of its worst recessions since the Great depression, but in the last months we have seen reports that are conflicting. The reports have been hopeful, with news of Wall Street gains, a drop in unemployment claims, and an increase in new home starts. It seems that the government wants to give us good news, and in that way build the confidence of the consumer, so that people will start spending money again.
 

Fixing your credit in financialy troubling times

Before the financial crises, with all the foreclosures, rising unemployment and government rescuing financial institutions left and right, people were spending a lot more than they are today, and much of it was with credit. Now people are guarding their money and looking for ever new ways to cut down on expenses, just to be able to make ends meet from month to month. There is no doubt that the financial institutions are doing fine now, however most people have seen their credit score degrade. So you might find your self in a completely different state than the thriving banks, where you need to fix your credit, and for some this is a first time experience. Many people have received e-mail from consumer credit companies inviting you to their program to fix your credit. Sometimes this can be a smart option, but this depends on the scope of your credit problems. If your credit problems are not of a complicated nature, then you can fix your credit your self, with an inexpensive, DIY (do it your self) approach, saving the fees that these companies charge you for their help.

Credit report

First you need to determine if a DIY approach is viable for your situation. It is common to have at least a few credit cards, even a department store card or perhaps a gas charge card. Many also have mortgages and car loans, and if this seems similar to your situation then a do it your self, fix your credit, approach can work for you by saving you money. It sure does need some discipline and time, but the process is realistic.

For starters, you want to get a hold of a copy of your credit report. Everyone can get one free copy per year, and you can obtain you free credit report online or through a local reporting agency. When you receive your report, look over it closely and make sure that all the debts that are listed are actually yours and that they are stated accurately. An increasing problem is identity theft, and people have seen all kinds of debts on their report acquired by scam artists. So if you see any debts that are not yours, or other inaccuracies, you need to start by addressing these. One way is to write a letter to the creditor informing them of the inaccuracy and asking them to provide proof that the amount stated on your report is truly yours. You do have a safe guard here, where the law requires the creditor to bring forth documentation and proof that the debt is yours, if you dispute the debt within 30 days of receiving the initial communication from the creditor. The dispute should be sent in writing, preferably by certified mail, and if the creditor doesn’t verify your debt within 30 days they are not allowed to collect it or list it on your credit report. This process is called debt validation, and is governed under the Fair Debt Collection Practices Act.

If the 30 day time period has passed, your rights will be weaker, but you should still contact the creditor if you believe a mistake has been done or you have been scammed by identity theft.

Missing credit card payments

Another common issue is when you miss credit card payments. The unfortunate truth is that there is no way to reverse this fact, short of inventing a time machine. But that doesn’t mean that the creditor wants you to default, and the penalty is therefore a simple (yet hefty) late fee or an increase in the APR associated with your card.

A good idea is to contact the credit card creditor and try to negotiate a reversal. You might not be able to get them to waiver the late fee, but you might have some luck in getting them to lower you APR back to where it was, especially if you are not a regular, late payer. If they see that paying late is common for your account, try to explain that you are in the process of fixing your credit, and part of your plan is to begin paying your bills on time. Ask them to consider a rate cut as a way of helping you get on the right path. Of course, if you do get a rate cut, the next time you pay late they will not be that forgiving. While this might sound like an unrealistic question to ask a creditor, remember that they want you to continue doing business with them, and for you to pay your bills on time. A bankrupt customer is worth nothing to their business.

Pick up the phone

If you come away with just one moral from this article, it should be to pick up the phone and call your creditors. You will be amazed at how friendly some of them can be, and willing to work with you to reduce your debt and fix your credit. On the one hand they do not want you to leave and go to a competitor, and on the other hand (as I mentioned above) they do not want their customers not to be able to pay.

In some cases it can take a while for this fix your credit strategy to pay off, but as long as you establish prompt payments, with time you will be restored to a good credit rating. It usually all comes down to dollars in versus dollars out, and while you have your first look at your credit report you will want to take a firm grip on your budget. Stop wasting money on the things that are not completely necessary, and use that money instead to pay your bills on time, and better yet make bigger down payments on your debt. You might want to start with your smallest debts, paying them off to give you the positive physiological effects of seeing a debt go to zero.

Every dollar counts

When fixing your credit, remember that every dollar counts. In time you will be very grateful for the effort you put in to this, as you feel the strains of being underwater in debt gradually fades away!