Credit repair : Your credit score advisor. If you are considering credit repair, it’s vital to know exactly what is used in...

Credit repair

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Your credit score advisor. If you are considering credit repair, it’s vital to know exactly what is used in the algorithm and what isn’t.
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Michael Freeman
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Count Your Chickens Before They Hatch
Save Some of Everything You Earn
FTC Tips for Avoiding Credit Repair Scams
credit repair process

Spoken Language: English

Business: Credit and Collection, Financial Services

Credit repair blog providing expert advice and opinion on raising your credit score and dealing with bad credit. Use our credit score calculation page to see which are the best places to get maximum improvement for your credit score with the least effort. Out strategies will also teach you how to manage your finances aiming for better credit score in the long run.

Getting your credit back on track is about more than bringing your credit score up to a certain number. It’s about your whole financial picture. If your finances are out of order, credit repair won’t last long. In fact, it may be impossible to improve your credit if you’re not following certain financial rules.

Spend Less Than You Make

It’s spending more than you make that gets you into credit trouble in the first place. When your spending is greater than your income, you accumulate more debt than you can handle and fall behind on payments because you can’t afford them. If you want to preserve your credit score, you have to get in the habit of spending below your earnings, that includes your monthly payments toward debt. You should have some money leftover at the end of each paycheck.

Save Some of Everything You Earn

Lack of savings is another thing that leads to credit trouble. Without access to savings, you’re forced to use credit cards, loans, and overdraft protection whenever your regular pay runs out. If you don’t have one already, open a savings account and start contributing to it every month. Leave your account untouched unless there’s an emergency.

Put Your Needs Before Wants

Sometimes, we overspend because we’ve gotten our needs and wants confused. Get back to the basics: needs are things you can’t live without and wants are things you don’t want to live without. You need food, for example, but you want shrimp or potato chips. You need clothes, but you want designer labels. Then, there are things you can’t classify as needs, like entertainment or hobbies.

Count Your Chickens Before They Hatch

Budgeting isn’t a word that many people want to hear, but when you’re going through credit repair, a budget is necessary. Having a budget helps you make all the other financial rules happen. A budget allows you to keep your spending in check so you can live below your means and helps you figure out whether you have enough money to save each month.

Charge What You Can Afford to Repay

If you’re using a credit card as part of the credit repair process, you have to be very careful not to charge more than you can afford to repay. When you’re making credit card purchases, refer to your budget. Don’t make the purchase if it’s not something you’ve already budgeted for or if you don’t have enough money in your budget to pay for the purchase. You need to be able to pay off every credit card balance at the end of the month if you want to stay on the path to better credit.

You can’t build a good credit score if you’re irresponsible with other areas of your finances. That irresponsibility will eventually impact your credit repair progress and not in a good way. Learn to be responsible with your money, make smart decisions, and you’ll notice your credit score responding to your new responsibility.

Learn to Play By Their Rules

Though the Federal government just recently passed a bunch of new laws that give consumers more protection against credit card issuers, the laws don’t completely stop credit card companies from getting over on consumers. Some companies have already figured out how to get around the rules. For example, when the Federal government told sub-prime credit card issuers their initial fees couldn’t exceed 25% of the card’s credit limit, those credit card companies snuck in a fee that must be paid before the credit card is even issued.

If you want to win with the credit card companies, to build and keep good credit, you have to play by their rules. Stay well within the boundaries of what you can and can’t do…

Pay well before the due date.

Credit card companies have to accept your payment as long as it’s received by 5 pm on the due date. And if your due date falls on the weekend or holiday, the card issuer has to accept your payment on the next business day. That’s only if the card issuer doesn’t accept payments on those days. Don’t tempt fate, as they sat. Aim to get your payment to your credit card issuer a few days before it’s actually due.

Read billing statement inserts.

Many changes to your credit card terms and conditions are included on a slip of paper inside your billing statement. You might be used to throwing those extra papers in the trash, especially if your billing statement is often accompanied by advertisements and solicitations. Avoid making assumptions about what those documents are. You’ll miss important announcements about your credit card account if you mistakenly throw away those updates.

The credit card company is in control.

Your credit card issuer can raise your interest rate, increase your fees, lower your credit limit, or cancel your credit card. The only thing you can do close your account. That’s a move that hurts you more than it hurts the credit card issuer because cancelling a credit card could affect your credit score.

Have more than one credit card.

If you were the credit card company’s only customer, then you’d be running the show. That’s what happens when you have just one credit card – you’ll accept more from that card issuer for the sake of keeping that credit card open. Open a second or third credit card so you have options. Be careful, though, opening too many credit cards puts you at risk of credit card debt.

Know who to contact for help.

If your credit card issuer is breaking the law, there are certain agencies you can contact. The Federal Trade Commission and your State Attorney General are usually the best places to start. These are government agencies that make the rules that credit card companies are required to follow.

Realize that credit cards are just a tool. They are beneficial for certain types of purchases and instrumental in influencing your credit score.

FTC Tips for Avoiding Credit Repair Scams

While the government doesn’t offer or promote programs to help with consumer debt, they are still closely monitoring the information from independent agents and third-party companies that do claim to offer services to repair one’s bad credit.

The Federal Trade Commission (FTC) offers tips to consumers who may be taken in by the various radio, Internet, and television advertisements which feature commercials for credit repair services. These ads come on pretty strong, promising help with erasing bad credit overnight. They guarantee easy credit repair with a simple phone call and promise it’s all on the up-and-up.

The FTC Begs to Differ

The FTC is well aware of the ads targeting consumer debt help and they are quick to warn consumers of the old adage ‘if it looks too good to be true, it is’. Companies who offer debt help or credit repair services are targeting consumers who are desperate for help to get out from under debt. They are offering an ‘easy button’ but at a very high price. Not only do the services promising guaranteed credit repair help, they also charge incredibly high fees and in some cases, do absolutely nothing to help you once they have collected your cash. While there are some very legitimate debt assistance agencies that can help a consumer with debt burdens, there are many more scammers out for a dollar.

How to Spot a Credit Repair Scam

The FTC recommends consumers pay close attention to any service they are considering for credit or debt help. Spotting a scam is not always easy. Technology today has made it even more efficient for disreputable companies to reach people in need. They know what to say and how to say it to lure unsuspecting consumers in the door.

Here are some red flags to watch for when researching a credit repair or debt elimination services company:

  • The agency guarantees they can erase all credit information from your credit report, even if the data being reported is factual.
  • The agency suggests you do not contact the credit reporting agencies on your own and say they will do it for you.
  • The agency tells you to dispute in writing all information on your credit report regardless of its accuracy.
  • The agency outlines a plan to invent a new identity by requesting an Employer Identification number to use in place of your Social Security number, which will initiate a new, unblemished credit report in your name.
  • The agency requires you pay the full fee for service upfront before services are rendered.

Your Reputation is On the Line, Not Theirs

If you are subjected to the above tactics or any other acts that cause you to be suspicious by any credit repair agency or debt assistance program, do not get involved. File a report with the FTC and do not move forward with any recommendations of the credit repair agency.

Following through with any of the above-mentioned actions can potentially land you in serious trouble with the federal government. It is a federal crime to lie on an application for a loan or line of credit. You are also committing a crime by misrepresenting yourself under false pretenses, such as using an Employer ID number instead of a Social Security number. You may also be charged with fraud for your involvement in a credit repair scam, even if it is initiated by a third-party.

Protect yourself and your credit from these con artist games. Settling debts and repairing credit are both processes that can be completed effectively by the consumer. There is no easy fix for credit repair. It takes time and patience to reach your better credit goal but it will cost you nothing more financially to do it on your own.

Avoid Payday Loans When Repairing Your Credit

Repairing credit often takes an extreme focus on allocating monies earned towards debt payoff. For some people who are already finding it hard to get by each paycheck, it can be easy to end up with nothing to live on several days before the next payday. Having not many options to survive until then, people have turned to payday loans as a means to get by until your next check is available.

Why Payday Loans Hurt

The problem with payday loans is not immediately apparent to those in need. They see a way to get quick cash with the worry of a credit check. Their focus is on the money at the end of the transaction and not necessarily the consequences that present after the deal is done.

When you take a payday loan, it is true you do get cash almost immediately. It is also true that payday lenders do not require a credit check. Essentially all you need to get a payday loan is proof of identification, proof of employment, and a bank account. Show up with your driver’s license, pay stub and a blank check and you’ve got yourself a loan.

However simple it seems, payday loans have a darker side. The contract you sign to ensure the loan contains terms and conditions people often fail to read. By signing the agreement, a borrower is promising to pay back the amount of the loan plus up to 500% interest in some cases. Would you even consider a credit card at that high rate of interest? Never. Borrowers must then write a check the lender will hold until your next payday. When the check is cashed, you are out the cost of the loan and all of the interest at one time.

Basically payday loan borrowers are borrowing against their income and throwing in several hundred extra dollars to the lender. It becomes a vicious cycle because borrowers who are already short on cash before payday will likely again become short on cash after paying the lender. The vicious cycle can continue as the borrower realizes they gave away most of their income paying back the loan and fnd once again they are in need of extra cash.

Debt Focus Lost

Eventually, the loan cycle will get the better of borrowers who soon will not be able to allocate money towards debts. They are putting more cash in the pockets of the lenders and will find it hard to break the cycle. By missing debt payments, your credit is certainly no longer on the road to repair. The borrower once again sets down the road of despair.

Breaking the Cycle

While it a good intention to devote as much cash as you can afford towards eliminating debts, it is essential you are only allocating what you can afford. Institute a budget to better manage your money. If you can come up with a reasonable budgetary guide, consult with a debt specialist who can analyze your income and expenses and recommend a better way.

Instead of passing your hard-earned cash over the payday lenders, make a habit of paying yourself $25 or $50 each month to be deposited into a high yield savings account. Build the fund so you will always have a resource outside of payday loans for quick cash and avoid payday loans and other debts in the future in order to repair your credit.

Protect Your Credit During Unemployment

When they say, “suffering a job loss” they’re not kidding. Losing a job is definitely a miserable experience that’s worsened by a bleak job market. If you’re going through a period of unemployment, it’s important that you keep your credit in good standing and repair is after things go bad. Many employers now use credit checks as part of the hiring process, so bad credit can keep you unemployed.

Sign up for unemployment benefits.

If you lost your job through no fault of your own, you may be able to collect an unemployment check through your state’s unemployment office. In some states, you can get unemployment for up to 99 weeks. Make this money stretch as far as you can.

Unemployment checks are sometimes barely enough to cover all the expenses, but stay current on all your credit cards and loans, as much as you can. If you foresee problems making your payments, contact your credit card issuer and your lenders for hardship options. You might also contact a consumer credit counseling agency for help lowering your credit card interest rates and payments. Staying on top of your payments is key to protecting your credit and credit repair.

Don’t rely on credit cards.

If you start using credit cards to make ends meet, you’ll soon find yourself with a credit card balance that’s too high to pay. Two missed payments is all it takes for credit card issuers to increase your APR to the penalty rate, which is often 30% or more.

Pretend like your credit cards don’t exist, except when it comes to sending your monthly payment. Minimum payments are acceptable during this period of time. You can make an exception for job-hunting expenses and basic living needs, but only when absolutely necessary and completely unavoidable.

Order your credit report for free.

You probably already know that you can order a free credit report through, but did you know you can also get one if you’re unemployed and plan to look for a job soon? All three of the credit bureaus are required to give you this courtesy “job-hunting” credit report under the Fair Credit Reporting Act.

Prospective employers are required to notify you before they check your credit report. If you keep a watch on your credit report, you won’t have to worry about what your hopefully future employer will find on there. But if you know you have credit trouble that can keep you from getting the job, it might help to explain them before the employer does the credit check.

Put credit repair on hold.

Credit repair requires time and money. Two things you may not have much of while you’re unemployed. You might continue with simple efforts like credit report disputes, but consider putting some of your more labor-intensive credit repair efforts on hold until you get a new job. In the meantime, it may make more sense to maintain a holding position on your current credit and keep additional problems at bay.

While you’re looking for a new job, consider making some extra money by holding a yard sale or selling things on eBay. Avoid cash advances and payday loans which are nearly impossible to repay while you’re unemployed.

Don’t Let Old Accounts Fall Off Credit Reports

When repairing your credit, you have to take the initiative and see what is being reported to the credit bureaus. You may find after checking your credit report that you owe some old debts from years gone by. It can be tempting to continue ignoring these debts since the creditor has not pursued them but doing so can be bad for your credit score.

Repay for Repair?

Some debtors choose to let debts fall from their credit reports after seven years since the time they stopped making payments on their account. They wait for the time to have past rather than spend the money to repay the original debt. While it is true that old debts will expire from the report and you’ll have saved yourself some money, there is no guarantee it will not hurt your credit.

The FICO score is a complex calculation used to gauge a person’s credit worthiness. It is compiled from the information being reported to the credit bureaus by your creditors. When an old debt drops off a credit report, it can actually hurt your score. Interestingly, the FICO calculation will group debts using specific characteristic. For example, if you have been through a bankruptcy, the group you are placed in may put you at the top of the list. Once the bankruptcy is removed from your credit report, you move to another group where you will be listed at the bottom.

When you move from the top of one group to the bottom of another group, your credit score can drop quite few dozen points with no specific reason behind it. FICO has worked to improve the transition by creating NextGen, a new credit-scoring system. Since most lenders still use the traditional FICO system for scoring, there is still a threat to your credit score.

Fallen Debts Come Back to Haunt

If you have chosen to let old debts die off, you may not be free and clear just yet. In some situations, specifically when you want to buy a home, you may be required by the lender to pay off old debts in full before being approved for a loan. Any open debts or debts that need to be eliminated can be a condition of many loans.

You have the option to negotiate a settlement with your creditors directly. It is advised that part of your negotiation process involves an agreement by the creditor to stop reporting information to the credit bureau or request that the account be listed as ‘paid as agreed’ instead of being listed as ‘settled’ on the credit report. This can help raise your credit score as well as improving the chance of loan approval. There is no guarantee a creditor will agree to the request but it certainly can help you credit wise if they will.

It is in your best interest to completely eliminate all debts in an effort to rebuild your credit. This will help you avoid future incidents of debt collections and decreases in your credit score. Eliminating debts will have a positive affect on your score and credit worthiness, which can be important in the future should you need additionally financing assistance with a vehicle or a mortgage loan.

When you are working to repair your credit, you need to always know just were you stand financially. Without the knowledge of what is coming in and what is going out expense-wise, you stand little chance of eliminating your debts and boosting your credit score.

What Is a Budget?

Notice that budget is not a four-letter word but so many people treat them as such and refuse to incorporate a budget into their financial life. A budget is essentially a listing of the amount of income a person has matched up next to how much money is being spent. It doesn’t take long to develop a personal budget but there is some work involved, To make things easier, here is a simple step-by-step guideline to help you plan your budget:

  • Start by gathering your bills and pay stubs.
  • Tally up the total amount of income you bring in on a monthly basis from all sources including paychecks, child support, and alimony.
  • Next, sort through your various bills and make a list of the creditor, account number, monthly payment requirements, and balance remaining on all of your bills. Tally up the monthly payments as well as the total outstanding balance for all debts. Include all of your expenses such as gas, utilities, cable, mortgage, food, entertainment, and transportation. Leave no stone unturned when calculating your debts. Include old and recent debts on your list.
  • Once you have totaled income and debt owed, subtract the debts from the income. Is the number you come up with a negative or a positive number? If you have a positive number remaining, it means you still have income left over after satisfying for financial obligations. If the number remaining is negative, you have to make some cuts.
  • Review the outgoing expenses and determine which can be eliminated. Most consumers will opt to stop cable services or downgrade a mobile phone plans as a starting point for reducing expenses. Depending on how far in debt you are on a monthly basis, you may have to make several sacrifices to save more cash.
  • Next thing you want to do is create a budget worksheet. You can download blank forms from the Internet or make your own using a lined piece of paper. At the top of the sheet, list the variety of budgeting categories you need to account for such as housing expenses (mortgage, insurance, maintenance costs), utilities (oil, electric, cable, Internet), transportation costs (gas, vehicle maintenance, car loan, insurance), other recurring debts (credit care minimums, health insurance) and incidentals like entertainment expenses (dining out, movies, travel). Don’t forget to include a space for cash you might want on hand at any given time.
  • Add up the expenses for each category and list the amounts in the appropriate columns. Subtract the monthly amount of your financial obligations from your take home monthly income. The amount of money remaining will be extra cash which can be put into savings, an emergency fund, or a retirement account.

Let Your Budget Live

Creating a budget is not a once and done thing. In order for a budget to work, you have to remain committed to following through with it and updating it as your income or your spending changes. Many people balk at sticking to a budget because they feel they don’t have any spending money but the reality is that budgets translate your true financial situation and if there is not enough money left over for something you want, you just can’t reasonably afford it.

Repairing your credit score involves eliminating as much debt as you can in the fastest time possible. The only way to be successful in debt elimination to boost your credit score is to create a budget and stick with it. After a little practice, you’ll likely end up relying on your budget plan long after you have become debt-free.

Don’t: Dispute Everything On Your Credit Report

Credit report disputes are just one of several strategies you can use in credit repair. After you order your credit report, you submit a dispute to the credit bureau online or via mail. The credit bureau is required to do an investigation and remove any disputed items that are inaccurate, incomplete, or unverifiable.

When you’re using the dispute process to help improve your credit, there is an important rule you should follow: Don’t dispute everything. This can backfire in a couple of different ways.

Too Many Disputes Could Be “Frivolous”

If you send too many disputes at one time, the credit bureau can decide these disputes are frivolous and refuse to process the disputes. The law allows them to do this. When this happens, none of your disputes are processed and nothing is removed from your credit report.

The only exception is when you’ve been a victim of identity theft and none of the accounts on your credit report belong to you. Even then, you should have documentation, like an ID theft report or affidavit, showing that the accounts were fraudulently opened.

Disputes Could Clean Your Credit Report

Let’s say you dispute everything from your credit report and it all gets removed. Your joy at a clear credit report will be short-lived when you find out that having nothing on your credit report is just as bad as having negative information on your credit report. This is not the goal of credit repair.

If you don’t have anything on your credit report, you can’t get a credit score. For FICO to calculate your credit score, you need to have at least one account that’s been open for six months. So until you open an account and have it for that length of time, you’ll be out of a credit score.

Good luck getting a credit card without a credit score. One of the reasons credit card applications are denied is because the card issuer can’t get your credit score. Having brand new credit makes it hard to get a credit card.

A Better Way

If you’re going to clean up your credit report by disputing things from your credit report, don’t dispute everything. You should leave at least one account, but preferably a few, on your credit report so you won’t have such a hard time getting new credit.

Send your disputes a few at a time when you’re disputing several things on your credit report. Two or three disputes at a time is a good idea. That way, the credit bureau won’t have a reason to think your disputes are frivolous. Include as much supporting documentation as you can to help the dispute process. Always send copies of your documents and keep the original for yourself.

The credit bureau has 30 to 45 days to investigate your dispute and give you an answer. Sending your disputes via certified mail with a return receipt request will give you the proof you need to file a complaint when the bureau doesn’t return the dispute within the required time frame. Whenever you have trouble with a credit bureau, you can file a dispute with the Federal Trade Commission.

Do It Yourself Credit Repair: The Good and the Bad

When it comes to credit repair, you only have a few options: hire someone, do it yourself, or do nothing. The “do nothing” method works, but it takes from seven to ten years for negative information to drop off your credit report. In the meantime, you’re stuck maneuvering around a bad credit score – paying high security deposits, looking for apartments that don’t do credit checks, paying high interest rates on credit cards and loans.

You could hire a credit repair company. Some actually perform the services they say they’ll perform. Other companies are simply scam operations that take your money and leave you without better credit. If you hire a credit repair company, you’re taking a risk.

Many consumers opt for DIY credit repair – repairing credit on their own, without the use of a credit repair professional.

Repairing your credit on your own won’t be the easiest thing you’ve ever done, but the hard work will pay off when you’re enjoying your great credit score.


If everyone knew how to repair their own credit, the nation’s average credit score would be higher than 692. Credit repair remains elusive for so many bad credit sufferers because the answers aren’t right in front of your face. If you want to repair your own credit, you’ll have to dig deep to figure out what it’s going to take to rid your credit report of the negative information.


Once you figure out what you need to do to repair your credit, you have to take action on your findings. This means ordering your credit report, sending out the appropriate credit repair letters, paying off necessary accounts, and following up to make sure your actions are successful.


The companies that control what goes on your credit report deal with millions of consumers and their requests to have information removed from their credit histories. Don’t be surprised if these companies – credit bureaus, debt collectors, and creditors – seem like they don’t want to help you. They usually don’t want to help you. Sometimes it takes two or three tries before you can remove certain things from your credit report. Don’t give up after one time.

Know When to Fold

While it makes sense to make several attempts to remove an item from your credit report, certain things will stay on your report until the credit reporting time limit has run it’s course. Court records like bankruptcy, judgments, and tax liens are close to impossible to remove.


DIY credit repair isn’t free. You won’t spend hundreds or thousands on a credit repair service, but you might have to pay off some accounts. For example, if you use the pay for delete strategy to remove accounts from your credit report, you’ll have to pay off your debt. Your credit repair may also involve paying off other delinquent accounts.

The Silver Lining

In the process of repairing your own credit, you’ll gain the credit management skills you need to keep a good credit score. Too often, consumers who hire credit repair companies need credit repair again in just a few years. As you approach credit repair, remember that the process takes time. Be patient and work diligently toward better credit.

Do you need a credit repair company?

As lenders continue to implement more aggressive qualifications for loan approval, consumers must be diligent in maintaining or improving their credit history and credit score. What may have been considered a good score a few years ago simply will not do the trick in today’s economy if you are shopping for a loan. In some cases your credit may be good enough to qualify for a loan but at higher interest rates than those offered to individuals with even better credit. Lenders are not the only people considering your credit history; insurance companies and employers also consider how you have managed your finances in the past when reviewing applications. If you have bad credit, your first priority to better improve your personal finances is credit repair. There are plenty of ways to achieve this goal with one of your options being a credit repair company.

What is a credit repair company?

You have undoubtedly seen or heard advertisements from companies that promise to fix your credit problems. These promises may include removing bankruptcies, judgments and liens from your credit file or erasing your bad credit. Still other companies claim they can create an entirely new credit identity to help you move on from your history of bad credit. While there may be a few companies that will honestly help you work on your bad credit history, almost all of these companies in the credit repair industry are interested in nothing more than separating you from your hard earned cash. Proceed with caution if you are considering a company that offers services to repair your credit.

Do-it-yourself credit repair.

Before signing on with a credit repair company, consider steps to repair your credit yourself. The first step in doing this is knowing how to spot and avoid help from individuals or companies that are nothing more than a scam. It is also important to understand what actions you can take legally to fix your credit and actions that are illegal. Finally, become familiar with debt elimination strategies and what factors are considered in determining your credit score and history. Repairing your credit is not something that will happen overnight, however it is something you can do on your own without paying additional money for a company to take the same actions.

Stop the cycle.

One of the biggest challenges facing individuals with bad credit is a cycle of financial difficulty followed by bad credit which can in turn lead to another financial hardship. To stop this cycle you have to address one issue at a time. If you are struggling with a large amount of debt which makes it impossible to pay your bills on time or reduce your debt balances, eliminating debt must become your first priority. Once you have achieved this goal, you can then begin to focus on the steps necessary to repair your credit and move forward to financial stability in the future. Getting out of debt and fixing your credit are two of the most difficult challenges a person must face, nevertheless it is necessary to address both issues to stop the cycle responsible for financial instability.

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