Bad credit is a barrier to getting new accounts, and credit reports riddled with negative information affect insurance applications and employment opportunities, too, according to the Federal Trade Commission website. You need to get debt under control and clean up your credit reports to negate the adverse effects. You have self-help options for fixing bad credit and can also use outside resources.
Negotiations
You are free to negotiate with your credit card companies or collection agencies that purchased your accounts to get rid of debt and improve your bad credit rating. Liz Pulliam Weston of the MSN Money website explains that lenders sometimes make settlement offers before charging off seriously delinquent accounts. If you can afford the offer, ask the creditor to report the account "paid as agreed" to the credit bureaus, which is a positive notation. Debt collectors often negotiate, too, because they buy debt cheaply and make a profit with discounted settlements. Offer what you can afford, and make removal of the collection account from your credit reports a condition of your payment. You do not need professional help to negotiate your debt. The Federal Trade Commission warns that many negotiation firms are scams and will make your credit rating even worse.
Education
Bad credit results from many circumstances. Some are unavoidable, like unemployment, divorce or illness, but some can be offset by education. If you get into trouble through mismanaging your money, budgeting education can help. Nonprofit credit counseling firms offer useful materials through their websites, according to the FTC. Some counselors also give seminars, and community colleges, credit unions and churches sometimes have financial courses.
Debt Management Plans
Debt management plans ensure your creditors get their money on time and make you debt free within a set time period of up to five years. Credit counselors set up these plans by working with your creditors, according to the FTC. Good counselors sometimes get your interest rate lowered or get lenders to forgive late payment penalties that piled up on your accounts. Your monthly payment goes to the counseling company, which deducts a fee and distributes the remaining money to your bills. The on-time payments and falling debt raise your credit score over time.
Credit Report Clean-Up
Some of your bad credit might be tied to mistakes on your credit reports. Federal law helps you fix this for free by giving you access to one copy of each of your three reports annual at no cost and spelling out a dispute process that requires the credit bureaus to cooperate in a timely manner, the Federal Reserve Bank of San Francisco explains. Get reports through the official annualcreditreport.com order site, find mistakes in bad entries and notify Experian, Equifax and TransUnion, the three major credit bureaus, through their online dispute pages. They get one month to handle your complaints and make appropriate changes in your files.
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