Many people are turning to professional credit repair programs. If you search on the internet for credit repair, a million different companies show up and they promise to do everything for you in order to repair your credit. Many people that are eager to buy a house often spend money on these programs in hopes that their credit will get high enough for them to take advantage of the current interest rates as well as to qualify to buy a home.
First, don’t use a company that sells credit line. Second, a credit repair service is not a licensed service so look at the details. Credit repair companies many times are NOT licensed, so look at their information and ASK them what they are going to do. If they can’t clearly explain what they are doing for you then beware. Finally, before hiring a credit repair agency, look at your own credit report.
There are three different scenarios for people who are debt ridden. Each of them have their own burdens but all of them have equal responsibilities when it comes to paying off their debts. They all have their own reasons and stories that lead them to that particular moment in their financial lives. They also have their own debt relief option that is suited for their unique circumstances.
The first scenario is probably that most lucky of them all: people who have money. Surprisingly, there are people who have more than enough income but still acquire a huge amount of debt. In fact, you will notice that those who have bigger salaries tend to get more loans and credit card debt because of wrong spending choices to support a high-end lifestyle. So if this is you, there is a debt relief option for you. Unfortunately, that option will still require you to settle your balance without any reductions.
For debtors with money, credit counseling and debt management plans should be a good option. With this form of debt relief, the qualifications is a steady income that can support the debt management plan that is created based on how much you can afford to pay. You will consolidate your payments by sending a big amount to the credit counselor who in turn will distribute your payments to the respective creditors.
Another option for people with money are debt consolidation loans or balance transfer cards. Apart from the steady income, you also need a good credit score or a collateral to get a low-interest rate on the loan you will take out. For the balance transfer, the same is true if you will apply for a new account.
The second scenario is not so ideal as it involves people who are short in cash and finding it difficult to reach even the minimum payments. When this is you, that means you are struggling with your minimum payments. This will mean you need to find a debt solution that will allow you the lowest payment terms possible. The best option for you at this point is debt settlement. It is also called debt negotiation or debt reduction. It aims to negotiate with a creditor or collector to allow you to pay only for a certain percentage of your outstanding balance and have the rest of it forgiven.
This can be done by yourself or through the help of a debt professional. This form of debt relief will allow you to get rid of your debt faster and without paying for the whole balance – but it will have negative effects on your credit score.
The last and the most desperate of all three is when you have no or very little money to work with. There are those who are in very dire financial situations after either losing a job or being put through a serious medical condition (either them or a family member that they are supporting). Some people who have even a little salary to work with may be able to afford a debt settlement program as their debt relief option. However, if they can only afford to pay lower than 25% of their outstanding balance, their only hope may be bankruptcy. This is the fastest way to get rid of debt and your creditors will no longer bother you after a judgement has been passed. The downside is you still get to pay as much as $3,000 for the whole process and your credit score will get a very serious blow.
It is best to get the advice of a credit counselor. Though you plan to skip on paying professional fees to achieve debt relief, you need at least an adviser to point you in the right direction. Their services are usually free so you can take advantage of it.
A credit report an give you a great idea of why your score is the number it is. A report is an accurate portrayal of how you have used your credit. Repair won’t happen overnight, but obtaining a report will give you a good idea of where to start.
When you receive your report check for any recent account activity. Look through and make sure that all account activity was done by you. If you see any hint of mixed accounts, or signs of identity theft get it corrected right away to protect your score.
If you have any paid off and closed accounts, be sure that the status is listed as zero. Also check that it is “paid and closed”. If you closed the credit line recently it may not show up on your credit report for 1 – 2 months.
Check to see how many inquiries have been made about your credit. Who has been requesting your credit information? See who they are and if they look familiar. Also notice the amount of inquiries, since more than one inquiry over a 6 month period can lower your credit score.
Check your current credit status. It is good to get a new credit report once a year. That way you can double check for things that can hurt your credit score.
Check how many negative strikes you have on your report. These include things such as late payments that result in lowered credit scores. These things should be listed on your report for at least seven years.
If you have filed bankruptcy before this will obviously hurt your credit score significantly. Bankruptcy usually lasts on your credit report for at least a decade. If any negative items are outdated be sure to contact your credit repair company to have them get them removed from your credit history.
Lastly, it is important to keep all your personal information current. Watch out for any misleading information on your report. This can be a sign of identity theft or a mix up with another person’s credit history.