Bad Credit Repair & Counseling

Repairing bad credit is one step in building and maintaining good financial records, but you must also handle your bills and debt load properly in the future, too. Your regular payments and balances combine to make up 65 percent of your score. Effective credit repair requires fixing your credit reports and getting counseling to hone your debt management skills.

Assessment

Assess your credit by ordering your Experian, TransUnion and Equifax reports through annualcreditreport.com. The Federal Trade Commission website advises that this site issues free reports every twelve months, while the credit bureaus charge for orders directly through their company sites. Highlight all of the bad items on each report. The information sometimes differs because the bureaus are not affiliated with each other. They collect and report data separately. Review the highlight items for mistakes in names, dates and amounts.

Repair

Credit bureau mistakes are the basis for credit repair because the Fair Credit Reporting Act mandates an investigation of every error you report. Agencies have only get 30 days to look into your disputes once you submit them, which is done on each bureau's website. Any items not verified within that month must be erased by law. You can get a lot of negative data removed if the bureaus are too busy to conduct thorough investigations or if the creditors do not cooperate with their inquiries.

Credit Counseling

Removal of past negative items is only a temporary fix if you neglect your bills going forward. Credit counseling firms offer classes, online information, financial counseling, budgeting assistance and debt management plans, according to the FTC. Many firms are non-profit, although they still charge fees for certain services. Counseling typically takes place in an office, over the phone or online. The counselor asks financial and personal questions to assess your situation and prepare suggestions for you. Outcomes range from preparing a budget to entering into a formal debt management plan to filing for bankruptcy.

Warning

The Internal Revenue Service warns that not all credit counseling firms are legitimate, even if they have non-profit status. Some make unreasonable promises, like erasing bad credit or solving your financial problems within weeks or months. Get an agency referral through a professional organization (see Resources) or from a trusted source like a bank, credit union or university. Ask whether the counselors are certified through an outside company and insist on full fee disclosure before accepting any services.