Bad Credit Resource Center

Your credit score gives you a snapshot of your overall financial habits - especially your habits surrounding debts and other financial responsibilities.  Developing some good financial habits can help your credit score by putting you in a good financial position. 

Good financial habits will ensure that you don’t get into too much debt and that you’re able to meet your financial obligations.  Learning to budget is a financial skill that is especially credit-friendly.

One of the primary reasons that people develop bad credit is overspending.  In many cases, this overspending is caused by a lack of a budget.  A budget lets you know how much you should be spending on each area in your life.

Contrary to popular belief, a budget does not have to be constricting or complicated 0r boring.  Simply note how much you earn each month, and on a piece of paper, write down how much you really need to spend on savings, rent, utilities, food, personal care, transportation, spending money, entertainment, hobbies, education, and other items.  Be sure that you account for every expenditure.

Then, just commit yourself to spending that particular amount on each item on your list.  Of course, some expenses on your list will change each month - for example, you may spend more on heating bills in the winter than in the summer - but estimating can help ensure that you can meet all your financial responsibilities.
 

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A good team of professionals can help you with your credit score.  The most important member of your team is going to be yourself - you’re the one with the financial urgency and the knowledge to become your own best champion in repairing your credit.  Besides this, you may want to check with your local library for financial help books. 

You may also want to include financial experts such as credit counselors or others to help you.  If you decide to seek a team of experts to help, be sure that you check each person’s credential, standing with the Better Business Bureau, and past clients to make sure that the person or company can really help you.  Also, be sure that you sign a contract or agreement with each professional member of your team.

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There are a number of credit repair scams around.  These scams usually promise to improve your bad credit situation, when in reality the “experts” offering these services will either overcharge you, actually put you in a worse financial situation, or involve you in illegal activity.  Here are some common scams to be aware of:

1) Credit repair companies that tell you to lie on loan applications or suggest that you develop a second identity.  This is illegal and dishonest. If a company suggests that you open accounts in a new name or falsify your information on loan applications, you better get away. 

You can be charged with fraud for doing this - and you’ll be held responsible for your actions, even if you were acting under the company’s advice. 

2) Credit repair companies that promise to pay your creditors from money you pay to them and which they keep in an escrow account.

Here’s how it works: the debtor gives money to the credit repair company, presumably for paying off debts.  The company places the money in an escrow account where it grows.  The idea is that the company will eventually pay off your debts when the amount reached in the account matches the debts.  The problem is that in the meantime, the credit repair company is removing some money from the account for administrative fees while creditors are becoming more and more anxious, increasing the interest on the debts and even starting legal action against the debtor.  This type of “credit help” actually ruins your credit rating!

3) Credit repair companies that ask for money up front, charge you fees or hidden fees for things you could do for free yourself - such as working out a budget or getting copies of your own credit reports and fixing the errors.

4) Credit repair companies that pressure you, don’t listen to you, or want you to sign a contract you have not read. These companies should not to be trusted.

5) Companies that don’t tell you your rights. 

If a company doesn’t advise you of your credit rights, that’s an indication that they are not really on your side. Why would you want to do business with a company that does not help you?

6) Companies that offer you fast or instant credit repair - no matter how bad your credit.  This is a misleading a claim that no company can legitimately deliver on.  If you have very bad credit, it may take years to fully repair. 

In many cases, these companies will claim that they can improve your poor credit history from your credit report by disputing it.  This is false information. You simply cannot remove true and accurate information from your credit report.  It is true that a credit bureau must investigate a claim of inaccurate information within thirty days, but this does not mean that the company will automatically remove the information. 

In fact, if the information is accurate, the data will stand.  Credit bureaus are aware of this common credit repair scheme and have become very good at detecting it.  Many credit repair companies (and even some individuals) will try to dispute every ding on a credit report, hoping that the backlog of disputes will cause the credit bureau to automatically remove the offending items from the report (the credit bureau is legally required to remove disputed items it has not investigated within 30 days). This technique is a scam and is dishonest since you’re not disputing inaccurate information. 

Don’t do business with credit repair companies that use this practice.

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Many companies advertise that they can help you with credit repair, but the quality of these services - not to mention what they offer - varies widely.  Some companies can really help you improve your credit while others are actually under investigation for suspect business practices.  If you decide to use a credit repair company, be sure that the company is legitimate and offers you viable services.

Generally, you should be looking for non-profit credit counseling services rather than credit repair companies (some of which are really just lenders offering home equity loans anyway, which are of limited use to you if you want to improve your credit). 

Check to make sure that the company has good standing with the Better Business Bureau and clients who are happy with the credit repair services they received from the company.  Always read the paperwork carefully before you sign and make sure that you know how much you are paying the company in fees and how much is going towards your debt.

Before deciding to seek help from a credit help or credit counseling service, determine the problem can’t be resolved on your own. Indications that you may need credit counseling include:

-You avoid going out because you feel depressed about your financial situation.

-You can’t pay your bills and avoid the necessities of life.

-You have no idea how you will repay your bills and loans - you don’t know where to begin.

-You avoid the phone, the mail, and the door because you are being harassed by collection agencies. 

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If you need bad credit repair, your finances probably aren’t in the best condition.  That means that you should attempt to spend as little as possible on credit repair services - use the money you save towards repaying your debts.  Before using credit repair services, follow the tips in this blog to repair your own credit. 
 
Also, you use free or low cost sources of credit repair help.  Some non-profit credit counseling services are actually registered charities and will work free on your behalf.  If you can get help from one of these companies or undertake credit improvement process yourself, you’ll be able to save money quite easily. Additionally, these companies tend to be more legitimate than credit repair companies that take your money and may provide little value in return.

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