Help for Fixing Consumer Credit

Getting into trouble with credit is not hard to do. High credit card balances on multiple accounts, missed payment or collection can really hurt a credit history. A bankruptcy or foreclosure can damage it for between seven and 10 years. Consumers can fix their credit, but it takes commitment, time and effort. Sometimes it also takes a little help from outside sources.

Credit Report Errors

Many people in trouble with credit problems fail to realize that they are best person to help them out of a bad credit situation. A copy of a current credit report is the best place to start, and annualcreditreport.com gives every consumer a free report from each of the three major credit bureaus once a year. It is not unusual to find errors on a credit report, such as accounts with incorrectly reported data or ones that belong to someone else. According to the Federal Trade Commission, sending a letter to the credit reporting agency listing the disputed account info and supporting data can start the process of correcting the information. The agency has 30 days to investigate the claim and request an investigation from the creditor. If the information is invalid, then the agency will correct the account entry.

Collections

Accurate, but damaging, credit items on a report are harder to fix. According to the credit reporting agency Experian, a collection account shows both a balance and a delinquency, both of which negatively affect a credit score. Paying off the debt changes the balance to $0, which is a positive factor, but the impact of the delinquency remains. However, the longer the period since the delinquency, the less impact it has on the score. After several years, the delinquency will have little to no lingering effect to a credit score. In addition, all negative reporting falls off a credit report in seven years.

Credit Counseling

Sometimes it is difficult for a consumer to gather the persistence and discipline required to fix her own credit. There may not be enough time in her schedule, or creating a repayment plan is a challenge because she cannot manage her spending. In those cases, a credit counseling agency can really help. These nonprofit agencies help negotiate settlements or better terms with creditors, set up a monthly budget and help create a payment plan called a debt management plan. A credit counseling agency may also collect one monthly debt payment from the consumer and distribute it among his creditors. These agencies receive a low monthly fee, typically $25 or less, along with a sign up fee of no more than $50. Some agencies will perform services at no cost to the consumer. The National Foundation for Credit Counseling helps consumers find the right reputable agency.

Credit Repair

Credit repair is the last step in fixing a credit history. New loans, such as auto loans, give the consumer the chance to show that her credit mismanagement is behind her when they are paid on time and in full. Secured credit cards, which hold money equal to the credit line amount of the card aside in an account, are another way to start building a positive credit history. After about two to three years, poor credit scores can recover into the average range.