If you have any experience as a consumer, you know that your social security number equals a credit report that has entries reflecting your financial habits and overall worthiness as a responsible consumer. You should understand by now that credit bureaus and creditors are not infallible, they can make mistakes on your credit report unknowingly, and unfortunately, it is you who must catch these inaccuracies and fix them.

Credit Scores – the warm and fuzzy creditors love.

Credit reports are more than just a list of accounts with their payment history, yes it’s true that creditors love to see lots of green tabs and positive check marks on your credit history. But lately, one of the most important factors and probably the deciding factor in whether you get credit approval or not is your credit score.

This three digit number speaks volumes to anyone researching your financial life. It’s no surprise that so much emphasis has been placed on credit scores in the last few years since that’s the first impression creditors get from you. Consumers have also gotten more apt to actively manipulate their scores by doing certain things that can legally raise their scores. From making larger monthly payments, to paying in full and then borrowing again, to fixing inaccuracies in their credit reports either alone or by hiring a credit repair agency.

What to do about credit inaccuracies.

Many people today are living with credit inaccuracies and outdated information, mostly for lack of knowledge on what to do about them or simply because they don’t even know they’re there. These entries vary from late payments that were never late, to closed accounts that still show as open, to defaulted accounts that should be included in bankruptcy, etc

The Fair Credit Reporting Act established for consumers the right to dispute credit entries for free, however the process is often lengthy and complicated so handling it on your own is definitely the hard way of doing it and although you can save you money this way it can’t guarantee results.

Hiring a credit repair agency would be a better approach, BUT! Proceed with caution. What does that mean? Well, you can’t erase accurate entries from your credit report nor can any credit repair agency. No one has these magical powers or special ways of doing this. I mention this because there are in deed a lot of scams in the field of credit repair, so many in fact that it’s really hard to tell anymore if an agency is legit or not.

If you have true inaccuracies and outdated information that needs to be fixed then by all means begin by consulting a credit repair agency and get a good feel for how they work and what it is exactly that they intend to do for you.

Finding reputable credit repair agencies.

Just like you shop for auto insurance or a primary care provider, you should take care of doing the proper screening when looking for a reputable credit repair agency. The Better Business Bureau is not a bad place to start your research and definitely only consider those companies with satisfactory records.

Also it’s important that you know that the Credit Repair Organizations Act establishes that these agencies must follow specific guidelines in order to protect consumers. You should be made aware of these and be given any disclosures before you sign anything. Your contract should have the following information:

• Terms for Services, which should include any limitations and disclosures.
• A detailed description of the services to be performed and their total costs.
• The time it will take to achieve the promised results.
• Any guarantees they are offering you.
• The Agency’s name, Point of contact, business address and website.

Be suspicious of any company that does not have a website, this is a sign that they’re not well established or not established at all and you could be dealing with someone whose intent is to run with your money. On that note here’s a list of tell tale sings that you may be dealing with a professional scammer and not a legitimate credit repair agency:

• The agency representative asks for payment before the services are provided. According to the Credit Repair Organizations Act, this is a violation and more than likely you’re not dealing with someone who adheres by these laws.
• Outrageous promises, like removing all bad entries from your credit report to include your bankruptcy record, any judgments, leans etc. Once again, “no one” has the power or right to do this, if the entries are accurate.
• The agency representative insists that all credit entries are disputable and encourages you to participate in your own dispute by sending letters to the credit bureaus. This is based on the theory that if creditors do not respond within 30 days the entries can be erased. The process of verifying credit entries today is much easier than it was 5 years ago, it does not take 30 days to verify these entries, they can be done within hours of receiving the dispute.
• The agency representative suggests or lays down a plan for you to get a new identity under a new social security number. Should you hear these words come through the phone line, simply hang up immediately and report the agency. You do not want to willingly participate in such procedures, you will be held liable for such actions and prosecuted by the federal government. This is a felony and it is very serious!
• The agency representative makes outrageous claims about their experience and the number of clients they have helped, yet has no way of proving it, or insists on you reading testimonials on their website or pamphlet. Never base your decision on testimonials these are heavily abused and never worth the time reading anyway. The best testimonial you can read is that which the Better Business Bureau provides for its registered companies.

Should you want to consider giving it a go on your own, visit the Federal Trade Commission’s website and at the bottom of that article you’ll find a sample dispute letter that you can tailor to your situation. Keep in mind that this approach will take you more time and effort, but it is most certainly possible to achieve the same results if you truly believe that you have inaccurate entries on your credit report.

Even if you’re in no danger of filing for bankruptcy or find yourself in a financial struggle, you proabably often think and worry about your credit rating. This is obviously one of the most important aspects of you as a consumer, it lets creditors know who you are and what financial habits you have. If your credit rating is currently less than desirable I’d like to offer you a few tips on how to take control of your credit score.

Limit the number of credit cards you sign up for – Ideally each individual should have no more than 3 credit cards, this is engouh to get you started building some credit history. You should also never sign up for more than one credit card at a time. Each time you submit an application, your credit is queried and this normally is ok once, but if you have several creditors querying your credit for the same thing, you’ll likely lose precious points off the top. More credit cards can be added later, but I would recommend that overall you have no more than 5 credit cards total.

Always pay more than the minimum – Paying on time is only part of your FICO score, your overall score will take into account how well you’re able to reduce the total outstanding balance on your credit card. If you only pay the minimum on your bill, you will continually show a high balance that’s only creeping down slowly. Try alternating the increase on payments each month, so if you’re minimun payment averages $40 dollars, you can pay that $40 dollars this month and next month pay at least 50% more of the minimum payment. This will crearly show that you are able to eliminate your balances.

Don’t close credit accounts you don’t use – I used to think this was a good idea, but it turns out that you really are deleting good history from your credit report, especially if these are accounts you’ve had for some time. It’s important that you show that you have been managing your own credit for some time, this experience counts. Also, and most importantly, if you close an account you’re eliminating available credit, you could potentially borrow from this account and this is taken into account as well in determining your overall FICO score. However, it’s also important that you keep in mind that there’s an even more important factor to this formula and that is to keep a ratio of no more than 30% of that available credit in use.

Nevermind those department store credit cards – Don’t bother with these, sure they entice you with a 10% discount, but this is another oppotunity for you to amount debt that must be paid back at a high interest rate no matter what your credit score is. Not only that but you will get another hit on your credit, which will take more points off your current FICO score. You may say to yourself “I won’t use it” I just want the 10% discount, but the damage is done once you turn the application in. Your credit will be queried and you will lose points; all so you can save 10%. It’s just not worth it.

Do not lend your credit! – I probably should have put this on top. I have also mentioned this point through other posts on this blog. Your credit should be like your underwear, you just don’t let others borrow it. There are so many dangers in doing this, you have to realize that you’re putting yourself on the line when you co-sign for credit card applications or major purchases like an auto mobile or anything else that requires someone else to bring a co-signer. Chances are, they don’t qualify for the credit on their own because they were not responsible with their own credit. There are times of course, when there are exceptions to this rule, and that is when you’re dealing with family members. Obviously it’s tough to turn your back on your family when they’re in need, by all means lend a hand just make sure they understand that you are taking on a risk that can affect your LIFE. They must understant this clearly.

Bankruptcy is going to leave a bad taste in your mouth for years to come, it’s a fact. If you have read the news lately, then you know that bankruptcy courts are working overtime to process the growing numbers of bankruptcy petitions being filed. This may leave you wondering now how to recover from bankruptcy after being discharged. Consumer bankruptcy has its advantages but there is a recovery period and the process maybe slow.

The fact of the matter is that it is now a done deal, you’ve filed for bankruptcy and you’ve been discharged and although that was somewhat of a relief initially, you are now facing a bleak future with your new credit. There are some things you can do for yourself to help you get through this and recover from bankruptcy in a progressive manner.

Reestablish credit with a bankruptcy credit card – It’s not that you can’t get credit anymore, it’s that you don’t qualify for a good rate. Because creditors who will consider your application are in fact taking a chance on you. So they invented programs where you can get a credit card again and this is an important move in recovering your credit. This is often referred to as a bankruptcy credit card, you just have to pay more on your interest rate. Much more sometimes. it’s not unheard of that creditors will charge anywhere from 19% to 29% for these types of programs. So do some digging but always shop around and try your best to get the best deal. Once you do get your new credit card, use it only for necessities and emergencies. Do not take cash advances unless it’s a true emergency and always pay on time. Reestablishing a positive record of credit transactions will begin the recovery process for your credit and soon enough you’ll forget that you filed bankruptcy.

Check your credit history often – This is something that a lot of people overlook, they think that because their credit is ruined they should not bother to check it anymore. You may find that your credit will have more mistakes after filing bankruptcy. Sometimes after bankruptcy some of your debts will remain recorded in default on your credit report, when they should be labeled “included in bankruptcy”, if this is the case then you need to take the necessary steps to fix this, because if the entires remain in default no one will ever lend you a penny. Also collections accounts may appear especially if your debts were sold to collections agencies and then your debts were discharged in bankruptcy. No creditor will ever bother to make sure that your credit is updated correctly and since they won’t be getting paid the last thing they’re going to do for you is a favor. So make sure you use the credit bureaus dispute systems to get these entries corrected. Next, you need to sign up for credit monitoring from one of the three credit bureaus for a fee or sign up for your annualcreditreport.com, for free, which you can only do once a year, but you need to get something.

Be on the alert for shoddy deals – Lenders will access public records to target filers of consumer bankruptcy, this is a well known fact because your bankruptcy file is public record and anyone can access them. They access these records so that they can offer you credit, auto deals, and even home financing. Often they will emphasize that your credit does not matter and they can finance anyone. You MUST be very cautious with these deals. They are geared to making lots of money from desperate people. This is not a good way to start recovering from bankruptcy. Read these terms carefully and ask all the questions you can and if it does not feel right to you then don’t do it. Keep looking and you’ll eventually find a creditor with a better deal, it’s a bit tougher and the choices are limited but you have to realize that you could be getting yourself into more trouble financially than actually helping your cause. Remember that always, these companies would not come after you if they didn’t have something very valuable to gain. They are never acting in your best interest.

Consult with professionals and get support – You don’t have to have a lot of capital to go to a financial planner, they’re there to assist everyone. After your bankruptcy discharge you should be clear of your some debts or repaying them under better terms, you should be on a tight budget and making sure your extra cash is going some place where you can’t touch it. You won’t always have the knowledge to know how to invest your money and you may not always know what kind of budget you should adopt to start making significant improvements, that’s why financial counselors are there. You won’t be able to recover from bankruptcy if you don’t adjust your budget considerably. It’s all about change and it’s all about looking back at where you were before and where you are now and most importantly what you can do to ensure your future brightens up. Consult a professional and ask them to work out a good reasonable budget for you and then stick to it, do not negotiate with yourself and do not compromise. This is how you’ll avoid bankruptcy again.

Think about your future and your family’s future – This also means setting goals, you may have had plans to retire at a certain age. You can still accomplish these things if you continue to work on your attitude about money. Bankruptcy is not the end, it is the beginning of something new. If you continually focus on the future you’ll naturally begin to take action towards accomplishing those things, but it must be a constant effort and your behavior with your money needs to show it. If you do not see yourself advancing in the right direction you can always stop and study your plans again and make the necessary changes. Always stay in touch with your financial counselor and bring up any questions or concerns. You should not be investing aggressively, you should be investing consistently to help you recover from bankruptcy.

Change your attitude and practice discipline - What you did before obviously did not work too well. Maybe you always thought that it was ok to buy things you needed on credit. Maybe you thought it was a good idea to finance your home with a sub-prime loan and pay interest only and maybe you only made the minimum payment on your credit cards. Since none of those things proved to be wise decisions and only lead you bankruptcy, it’s time to change your habits, change your way of rationalizing when it comes to making purchases from now on. There’s a difference between needing and wanting something, but we often make ourselves think that what we want is what we need. You had everything to do with the decision making process in your finances so start with that and change it completely. Bankruptcy protection is over with, if you end up in serious debt again, there will be nothing anyone can do for you.

In part one of this post “Does credit repair really work? Part I” I talked about some of the situations in which credit repair can help you. Again, if your credit report shows negative entries that accurately reflect your credit history, it’s best not to begin a dispute with the help of an agency for it will only cost you time and money and the likelihood of those entries begin removed is very tough if the information is accurate. An honest and reputable company should be able to tell you that up front.

Credit can be complicated, most people are only concerned with learning the score system and know that as long as their score is above 620, they’re in good standing. But when your credit score drops because of real inaccuracies on your credit report, it’s best to get help to resolve and monitor your report from professional services. However there are things to be aware of when making your selection.

Credit Repair Scams – Because having bad credit and being in need of credit creates a bit of a desperate situation for some, there will always be someone who offers a service that can help. If you’re going to remember anything about this post, remember this: scrutinize a lot in this process. Ask a lot of questions and check the company’s that offer you services. Credit repair scams are everywhere, they advertise online, in newspapers and such. I personally would not trust a wooden stake sign written with a sharpie that says: “Credit Repair, fast and easy, guaranteed results 1-800-555-0000″ It just does not ring well to me and I see them everywhere here in Southern California. Learn to read these advertisements, the use of words like fast, easy, guaranteed, money back guaranteed and excessive use of testimonials can be a hint that these are not legitimate companies.

Ask the representative of the company to explain the methods they use to accomplish this, you need to know precisely what it is that they do. If they mention anything that sounds illegal, like changing your identity, or giving you a new social security number or simply disputing every negative entry regardless of the reasons they’re there, you might want to think twice about hiring them. The Fair Credit Reporting Act says that only items that are unverifiable can be disputed, if you did file for bankruptcy and you had late payments in the past, then these would be verifiable entries. Anyone who suggests that they can be disputed and removed more than likely has a less than agreeable method of doing this.

How does credit repair work? – Really there are only two ways. One is by simply contacting your creditors directly and conversing the situation with them about the entries they made being a mistake. This can work sometimes, but you must have proof that these are errors. No need to get into a screaming match with the creditors, that will not accomplish anything. Contacting the credit bureaus yourself is another approach, by using their dispute process. This will basically transfer the burden of having to verify these entries to the bureaus. This is an important benefit and you should use it. Here are the links to the dispute portals for each bureau:

TransUnion Credit Disputes

Experian Credit Disputes

Equifax Credit Disputes

Should these approaches fail, you need to consider hiring a professional firm to work this problem for you. Again in this process you want to be selective and concentrate on looking for companies that have the experience to take on your case. Their approach is similar to you disputing directly with the bureaus but a legitimate credit repair company makes use of legal procedures and creditors are more keen to listen and negotiate with them.

Selecting a credit repair company – This is one of the most important steps in the process of correcting those inaccuracies. Look for an established company with plenty of exposure that has a high rate of success and experience that can actually help you repair your credit based on inaccuracies. Don’t get sold on promises or silly guarantees. Read everything about them on their websites, do a search for the name of the company and see what other people are saying about them. Having a comprehensive range of services is a plus in any service I seek, and having a high quality ranking is even more important.

Begin your evaluation of these services by visiting the Better Business Bureau and becoming familiar with their rating system. Measure the companies you intend to use against these ratings and simply select the one with the best record.

Your credit report, get it while it’s hot!

As you already know, your credit report is everything these days and you can’t do much without it. Once you file for bankruptcy, your credit rating goes out the window. This of course makes it very difficult for you to get credit again, apply for loans, rent property etc. One thing you can do prior to filing your bankruptcy petition is to get a copy of your credit report from the three credit bureaus while it’s still in good standing.

You’ll find quickly that after bankruptcy things get more complicated, but there will be times when you might encounter a company or someone who may be willing to work with you despite your current credit score. When someone is considering approving you but needs some convincing, your previous credit history could be the key to closing the deal. Of course this is not going to apply to everyone, since some people have bad credit all their lives and most creditors will simply not care how good your credit was before you filed. So these are special circumstances in which it’s important that you actually had good credit with a good score prior to filing bankruptcy, it can give you some leverage in certain negotiations.

With the current state of the mortgage market and the number of foreclosures and bankruptcy cases around the country, many people are losing their homes and in some cases voluntarily surrendering their homes to their lenders after filing bankruptcy chapter 7. Whether you willingly surrender your property or it is foreclosed by your lender, you’re going to need to live somewhere, and having a copy of your credit report prior to filing could make a difference.

Another thing to keep in mind when you go looking for a place after you leave your home is to try and stick to places that are being rented by individual owners. Apartment complexes are going to have management companies who often require the typical procedures for renting, which are a credit check, references, rent history and a long application and normally frown when they see consumer bankruptcy entries on credit reports.

Renting from a property owner who manages their own property could be a better option since they’re usually more motivated to keep their places rented. Just be honest about your bad credit and bankruptcy case when you approach them. You may find that they can be more understanding and sympathetic than a management company. Often these real estate investors will hire management companies to do this for them. These are usually smaller companies that work hard to keep a high level of occupancy and can be very flexible, you just need to ask.

If you don’t have much choice when you start looking for a place, and decide to stick to the apartment complex settings, look for places that show move-in specials like 1st month free, or 1/2 month rent for 2 months etc. These incentives are a sign that these properties have more vacancies than they’d like, so when you apply they may be willing to overlook your bad credit and bankruptcy record, and once again if you can prove to them that prior to filing bankruptcy or your foreclosure your credit was good, it’ll give them more confidence in renting to you.

Obviously once you get approved you don’t want to mess it all up by being late or missing payments. This will work against you in so many ways, since now you’re in fact working towards rebuilding your credit, so getting positive entries and good referrals are the things that you should be striving for. The last tip for making your new landlord happy is to offer to pay them rent via direct deposit, this can really increase your chances of getting approved and of course you’re creating a great referral.