How to Repair Your Credit for Free Yourself

Credit repair is an important part of improving your financial standing. Not only does good credit afford you opportunities to purchase big-ticket items--such as a car or a home--at lower interest rates, it may also help you rent an apartment or get a job. Many people invest much-needed funds into costly credit repair programs, only to find themselves no better off than they were when they contacted the credit repair agency. Fortunately, there are ways that you can repair your credit yourself--for free.

Instructions

1

Get a copy of your credit report from each of the three major reporting agencies: Experian, TransUnion and Equifax. This gives you a clear idea of where you need to start in terms of settling old accounts and working with your creditors. Write down contact names and phone numbers next to each account on your report, so you'll know who to talk to and what number to use to reach the company. You can find this information on your bill or online. If you do not have a contact name, you can call the main customer service line and ask them for the best contact.

2

Draft a letter to all of your creditors either requesting a payment plan or informing them of your intent to pay. Most creditors just want to get their money back, and they will be willing to work with you while you clean up your credit.

3

Offer a reasonable payment plan to larger creditors. Come up with an amount you can afford to pay each month and offer to begin making the smaller payments to eradicate your debt.

4

Ask for a settlement on moderate to small accounts. For example, if you owe $1,500 on an old credit card, the company may be willing to take $750 for it, provided you can pay it all at once. If they agree to a settlement amount, ask for it in writing, so they can't claim later that you still owe them money.

5

Monitor your credit report closely. As you pay off accounts, send a request to the credit bureaus and the company you have paid to update your account to reflect its new status. Some companies are much slower to report the good news of a paid account than they are the bad news of a past due one. It's up to you to stay on top of them about it.

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What Do You Do if a Collection Agency Won't Accept Your Proposed Settlement?

Submitting a settlement offer to the collection agency handling your overdue bills can help you resolve the debt for less than you owe. While some agencies eagerly accept settlements, other agencies do not accept a proposed settlement offer. Having your initial offer rejected doesn't mean the agency won't accept subsequent offers.

What is a Settlement?

A debt settlement is a way for debtors to pay off balances owed to creditors. Debtors would ordinarily have to pay off the complete balance to satisfy the debt. But when this isn't an option, some collection agencies and creditors will negotiate a settlement. Settlements involve paying a collection agency or creditor a lump sum that's less than the existing balance on the account. Collection agencies may allow settlements when a borrower faces bankruptcy or other financial hardship.

Process

It's likely that a collection agency will not accept the first proposed settlement offer. For this reason, it's wise for debtors to start with an offer that's less than they can afford. This allows room for negotiating with the collection agency. Bankrate.com recommends offering an initial settlement amount around 30 cents on the dollar. Call the agency and speak with a person who handles proposed settlement offers. State your name and account number and present your settlement offer.

Negotiating with Agencies

Collection agencies want to collect on overdue balances, and most will negotiate a settlement that both parties can agree on. Don't budge on your offer if the collection agency rejects your proposed settlement. If you're planning on filing bankruptcy papers to eliminate your debts, mention this while negotiating with the collection agency. The collection agency will most likely counter with a higher settlement offer. Only agree to a settlement offer if you can afford the amount.

Considerations

To ensure that collection agencies uphold their end of the agreement, get written confirmation of the proposed settlement. You can ask the collection agency to send a letter outlining the terms of the settlement or you can send or fax a letter to the collection agency. The agency will sign the agreement and mail you a copy. Hold off sending your final payment until the collection agency provides a signed letter confirming the settlement agreement.

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Government Help for Senior Citizens' Credit Card Debt

Federal, state and local governments provide billions of dollars in grants funding every year to qualified individuals and organizations who want to use government money for the betterment of society. Unfortunately, this fact causes many Americans, including senior citizens, to fall prey to grant scams that falsely promise to pay off debts. The worst criminals steal not only money, but also private information; and they use it to establish false identities.

The Scam

Sometimes the scam comes in the mail. Sometimes it's on TV or in magazine ads. It may also arrive through a telephone call. However, the scam is always the same: a false promise to provide "free government money" that doesn't have to be repaid. Seniors are particularly vulnerable to con artists because they're often told they're eligible for a grant because of their age, according to the website Snopes. Another common scam occurs when a senior is told he's eligible just because he paid his taxes on time.

How to Recognize a Scam

Government grants do not require applicants to pay a fee to apply. Grants also don't require applicants to provide personal information, such as Social Security, bank account and credit card numbers. The government does not reach out to people to offer a grant; the applicant must seek out the grant. Real grant information is available for free on the web from federal, state and local governments. Applicants do not have to pay for grant searches or grant criteria.

When Grandma Is Scammed

If you or someone you know has been scammed, immediately order credit reports from Equifax, Experian and TransUnion, and file a complaint with the Federal Trade Commission and your state's attorney general's office. Checking grandma's credit history is essential; the worst scammers use personal information to establish a false identity. With the new identity, the scammer secures and defaults on new loans, which can ruin her credit. She should alert the credit bureaus of her stolen identity, since debt can lead to wage garnishments or home foreclosures.

Legitimate Debt Help for Senior Citizens

If you or a senior you know needs debt relief, call a legitimate credit counseling agency. The National Foundation for Credit Counseling is a well-respected nonprofit agency that partners with local agencies to provide help for people of all ages. If your senior owns a home, a reverse mortgage may be an option. In a reverse mortgage, the homeowner receives regular payments from the home's equity, which don't have to be repaid until the homeowner dies or the home is sold (applicants must be age 62 to apply). There are also debt settlement options, and even bankruptcy as a last resort.

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How Long Does a Judgement Appear on My Credit?

When you receive a judgment against you, it will show up on your credit report. At that point, your creditors and potential creditors will be able to see the judgment. This can influence lending decisions and make it more difficult to get credit again in the future. The length of time that the judgment stays on your credit report will vary, depending on the type.

Collection Accounts

When you do not pay a bill, the account will most likely go into collections. When this happens, the creditor will report the item as a negative on your credit report. The item will typically be reported to the credit bureaus approximately 180 days after it first becomes delinquent. From that point, it can appear on your credit report for about 7.5 years from the date that it is reported to the credit bureaus.

Bankruptcies

If you have a bankruptcy judgment against you, it is much more severe than simply allowing one account to go into collections. Because of this, you will be on your report for a longer period of time. With a bankruptcy judgment, it will remain on your credit report for a period of 10 years from the date of discharge. This applies regardless of whether you file for Chapter 7 liquidation bankruptcy or if you file for reorganization under Chapter 13.

Student Loans

The one exception to the 7.5-year rule on delinquent accounts is student loans. If you do not pay student loans and they remain delinquent, they can stay on your credit report indefinitely. The student loans will remain on your credit report for as long as they are outstanding. To remove the student loans from your credit report, you will have to pay them off. They also cannot be eliminated through filing for bankruptcy.

Tax Liens

Another type of negative item that could show up on your credit report is a tax lien. A tax lien is placed on your property when you do not pay your property taxes or your personal income taxes. When this occurs, it will remain on your credit report for seven years from the time you pay the lien. By comparison, other liens stay on your credit report for that amount of time regardless of when you pay.

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Credit Risk Management Strategies for Consumer Lending

Consumer credit companies utilize a variety of risk management strategies. They fund the credit bureaus that track consumer credit behavior, allowing companies to evaluate potential borrowers based on their past credit behavior. Collection agencies can harass delinquent borrowers until they pay their debts. In many cases, as with mortgages guaranteed by the Federal Housing Administration (FHA), consumer credit companies turn to the government to manage their risks.

Credit Behavior Monitoring

Credit scores and credit reports are the primary means by which consumer lenders insulate themselves from risk. By observing the ability of a consumer to manage his debts responsibly, they can determine how risky it is to lend him money. There is always risk in any business venture, but past behavior is a reasonably good indicator of future performance. The credit score system is largely automated, however, and consumers can take advantage of ways to take on more risk than the companies price into interest rates.

Lawsuits

Creditors have a right to sue for collection for delinquent debts until the statute of limitations runs out in the state in which they made the loan. These lawsuits are usually only profitable for debts well into the four figures, but it is an effective method for encouraging debtors to continue to meet their obligations. If creditors were not able to sue for collection, it would be much easier for debtors to walk away from their contracts.

Seizure of Secured Assets

Consumer lenders manage their risk by offering secured loans such as mortgages and auto loans. A mortgage holder is less likely to default on someone's debts if it knows she will lose her house if it does so. Credit bureaus award higher scores to individuals with a mixture of secured and unsecured debts because it is more difficult for them to enter bankruptcy or default on their loans without suffering major consequences. The mere threat of asset seizure keeps many debtors making their minimum payments.

Debt Settlement and Collection

Consumer lending companies protect against the possibility of a total write-off by selling delinquent debts to collection companies. This enables the lender to recoup at least some of its losses and saves on the overhead of running a larger collections department. Lenders also make offers to settle debts for less than the original amount to work on reducing their losses. These settlements end up working out even more in the favor of the lender because any loss on the original debt can be written off for tax purposes.

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How do I Manage Credit Card Debt While Unemployed?

Unemployment, no matter how dedicated you are to your job or the amount of time you have worked at your firm, can strike you at any time. In times of economic uncertainty, extended unemployment may occur even if you search for another job vigilantly. Most financial institutions understand the devastating effects of your loss of income, and usually will work with you to manage and control your credit card debt. Unemployment does not have to destroy your credit rating.

Instructions

1

Pay the minimum monthly amount on your credit card; this allows you to maintain your credit rating, prevents interest rate increases, and eliminates the possibility of credit companies seizing assets or bank holdings. There are no negative consequences on your credit rating when you pay the minimum payment. Depending on your credit rating, a bank may work to lower your monthly payment temporarily.

2

Consult a debt-management program to assist you in consolidating your credit card debt. There are many non-profit organizations that will work with you if you are unemployed and cannot make your financial obligations. Debt-management companies will negotiate on your behalf, as well as create a modified monthly budget for you to follow. These non-profit organizations may also work to lower your monthly minimum payment and interest rate. Instead of paying your financial institutions, you make payments to the organization assisting you with your debt.

3

Avoid putting more money on your credit card while you are unemployed. Creditors and financial institutions react negatively when you place more than 30 percent of your available credit on your credit cards. Additionally, these institutions can track if you are placing groceries and other day-to-day items on your credit card continuously. Banks and lenders may choose to raise your interest rate or lower your available credit limit when they find this activity.

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About Section 609 of the Fair Credit Reporting Act

Consumers have the right to be informed if and when someone requests a copy of their credit report, and the Fair Credit Reporting Act protects the rights of consumers in this regard. Creditors, employers and other vendors cannot gain access to your report without your consent. Further, once your credit report is accessed, you have the right to request a review of the information reported about you.

Identification

Section 609 of the Fair Credit Reporting Act (FCRA) refers to a consumer reporting agency's obligation to disclose information to consumers upon request. Credit reporting agencies are required to make available all information in the consumer's file, as well as the sources of the information on file. The information disclosed must also include the dates and original payees of all accounts. Further, Section 609 of the FCRA stipulates that consumer reporting agencies must clearly make consumers aware of their right to dispute information in their credit file.

Summary of Rights

According to Section 609 of the FCRA, a summary of rights must be included in the information disclosed in a consumer credit file. A consumer reporting agency must include a toll free number of the agency as well as a list of federal agencies that can enforce provisions of disclosure documents. In addition, credit reporting agencies must also disclose the rights of victims of identity theft. Victims of identity theft are entitled to documentation of fraudulent transactions within 30 days after filing an identity theft claim.

Credit Scores

Credit reporting agencies must supply consumers with a credit score based on a scoring model used by residential property lenders, according to Section 609 of the FCRA. The score should accurately assess the consumer's credit behavior as well as accurately predict future credit habits . Consumer reporting agencies are allowed to charge a "fair and reasonable fee" to obtain a report and/or credit score.

Considerations

The Fair Credit Reporting Act is federal law. Section 609 of the FCRA must disclose a statement that consumers may have additional rights under state law. State or local consumer protection agencies or the attorney general's office usually have a list of state laws regarding credit reporting, debt collection and rights violations.

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