DALLAS — There is life after bankruptcy, even though your credit is shot.

In fact, many creditors view you as a prime customer after bankruptcy because you’re getting a fresh financial start.

But don’t be fooled. You still have to rebuild your credit, and it will take time, some hard work and major changes in your lifestyle to do it right.

“It’s coming to terms with living within your means,” said John Ventura, a Houston bankruptcy attorney and author of “The Credit Repair Handbook.”

“Living within your means is spending less money than you bring in and you don’t obligate yourself for more than you can really afford to pay,” said Ventura. “You don’t carry a lot of credit; you save.”

If you’re coming out of bankruptcy, make it an opportunity to reinvent your financial life.

Make rebuilding your credit a priority because, like it or not, your credit history is seen by the business world as a reflection of your character.

Companies that insure cars and homes are checking your credit to see how great a risk you are and set your premiums according to that level. They argue that a poor credit record is a predictor of how many claims you will file and an indicator of personal responsibility.

Many employers - particularly those hiring for sensitive financial positions — will check your credit before hiring you.

After a bankruptcy, figure out how you got into financial trouble in the first place.

Was it simply that you didn’t live within your means? Or did you lose your job or suffer a serious illness?

“It doesn’t matter what the crisis is,” said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. “It was their inability to cope with the unplanned that threw them into a financial crisis.”

You will have to cut your expenses, save money and spend judiciously. That may mean taking a second job for extra money to pay bills and cutting out luxuries such as cable TV.

“You’ve really got to be committed to the habits that will drive the result that you want,” Mark said.

First, develop a spending plan to track your spending, so you know where your dollars are going. To make saving easier, sign up for automatic saving, where you have a fixed amount automatically deposited in your savings account each month.

Make sure that you pay all your bills on time, not just credit cards. Utilities, landlords and cable companies are also creditors.

Use consumer credit as little as possible and only as a last resort. This doesn’t include a mortgage or perhaps a car loan.

Don’t be surprised if after bankruptcy you’re inundated with credit offers because creditors know that you’re starting with a clean slate, and they’re eager to get you back into the credit world.

Don’t be tempted.

A Richardson, Texas, executive assistant who came out of bankruptcy last August was surprised at how heavily banks and auto dealerships courted her.

“Ever since I declared bankruptcy, I started getting all these credit card applications,” said the woman, who didn’t want to be identified. “It’s incredible. They weren’t bad rates at all. I didn’t think I’d get any of that kind of mail for a while, but it started pouring in.”

She didn’t give in to the credit offers and uses only her debit card and cash to shop.

“I wanted to stay away from that stuff and wanted to get things balanced in my life,” said the woman, who said her bankruptcy was caused by a job loss, medical bills and repairs on her home. “I was concentrating on just getting my bills paid, just trying to get a budget.”

Many cause inconvenience beyond hefty upfront payment

By Ilyce R. Glink  |  January 16, 2008

Every day, thousands of people type the words “credit repair” into an Internet search engine. Thousands more type in phrases like “bad credit” or “bad credit repair.”

Figuring out how to repair your credit is on the minds of home buyers, sellers and owners, all of whom have realized that having stellar credit gives you financial options — options that simply aren’t available to those with low credit scores.

Unfortunately, some of the Web sites that come up in a search for “credit repair” can do more harm than good.

Credit repair scams abound in economic times like these: a shaky economy; record levels of foreclosures; and a rising number of bankruptcies, credit card delinquencies and late mortgage payments.

And yet, some people are so desperate, that they’ll try anything, even a general search on the Internet.

The typical credit repair scam works in one of a couple of different ways. There is always the promise that your credit history will be wiped clean, and you’ll be asked for a large payment upfront, sometimes as much as $1,000 to $1,500.

In one typical scam, the credit repair organization will tell you that you’ll get a brand-new Social Security number. Since the Social Security number is new, it won’t have any blemishes on it and your credit will be perfect.

Unfortunately, the Social Security Administration (SSA) almost never gives out a new Social Security number — even to people who have legitimately had their number stolen and used over and over again.

Instead, the SSA expects that you will work hard to clean up the fraud, or at least do what you can to live with it. Only in extremely rare cases, such as when a Social Security number has been stolen and used by dozens of people will the office consider issuing someone a new number.

So what is the credit repair company actually doing? They are filing for a new number, but it’s an EIN, an employer identification number. This is a nine-digit number (the same as a Social Security number) that is used to identify companies to the IRS or for tax payment purposes only.

If you start using an EIN as your Social Security number and change how your income is reported to the IRS, you’ll find yourself in a pickle when it comes to retire and the IRS has no record of your work history. You might also find yourself accused of conspiring to commit fraud.

Another common credit repair scam is to dispute all of the negative information on your credit history.

Under federal law, a credit reporting bureau must investigate all disputes within 30 days. If the bureau can confirm the negative information, it stays on your report. But if it can’t confirm it, the information is pulled off of your credit history.

But here’s the key: While the information is being disputed, it temporarily disappears from your credit history. So, your credit history looks perfect, even though it isn’t. At the end of the 30 days, the credit repair company will dispute all of the charges again.

For a big fat fee, credit repair companies promise you the moon. Unfortunately, all you’re going to get is trouble — and a much thinner wallet.

Next week: What can you do to legitimately repair your credit? I’ll have some 10 top tips for improving your credit history and raising your credit score.

It didn’t turn out as she’d hoped. For a modest $300 credit line, she was hit with a $150 annual fee, plus late fees and over-the-limit fees. After she’d had the card a few months, her credit score was still blemished, so she canceled it.

“I’m staying away from credit cards now,” Potter, 57, says.

The credit crunch has made it harder to get loans, especially for those with bruised credit. To fill that gap, a breed of credit cards, often called subprime — and some critics call predatory — has increasingly sought out consumers. These cards offer only a slight amount of credit, yet charge steep fees. Among their targets: young adults with little credit history and families struggling to climb out of debt.

In the first half of this year, direct mailing of such cards jumped 41% over the same period in 2006, according to Mintel International Group, a research firm. Millions of consumers are being hurt, says a new report on subprime cards from the National Consumer Law Center, which has another name for them: fee-harvester cards.

One such card offers a credit limit of just $250. Yet applicants automatically get socked with a $95 program fee, a $29 account set-up fee, a $6 monthly participation fee and a $48 annual fee — a total of $178, the report said. Available credit left for the user: a scant $72.

This year, the New York state attorney general’s office investigated First Premier Bank after consumers complained about having to pay $178 in upfront fees and receiving credit lines of only $250 to $300 on the bank’s subprime cards.

First Premier agreed to pay $4.5 million in refunds to thousands of New Yorkers. The bank said it cooperated with the attorney general’s office even though it disagreed with the characterizations it made.

The banking industry points out that subprime cards must charge high rates because consumers in debt are risky borrowers. But some experts argue that issuers are cashing in on vulnerable consumers.

“They are now the most profitable credit card — and not because they lend people money, but because they trigger more fees per household than any other financial loan,” says Robert Manning, a finance professor at Rochester Institute of Technology.

Some people with a tarnished financial history assume that the only way to raise a poor credit score is to use a costly subprime card to eventually qualify for a traditional card. Some don’t realize that the cards carry exceedingly high fees — and that given how little credit they actually offer, it’s hard to use them to raise your score.

“They give the fees different names, like account maintenance, activation, monthly maintenance fee,” says Curtis Arnold of CardRatings.com, a consumer site. “It makes it challenging even for experts to find out what they stand for.”

The worst subprime card issuers “are quietly collecting hundreds of millions of dollars in profits selling nearly worthless predatory credit cards targeting vulnerable consumers,” says the report by the National Consumer Law Center.

$150 annual fee

Potter, who works in real estate, wasn’t so upset that her Imagine Card provided a credit line of only $300. But the $150 annual fee shocked her, because it left her with scarcely any credit to use.

The card application required her to arrange for the minimum monthly payments to be deducted from her checking account. But that would have reduced the fees so slowly that “it deprived me of using my card,” she says.

Potter went online and arranged to pay the entire $150 fee from her bank account. After seeing confirmation of that fee payment, she assumed she then had $300 in credit and used her card to pay for gas and restaurant meals. But she says her $150 payment was actually held back until the monthly due date. By the time it was credited, her card charges had triggered an over-the-limit fee.

“It snowballed,” Potter says, “and instead of improving my credit, it made it worse.”

The Imagine Card is issued by the First Bank of Delaware (FBOD) and serviced by CompuCredit (CCRT), which says it doesn’t comment on individual customers. It says it serves people who are neglected by traditional financial institutions.

Subprime cards often zero in on young adults with no credit history. Last year, when Judy Palomino’s 20-year-old daughter was trying to build up credit, she unknowingly ended up with a subprime card.

It began, Palomino learned, when an application for a First Premier card arrived, unsolicited, in the mail. She says her daughter responded by asking for more information and didn’t sign anything.

Yet, a card arrived with a $300 credit line and a $175 fee.

“I thought they were trying to take advantage of her being a young girl,” says Palomino, who lives in Fountain Valley, Calif.

Palomino stepped in to help her daughter cancel the card. “It was a big hassle,” she says. “It took a couple of months before we could get them to respond.”

First Premier Bank doesn’t comment on specific cases. But it says that complaints are few and that it will offer a full refund of fees to customers who aren’t satisfied.

Even if subprime issuers agree to provide clearer disclosure of fees, they’re unlikely to reduce them. Unlike traditional card issuers, they make most of their money from fees, not interest charges.

Issuers say their fees are fair because of the risk of extending credit to people who are laden with debt or who have no credit history. Even so, subprime cards have proven highly profitable. Last year, CompuCredit collected $400 million in fees from subprime cards, the law center’s report found. By the middle of this year, CompuCredit subprime card holders had racked up $1 billion in debt, the report says.

CompuCredit says its cards meet or exceed regulatory requirements and industry best practices. And it says that if its customers make payments on time, they’ll receive a gradual increase in their credit line and a reduction in their fees.

If consumers fail to pay the fees imposed by subprime cards, the debt may be passed on to collection agencies, possibly resulting in lawsuits. Such consumer debt cases have exploded in New York City Civil Court, according to a new report by the Urban Justice Center, which reviewed 600 cases. Most are related to subprime card debt.

Though the justice center’s report focused on New York City, it says that across the USA, courts are overwhelmed by consumer debt litigation, and that most of the cases stem from subprime card debt.

The cases the justice center examined involved mainly debt-collection companies that bought card debt for pennies on the dollar. Few of the defendants had lawyers. Many didn’t show up in court. As a result, 80% of the cases led to a default judgment. The collector or card issuer could then freeze a checking account and take out money or garnish wages.

Many people who are overwhelmed by card debt don’t seek protection by filing for bankruptcy because they want to pay their bills or think they don’t owe the bill, says Anika Singh, a former staff attorney at the Urban Justice Center.

Secured credit cards

Some consumer advocates suggest that instead of resorting to a subprime card, consumers with risky credit should seek a secured credit card. They would have to deposit money with a lender; the line of credit is typically based on that amount.

After making on-time payments for a prescribed period, they may qualify for a traditional unsecured card with a higher limit.

If it’s too late and consumers are already getting calls from a debt collector, they can seek legal advice. Low-income consumers can turn to a legal services program.

“You have rights under federal law to put an end to harassing debt-collection calls, and you have the right to demand that they verify that you owe the debt,” Singh says.

The best advice, some critics say, is to avoid subprime cards entirely.

“I can’t think of any good reason to apply for one of these cards,” says Ruth Susswein of Consumer Action. “You may as well just burn your cash. It’s quicker and easier.”

Where the cash goes
Costly subprime credit cards saddle customers with costs comparable to short-term “payday” loans. Examples of one subprime card and one payday loan.
	Initial fee	Recurring fee	Available credit	Cost for one year	APR* (with fees)
Subprime credit card: $20		$19 per month	$51	$248	486%
Payday loan:	NA	$7 per 14 days	$50	$182	364%
* — Annual percentage rate is based on the one-year cost of all fees and interest, as if the credit card were a one-year loan; Source: National Consumer Law Center report

WASHINGTON, D.C., Oct. 4, 2007 (NBC) — In over your head with no way out? Debt and credit problems can affect all aspects of your life. The debt load can overwhelm your ability to pay and ruin your credit.

Diane Johnson of the non-profit Money Management International, a consumer credit counseling service, says you need to learn from your mistakes.

“People walk into a drug store for toothpaste and walk out with $40 worth of cosmetics, so you want to take a good look at your particular spending habits and I guarantee you, without too much sacrifice, you will find places to cut back that won’t be too painful.”

If you’re credit is poor, you may not be able to refinance your home or find a more favorable rate for your car payment, so factor in your fixed expenses then trim your variable ones, such as vacations, expensive hobbies, shopping, and dining out.

Then take control of your periodic bills.

“Did you pay your car insurance quarterly, taxes quarterly, anything that you’re not paying regularly but takes a big bite out of your budget? You need to look at that for the past 12 months, divide by 12, and you can come up with a monthly budget for that,” Johnson explained.

Learning to live with bad credit means being forced to curb your enthusiasm for spending, but it doesn’t necessarily mean doing without your credit cards, just changing the way you use them and pay them.

Smart Money Magazine pinpoints credit card debt as the first to eliminate. Start with the biggest balance or the smallest.

“If you have something that isn’t costing quite as much but you can eliminate it quickly, I generally recommend people do that because it’s a big confidence booster,” said Smart Money’s Beverly Goodman.

Consolidating that credit card debt is also a smart move, but putting it all on a home equity line can be risky.

“You’re essentially transferring some groceries, some shoes — whatever is on your credit card bill — you’re now attaching that to your house. If that’s something you don’t have the discipline to handle you’re better off staying away from it because you don’t want to lose your house,” Goodman explained.

Even those with good credit should make a mental note of where they can cut back if they need to.

Experts say you shouldn’t borrow from savings or retirement accounts to pay off outstanding debt, but it depends where you are in life and what your responsibilities are. If you’re young and single, taking some out of savings can provide you with the big fix.

However if you have a family or are nearing retirement, it is something you should approach very cautiously.

Sarah Dinkins

September 5, 2007

We receive many questions regarding whether one should undertake credit repair actions or hire the services of a credit repair agency before or after consolidating debt. As usual, the answer to this question is not a simple one and will depend on many variables.

Credit and debt problems change from one debtor to another and no general solution is available for all. However, there are some guidelines that can be followed in order to achieve positive results.

In order to understand what follows it is important to give a general idea of what debt consolidation and credit repair effects are. Both a debt consolidation and credit repair process have implications on each other and thus a correct combination of both in terms of time and opportunity can produce the best outcome and achieve the most advantageous results which is what everyone wants when undertaking such processes.

Debt Consolidation Effects

Debt consolidation produces several effects that can alter a credit repair process. For starters, depending on the strategy used, the amount of creditors may be reduced. If the process implies a debt consolidation loan which is used to repay all or the majority of the outstanding debt, then, all the creditors (or most of them) will be replaced by the new lender and thus, though some entries on your report may remain, from now on, you have a fresh start on your credit history.

If a debt consolidation loan is not the way to go, debt consolidation will imply only negotiations with current creditors to reduce debt and agree new repayment programs. Debt consolidation when it implies negotiation can also include the removal of negative entries on the credit report. In any case, the debt reduction alone will improve your credit score and history. However, certain debt consolidation agencies chose to default on several loans and lines of credit prior to negotiations in order to obtain better results and this implies new bad entries on your credit report.

Credit Repair Programs Effects

Credit repair programs have different effects depending on the stage of the program. At first, unfortunately, credit repair programs tend to make the applicant’s credit score to drop to lower levels than the ones before joining the program. This is mainly due to the fact that credit repair programs often imply the interruption of payment of certain debts to make room for negotiations.

At a later stage, on the other hand, your credit score will continually increase as negative inputs on your credit report keep getting removed by creditors or by the mere pass of time. The interaction of credit repair programs and debt consolidation programs is not unpredictable. Moreover, there are agencies that provide both services.

The combined efforts of credit repair and debt consolidation can get you back to a good credit and financial stance in as little as two years. For some this may sound as a long time but let me assure that it is not.

Investing two years time and efforts will result on a good credit score and access to all financial products available for those that never had bad credit. Thus, the answer to the question asked at the beginning of this article is simple: neither before or after, at the same time.

When applying for insurance, ask the insurer what factors will be considered in determining your rates. Insurers won’t tell you how they weigh them, but the company might tell you the factors it considers when reviewing a potential customer’s credit report. For example, some insurers are interested only in major credit events, such as foreclosures and bankruptcies.Monitor your credit reports regularly for errors. You’re entitled to a free copy of a credit report from the three credit-reporting agencies — TransUnion, Equifax and Experian — once a year. You can order your credit reports at www.annualcreditreport.com or by calling (877) 322-8228. You’ll have to pay extra to get your credit score.

If you find errors in your credit report, contact the credit agency that issued the report. The agencies are required by law to investigate disputed items.

Beware of companies that claim they can ‘’repair'’ your credit report. You can find more information about credit-repair scams at the Federal Trade Commission’s Web site, www.ftc.gov

Tired of seeing the unpaid bills piling up on your table? Well, instead of fretting and suffering from depression, look for a bad credit debt consolidation loan. You will have to look around for a good financial company which can bail you out of your troubles and help in credit card debt reduction. Nevertheless, while you are doing that, it pays to have a good idea about what you are about to put yourself into!

Look for a company that offers extensive good debt consolidation service. This will include a clear-cut list of programs and access to a good financial consultant who will help you choose the best debt consolidation program for yourself.

Are You Eligible?

A bad credit debt consolidation loan is best opted for when you have a large amount of dues to clear. You need to have a fixed asset in order to be eligible for this type of assistance for credit card debt reduction. . By fixed asset, such companies usually mean a house. You will have to mortgage the property and get a loan to clear your dues – even it means clearing off another mortgage based on the same property! However, some debt consolidation companies provide loans even if you cannot show an asset. Be careful, it is not as simple as it sounds. Read the fine print carefully as there may be quite a few loopholes. Think calmly and look around for reliable information that can help you decide which the best debt consolidation program is.

Other Options

You can look at a credit card consolidation program for assistance too. This is however, only for those who have smaller amounts of dues. Here, you can transfer the debt of all your credit cards into a single amount, thereby reducing the interest payments! If lucky, you may get a break of 6 months to clear the dues with 0% interest! Be careful about paying that single consolidated loan, as when the relaxation period ends, the interest rates become exorbitant! That may push you back into the clutches of debt.

Whichever option you choose, make sure that you do not fall into additional debts. Clear off your dues first. Till then control your expenses and try to improve your income if possible. A bad credit history is a terrible thing to happen and it is best to repair the situation before you have to face the embarrassment of declaring yourself bankrupt!

So, do not wait for too long, look around for a company, which is known to deal with bad credit debt consolidation effectively.

(ARA) - Mortgage rates are at historic lows, and it seems like everyone’s jumping on the refinance bandwagon these days.  But is it really a good idea for people with bad credit?

Well, if your credit was better when you took out the original loan and helped you qualify for a low rate, refinancing when your credit is worse makes little sense.  If your credit is better now, but still not great, you should analyze how much you could really save by refinancing now as opposed to waiting until you have time to improve your credit even more.  If your credit is at about the same level now as it was originally, trends in the market will have more to do with how much you can or cannot save by refinancing your home.

Of course there are other considerations, such as whether your current home loan requires you to pay mortgage insurance that refinancing could alleviate; the type of loan you have; an introductory “pre-pay” period that may be about to expire; and additional factors that your loan officer or financial planner can explain.

Once you decide that refinancing makes sense for you, you have two options: try to repair your credit before applying for a loan, or apply for a loan right away without attempting any credit improvements. If you would like to try to repair your credit first, be prepared to spend some money and some time paying down your debts.

If you decide to repair your credit on your own, you’ll want to be careful about making payments on collections accounts that you haven’t paid on in a few years, in order to avoid bringing them to the forefront of your credit.  Your best bet with credit cards is to pay them all down (but not entirely off), and not to close any of them. Paying off an account sends a message to the credit reporting agency that you’re not comfortable carrying a balance, and cancelling a credit card sends an even clearer message that you believe yourself to be in trouble with credit.

As you can see, going about repairing your credit score yourself can be tricky. You may want to enlist the help of a financial planner, a loan officer who offers credit advice, or even a credit counseling agency. These professionals can guide you through the credit repair process and help you maximize the score you receive for the amount of money you’re able to spend.

If you choose to apply for the loan right away, you’ll have to consult with what is known as a B/C lender. These lenders specialize in working with people who have bruised credit. The programs they offer are less stringent in their requirements for approval of the loan. You’ll pay more in interest for a B/C loan to offset the implied chance the lender is taking in working with someone who’s had credit trouble in the past, but the advantage is being able to apply and be approved for your loan without spending time and money raising your credit score.

You must make all these decisions based on how much you can save by acting now or waiting until later. Refinancing with a low credit score is not anyone’s first choice, but it may make sense for you if other factors would cost you even more before you have time to bring your credit score up.  A financial planner or loan officer can advise you, but the final decision must be yours.

Have you ever wondered about those ads you see from companies and law firms which offer to fix your credit for a low monthly fee? People with credit problems often ask me when it comes to improving their credit score whether they should hire a credit repair company or do it themselves? Unfortunately, there is no simple or universal answer to this question. However, I will shed some light on the subject if you’re in need of a little enlightenment.

According to the Federal Trade Commission (FTC) “Everything a credit repair clinic can do for you legally you can do for yourself at little or no cost”. While I agree with the FTC I also understand some consumers do not have the time, patience (or knowledge) to do the work themselves and the thought of “drive-thru-we-do-it-all-for-you-credit-repair” becomes very appealing. After all, everything a mobile oil change service can do for me I can also do myself at little or no cost (but you won’t find me changing the oil in my car this weekend!).

Although some things are better done yourself, only you can determine if doing your own credit restoration work will be one of them. This is why understanding both the advantages and limitations of a credit repair company and the structure from which it operates are VERY important.

REFERENCES: Any legitimate company or individual doing credit restoration work for consumers will be able to provide you with at least half a dozen references. If the company or person is local you should be able to call these references. This is without question the most important point of consideration when hiring a professional to do the work for you.

If possible, I suggest you ask friends, family, relatives and professional contacts if they know of someone who does credit restoration work as a side business. By far the highest percentage of successful stories I hear from consumers are those which come from those who found a credit consultant via personal referral. I cannot stress this enough. It’s the difference between going on a vacation with a close friend instead of a stranger.

CONTRACT: Unlike painting a house or putting in a driveway, credit restoration work (and results) are extremely broad. Therefore, the use of a contract is imperative. Most likely your credit challenges didn’t occur overnight and they won’t be improved overnight either. A good contract protects you as well as the service provider. The contract should be easy to understand without an Attorney and spell out the actual services which will be rendered as well as the service providers’ limitations (i.e. they cannot guarantee the removal of any one particular item but can guarantee an overall increase in score overtime).

MONTHLY FEE: One of the most critical elements which affects “how” a credit restoration company operates is determined by its’ payment structure. One of the most common payment structures of large companies or law firms doing credit restoration is that of the monthly “auto-debit” fee. In this structure the consumer usually pays $49 to $99 up front and then a monthly fee of $39 to $49 per month. While there is an advantage to this method (affordability) with it comes many disadvantages.

1.) The first disadvantage this structure creates is that it gives the company absolutely no incentive to work quickly or aggressively on behalf of the consumer. In fact, the opposite is true. The longer they take the longer they will continue to collect their monthly fee! In most cases this structure leads to slow results over a very long period of time. Looking at it logically, this shouldn’t come as a surprise.

2.) The other challenge within this structure is the actual amount of time, effort and resources which a company or law firm can reasonably allocate on a consumer’s behalf. Remember, any large business has a tremendous amount of overhead which quickly chews up most of that monthly fee. Out of that $39 to $49 there are monthly expenses including but not limited to: Advertising, Office Rent and Utilities, Employee Payroll and Taxes, Health Insurance, Phone Service, Office Supplies, Refunds, Computer Maintenance and Programming, Website Administration, Office Supplies and let’s not forget postage for mailing letters to creditors, collection agencies and credit bureaus. A much simpler way to think of this is by imagining if you had a client paying you $39 a month; how much work would you be willing to do?

3.) One of the biggest challenges credit repair companies charging low monthly fees run into is being forced to rely on the use of Automated “Boiler Plate” Dispute and Correspondence Letters. Boiler Plate Letters are simple form letters which are used for ALL consumers (one format fits all). Once set up in a computer program with the consumers’ information they are “shot out” automatically on behalf of the consumers needs (i.e. disputing a late pay, charge-off or judgment etc).

The problem here is that when a credit repair company has thousands of clients they are shooting these form letters out for, the creditors, collection agencies and credit bureaus can take notice of these letters being used over and over and discover your correspondence is coming from a third party (i.e. credit repair company or law firm) and in some cases ignore it or (worse yet) mark the dispute frivolous and flag your credit report. I spoke with a man recently who was on the inside of a large credit repair company who informed me they had an archive of over 10,000 boiler plate letters on file to avoid this problem. Of course, they charged customers by the month.

NON-DISCLOSURE OF METHODS: One of the most troubling issues with 95% of large credit repair firms (especially law firms) is their non-disclosure of dispute tactics and methods. As a consumer it is vital that you are made aware of the methods they are using in dealing with your creditors, collections and the credit bureaus. If the organization or law firm violates laws or makes errors (I have witnessed both) you could be held liable for their negligence. In addition, this can actually make your credit worse and create problems which are very difficult to clean up. Anyone doing credit restoration for you should disclose “what” they are doing since you are paying for a service. If they won’t, you better run the other way as they could be pouring gas on a blazing camp fire.

LOCATED IN HOME STATE: This is one of the most overlooked keys to successful third party credit restoration which consumers miss. It is absolutely vital when having someone else do your credit restoration work for you that they operate within your home state. Here’s why: if a credit repair company or law firm mails dispute letters or correspondence on your behalf from another state, that mail will be postmarked from that state. If the credit bureau catches this they can (and in many cases will) mark the dispute as frivolous and flag your credit file.

It is known that many Credit Repair Companies and Law Firms will resort to or create some kind of method to get around this in order to get disputes postmarked from the consumers’ home state (potentially more non-disclosure). For example. If they are in NY and you are in CA they will first have to mail your dispute letters inside an envelope from NY to CA. Once in CA someone opens the envelope and then mails your dispute letters from CA so they postmarked from your home state. I am not an expert on postal regulations but had a postal employee tell me the concept sounded extremely shady at best.

CUSTOMIZATION: It’s for this reason that some of the most advanced forms of credit restoration are done completely customized for the client and even (in many cases) by hand. The best credit restoration companies I’ve seen are usually run by one person or a small number of people and are extremely customized for each client. The is the most effective but with effectiveness comes cost. Every one of these services I have seen charges a very large upfront fee and works entirely off of referrals. This type of service is simply impossible to perform for $39 or even $49 a month.

Unfortunately, if you are unable to find someone in your area (preferably an individual) by way of referral through a friend, relative or professional contact, then I recommend you take matters into your own hands and do it yourself. I realize most consumers do not want to hear this but the good news is that it will almost always turn out to be the highest paid work you will ever do in your life. How high? How does $500 to $2500 an hour sound? I understand it’s a bold claim but not one I am unable to back up.

If you’re ever going to finance a first or second home (which everyone eventually should for the tax breaks) the difference between good credit and poor credit will affect your interest rate. If you secure a $200,000 mortgage on a 30 year term and your interest rate is only 2% lower because of a high credit score, that 2% will save you $96,934.11 over the course of the loan (just because you had better credit). Take that $96,934.11 and divide it by the 30 to 50 hours you may spend working on your credit situation and you’ll quickly realize credit restoration when done properly does not cost – it pays!

By Uzma Afzal

This article is intended to provide information to all people trying to improve their credit score, including those seeking a riba free loan. Credit remediation is a subject consumers often face with fear and trepidation, and for good reason. With the exception of recognizing that the best score wins, the average home shopper knows very little about the whole credit scoring process. Sub-prime borrowers who are eager to move into A-Paper territory often find themselves at a loss when trying to find ways to upgrade their credit history. The good news is there are ways to improve less-than-perfect credit scores and obtain a loan for the home you really want.

The first step in the process is making sure that you have a current copy of your credit report. Congress recently amended the Fair Credit Reporting Act so that consumers may now receive one free credit report annually. There are three major credit bureaus: Equifax, Experian, and Transunion. Since entries can vary across bureaus, you’ll want to request a free report from each of the three companies. (Go to www.annualcreditreport.com)

It’s also important to know just what a good credit score is. Most A-Paper scores generally begin around 680, although this number may differ slightly among lenders. Don’t despair if you come up shy; there is always room for improvement. Increasing your score just 5 points can save a significant amount of money. For example, if your score is 698 and you increase it to 703, then you could save yourself thousands of dollars over time as a result of a slight improvement in your loan’s interest rate.

While credit repair is necessary for some, it’s not the only way to increase your credit score. Even if you have stellar credit, you can enhance your score through these steps:

• Evenly distribute your credit card debt to change the ratio of debt to available credit. Let’s say you have a credit score of 665. If you have debt on only one card, and four additional credit cards with zero balances, evenly distributing the debt of the first card could move you closer, and possibly into, that ideal bracket.

• Keep your existing accounts open and active. The average consumer is usually anxious to close credit card accounts that have zero balances, but doing this can cause them to lose the benefits of a long-term credit history and increase their ratio of debt-to-available credit. The bottom line is don’t close those old accounts!

• Keep credit inquiries to a minimum. Each inquiry into your credit history can impact your score anywhere from 2-50 points. When it comes to mortgage and auto loans, even though you’re only looking for one loan, multiple lenders may request your credit report. To compensate for this, the score counts multiple auto or mortgage inquiries in any 14-day period as just one inquiry, so try and stay within that time frame.

Remember, credit scores don’t change overnight. Improving them requires time and diligent effort on your part, so it’s a good idea to get the ball rolling at least three to six months prior to submitting your application for home financing.

If credit repair is what you need, you can either begin the process yourself or seek out a repair service. If you decide to make your own improvements, visit as many websites as possible to get information regarding credit laws and consumer rights. Diligently search through them and educate yourself to ensure that you don’t sustain any self-inflicted wounds. A good place to start would be the Federal Trade Commission’s (FTC) website, which contains a wealth of helpful literature.

If you’re facing severe or complicated credit issues, then you’ll probably want to enlist the assistance of a professional credit repair company. Before you do, be sure to familiarize yourself with the FTC’s regulations on credit repair. With over 1,100 credit repair companies to choose from, it’s important to be certain you are dealing with a reputable firm. Examine the FTC’s information on fraudulent practices to avoid falling prey to credit repair scams.

Addressing credit issues can be uncomfortable to say the least. But by taking these steps now, you’ll be that much closer to obtaining the home of your dreams.