Finance

How to repair your credit rating

Deciding whether to hire a credit repair firm or doing it yourself depends a lot on your willingness to work as well as your ability to be organized and follow through the process.

First you will need a copy of your credit report and credit score from each of the three major credit bureaus. Since creditors don't all report to the same credit bureau, and some use more than one, it is important to see exactly what appears on each report.

Then you need to have a folder for each creditor that you will work with to fix your credit report. Keep notes, copies of letters, and a copy of the portion of the credit reports that are about that creditor. This will keep things organized and within easy reach while you work on improving your credit.

Basic steps to repairing your own credit

• Get a copy of all 3 of your credit reports from the major credit bureaus.

• Go through each report and make a note of any errors, as well as good credit references left out of your reports.

• Write a letter to each credit bureau outlining the errors and omissions.

• Write a letter to each creditor who has not reported the good credit references you do have.

• After 30 days, get a copy of your updated credit reports .

• Do more letters to the bureaus and creditors who haven't taken the appropriate actions previously requested by you.

Repeat the last item as necessary, until all items are cleared and posted, until at least 90 days have passed, then

File a complaint with the FTC (Federal Trade Commission) under the Fair Credit Reporting Act

If you don't have errors or omissions to fix, and just have bad credit, here is what you need to do to fix your credit score:

• Negotiate good updates with your creditors by either settling debts, or making payments on time until the debt is paid.

• Open a savings account, make regular deposits and leave the money alone.

• Apply for a low limit, or secured credit card, use it and pay it off each month, on time.

• Make all credit and loan payments on time or early.

Things don't happen overnight, but after 6 or 8 months, you should see an improvement in your credit score.

Hiring professional help

If you really don't want to deal with it yourself, and would rather a professional, we recommend one who is well-versed in the use of the Fair Credit Reporting Act to protect your credit, and who will handle all the detail work for you.

Once you see a decent improvement in your credit score, make sure you negotiate lower interest rates on your loans and credit cards.

If you prefer do-it-yourself credit repair

Then you need the one book that doesn't fool around or put you on the edge of risk with your credit, Credit Repair Made Simple offers tips, sample letters, and easy instructions you can follow to repair your credit yourself. Written by Brian Eichhorn, president of Cornerstone Credit Counseling, you get great insight into your credit report, and how to improve your rating.