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Whenever you apply for any type of credit or financing, a credit report is pulled from at least one of the three major credit bureaus. While there are hundreds of smaller credit bureaus around the country, virtually every credit bureau is affiliated with either Experian, Trans Union, or Equifax.

These credit bureaus collect and maintain information on the vast majority of Americans, but they are not affiliated with the government in any way. The credit bureaus are for-profit corporations and they sell your personal information for money.

The credit bureaus receive your personal information through the same lenders who grant you credit. They have agreements with each of these credit grantors that require the credit grantor to inform the credit bureaus of everything that occurs in your relationship with the credit grantor. If you make a payment late, the negative credit listing is quickly reported to at least one of the three major credit bureaus and is added to your credit history. Credit reports are not just a record of how you are currently managing your credit accounts. Credit reports are histories of everything you are doing with your credit now, and everything you have done in the past.

The credit bureaus collect this information, list it on your credit report, then sell it to other credit grantors who wish to see your credit history before they decide to lend you money. The credit grantors who review your credit are especially interested in any negative credit. If you have shown any tendency to pay late, or to disregard your financial commitments in the past, then the creditors' computers will typically reject your application.

Just like when you were in grade school, your credit report is your financial report card to the world.

Merchant Trade Lines
These include all regular credit lines such as department store cards, auto loans, mortgages, and credit cards. If there is any history of late payment, or if the trade line was included in bankruptcy, charged off, or put into repossession, the listing will be considered negative by all credit grantors.

Collection Accounts
When an account is referred to collections because of delinquency or because of a bad check, this appears on the credit report as a collection account. Collection accounts can appear as paid or unpaid accounts. Any type of collection account, whether paid or not, is considered very negative by all credit grantors.

Court Records
Court records include bankruptcies, judgments, liens, divorce, satisfied judgments, and satisfied liens. All court records, including satisfactions, are considered negative by all credit grantors.

Inquiries
Every time a potential credit grantor looks at your credit file, a credit inquiry appears on at least one of your credit bureau reports. If the number of inquiries is very few over the last two years, then there may be no negative effect on your credit worthiness. However, if there are many recent inquiries showing on your credit report, credit grantors may become nervous and deny you credit.

With the passing of each year, your credit report is used more and more often as a yard stick to measure your character. Prospective creditors will always review at least one of your credit reports before granting you credit. Today it is increasingly common for insurance companies to review your credit before extending auto or health insurance. Many employers now check credit before they consider you for a position. If you rent, you may have already been through a credit check to determine your worthiness as a renter.

The Fair Credit Reporting Act (FCRA) requires that most negative credit items be deleted from your credit bureau file in no more than seven years, except for bankruptcy which can be reported for up to ten years. These are the time limits for reporting negative credit. The creditor or the credit bureau can choose to have the negative credit information deleted whenever they please. Inquiries may remain on the credit report for up to two years.

Under the new Fair Credit Reporting Act, no collection or charge off may remain on the credit report for more than seven and one half years from the first late payment that initiated the collection or charge off status.

Most credit grantors are not allowed by the credit bureaus to show you your own credit report. But you can purchase your credit report from the credit bureau for a fee or you may buy it on line through a variety of services.

If you order your credit report from the credit bureaus themselves, you may find that you cannot read it because the information is listed in an unfamiliar code. Trans Union and Equifax credit reports are very difficult to interpret and understand. Experian credit reports, however, are relatively easy for most people to read. The Qspace report is one of the most easy to read.

As you may have already experienced, even one small late pay listing may result in credit denials. It is a myth that a large amount of positive credit can outweigh some negative credit. Any negative credit whatsoever can become a substantial credit obstacle.

Different kinds of creditors respond differently to bad credit. It is safe to say that your bankruptcy will continue to make it more difficult to get credit for seven years after your last late payment assuming you don't repair your credit.

Within two years after the last negative listing, a consumer can usually acquire "sub-A" financing for a home (assuming all accounts are paid.) Within three years, the consumer should be able to get normal, "A," mortgage rates even without credit repair (that assumes that the person has been current on bills all the while.)

Auto financing is a little less forgiving. You may find yourself paying higher or slightly higher interest rates on cars until seven years after the negative listings (without credit repair), when the listings are deleted from the credit report. You can get auto financing with bad credit in most areas, but the rates are going to be astronomical. Yet, time heals all wounds, and you should be doing better within three years of the negative listing.

Credit cards and banks are the least forgiving of all. Many standard rate credit cards will not even consider an application from a person with a any negative credit on their credit report. In these days, though, there are credit cards that cater to every credit situation; even someone who discharged their bankruptcy the day before applying. Most of these cards charge very high interest or unusual up front fees or security deposits. It is common for one of these cards to charge you an "application" fee equal to the limit on the card. After the bankrupcty ages, prospects become better, but they will remain sub-standard until the negative listins fall off the credit report. With that said, it shouldn¹t be forgotten that bad credit can usually be repaired (after a significant amount of effort and follow-through.) Even bankruptcy can be repaired after enough effort and time are dedicated to the task. Click Here to Learn About Credit Repair.

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It is quite difficult to repair your credit without somehow satisfying your outstanding debts. However, the act of paying off a debt will not improve your credit rating much, if at all. Negative credit is allowed to stay on the credit report for a maximum of seven and one half years, except for bankruptcy which may remain on the credit report for ten years. Under the old Fair Credit Reporting Act (FCRA), the seven year clock began ticking on "the date of last activity" or, in other words, when the last action took place on the account. Under the revised FCRA, the credit bureaus must start the seven year clock on the first payment that you missed that led to the collection or charge off status. Now, creditors and collection agencies aren't allowed to extend the reporting period by passing the account back and forth between agencies.

However, by paying an outstanding, delinquent debt you will change the account status to "paid collection," "paid was late," or "paid was charged off" - which will still stand out as a very negative listing. When you have outstanding debt, it is almost always prudent to seek professional help so that you may settle your debts without further damaging your credit. In some cases, it is even possible to negotiate the deletion of negative credit as part of the payoff.

The credit bureaus have cleverly spread this myth through the news media and government agencies to discourage credit repair. In truth, the credit bureaus will sometimes temporarily delete a negative listing if they haven't heard from the credit grantor after approximately thirty days. If the credit grantor reports late, say after six weeks, and then verifies the negative listing, the credit bureau will often reinsert the negative listing on the credit report and reverse the credit repair. This is often known as a "soft delete." Usually, though, the creditor simply fails to respond and the negative listing is permanently deleted and repaired. If the item is verified by the credit grantor, either before thirty days or after, the account may still be repaired again at some future time.

Under the new Fair Credit Reporting Act (FCRA), the credit bureaus must follow strict procedures to notify you if they decide to re-report an entry on your credit report. These new procedures have reduced the frequency of the re-reporting of listings, and they have increased the risk of lawsuit for the credit bureaus when they do it.

There is no type of negative listing that hasn't been reparied and removed from a credit report thousands of times. Negative items, such as bankruptcy or unpaid debts, are certainly more difficult to repair and remove from the credit report, but this has more to do with the operational systems of the credit bureaus than with the severity of the bad credit item. For example, judgments and tax liens are severely negative listings, yet are, overall, easier to repair.

Disputing the credit report is easy. Getting results (and actually repairing bad credit) is amazingly difficult, complex, and infuriating. It isn't a coincidence that the Federal Trade Commission receives more complaints against credit bureaus than any other type of business. If you call the FTC today to report a complaint about the credit bureaus, their phone mail system will ask you if to press one if your complaint is about the credit bureaus, and press another number if your complaint is about anything else. Clearly, this situation evolved out of deep consumer frustration with the uncooperative nature of the credit repair process.

Remember, the credit bureaus are primarily interested in protecting their profits. Investigating your challenge consumes these profits. Short of sparking a large number of lawsuits, the credit bureaus seem to do everything in their power to discourage consumers from making progress with their credit repair. Repairing your own credit is like repairing your own transmission or representing yourself in court; it is possible, but you must decide if your are willing to take the time and assume the risks of doing it yourself.

Unless you hire a professional to help you, credit repair will have to become a full-fledged hobby.

Many bankruptcy attorneys do not adequately understand or explain the effects of bankruptcy to their clients. Stated simply, bankruptcy is to the credit rating what the atomic bomb is to the battlefield.

When you file for bankruptcy, every credit account that you decide to include in bankruptcy will become an "included in bankruptcy" item. Additionally, a bankruptcy filing and bankruptcy discharge listing will appear in the court records section of your credit report. Because so many negative items are attached to the bankruptcy, it becomes very difficult to remove all trace of the bad credit. If at all possible, you should avoid bankruptcy.

No known creditor considers information given in a 100-word statement. It makes one wonder why they included this meaningless stipulation into the Fair Credit Reporting Act.

Most creditors will not even look at the credit report when a credit application is made. Rather, they will simply take a numerical score from the credit report and make a determination as to whether or not they should extend the credit. This score, or FICO score, does not take into consideration the contents of a 100-word statement.

The statement does, however, verify that some of the negative listings on the credit report are technically accurate. This just makes your credit repair job more difficult. Make 100-word statements the first things you delete from your credit file (if you ever added one in the first place.)

Many credit repair operators have promoted this scheme, known as "file segregation". Technically, we have seen some few people that have succeeded in using a false Social Security Number and have fooled the credit bureaus into giving them a new identity. The scheme is complicated: one must change almost all identifying information about oneself and be very careful never to use the old information again. Most often, we've seen people embark on these schemes only to slip and, at some time, provide the old information mixed with the new. Then, both credit reports merge and the consumer is left with a tangled mess of deception and suspicious credit reports.

In the worst cases, people have been charged with crimes, or terminated from jobs, for using the false information.

This scheme has proven to be complex, difficult, and (according to the FTC) illegal. Lying about any personal information on a credit application is usually a federal crime. Using these "file segregation" credit repair schemes requires an enormous amount of coordination, not to mention personal risk.

Recently, the FTC has gone out of its way to shut down any credit repair company that promotes literature discussing file segregation. It remains to be seen if they will be successful under the First Amendment.

If asked for our recommendation as to whether a person should try a file segregation credit repair program, our answer is always, "No, it is too risky, difficult and legally problematic."

Any amount of bad credit is devastating to your chances of being approved by a credit grantor. Most credit grantors never actually look at your credit report. A computer pulls your credit report, rates your credit standing, income, indebtedness, and stability, generates a number (or FICO score,) then spits out an acceptance or denial. Even one or two slow pays will usually trigger a credit card or personal loan denial. The slightest amount of negative credit will cause the interest on an auto loan to skyrocket. You will probably find that even a little bad credit, regardless of how much good credit you have, is an unacceptable barrier to credit approval.

Consumer Credit Counseling Service or CCCS is a nonprofit debt counseling service that assists consumers who are over their heads in debt. CCCS is funded and controlled by the credit grantors and the credit bureaus.

Often, CCCS provides a beneficial service to the consumer. Because of the obvious allegiance between CCCS and the credit bureaus, you cannot reasonably expect CCCS to do anything that the credit bureaus would frown upon, such as help you repair your credit.

In fact, if you decide to leave CCCS before you have finished their program, they can list your failure to complete the process as a negative listing on your credit report (though this is rare.) When you are participating in the CCCS program, your creditors will often note it on your credit report. If you have perfect credit, and wish to keep it, you may not want to use a credit counseling service. These services usually create negative listings because their process will generally make you late on your bills at least 30 days.

The fact that you resorted to a debt counseling program is a red flag for prospective credit grantors. Remember, paying off your debts is a step in the right direction, but it does not repair your credit.

With these factors in mind, consumer credit counseling can be a life-saver if you're over your head and need some help and some breathing room.

When you speak with credit grantors, collection agencies, or credit bureaus, their typically under-educated staff may tell you all manner of such pseudo-legal nonsense. The law demands that negative listings appear on your credit report for no longer than seven years. The credit grantor or the credit bureau can choose to delete the negative credit listing whenever they see fit.

Repairing your credit by yourself is possible. But remember, the credit bureaus are committed to the failure of credit repair efforts, and the credit bureaus have far more experience in discouraging hopeful consumers than you have in beating giant credit bureaus.

Yet, some consumers have achieved results in repairing their credit without professional assistance. The following is a guide to help you determine whether or not you should seek professional assistance in your credit repair efforts.

Attempting to repair your own credit while failing to dedicate sufficient time or attention can result in further damage to your credit rating and may make it impossible for anyone to repair your credit for you. For this purpose, we'll give you a preview of the time commitment required to repair your credit. Examine very carefully your capabilities and your schedule before deciding to repair your own credit.

 

Example of a Month's Activities in Restoring Your Credit (for a couple)
Activity	Hours Required
Monitored calendar daily to check deadline of each of six credit bureau correspondences	2 hours
Drafted six new original credit bureau query challenges	4 hours
Visited post office six times to mail correspondences by Certified Mail/Return Receipt Req.	2 hours
Carefully analyzed and marked six credit reports to find negatives/deletions/ positive changes	3 hours
Drafted 4 tardy credit bureau response follow-up letters	2 hours
Visited post office 4 times to mail follow'up letters by Certified Mail/Return Receipt Req.	2 hours
Responded to 2 credit bureau stall letters by providing further information/ challenging time loss	2 hours
Visited post office 2 times to mail stall responses by Certified Mail/Return Receipt Req.	1 hour
Responded to 2 "frivolous or irrelevant" credit bureau rejection of dispute letters	2 hours
Visited post office 2 times to mail "frivolous or irrelevant" claim Certified Mail/Return Receipt Req.	1 hour
Requisitioned six new credit reports at $8.00 each through local credit bureau	2 hours
Contacted ten creditors and made creditor-direct challenges	8 hours
Drafted 20 letters to creditors (one per spouse) to challenge and demand further documentation	4 hours
Visited post office once to mail letters to creditors Certified Mail/Return Receipt Req.	2 hours
Contacted ten creditors by telephone to negotiate deletion of negative listing	4 hours
Carefully analyzed ten responses from creditors with billing histories and promissory agreements	5 hours
Contacted six state, federal, and licensing organizations to locate addresses and forms for complaints	2 hours
Prepared complaints to six state, federal, and licensing organizations	3 hours
Visited post office to mail complaints Certified Mail/Return Receipt Req.	.5 hours
Total hours per month (first month)	51.5 hours

This chart shows liberal estimates of time required to repair your own credit. If you are a single person working on his/her credit alone, you can subtract 25% from the total time required. This time investment will continue on a monthly basis, gradually shrinking as creditors agree to delete their listings. On the average, you can expect the process to take between twelve to eighteen months, unless you have very little negative credit (meaning, one negative item per report.)

Each response to a creditor or a credit bureau must be an original and must pertain specifically to your present situation or you may be red-flagged as a frivolous credit repair troublemaker or be ignored altogether. There are no effective "form letters" or "fill in the blank" responses that yield results. Credit bureau checkers spot form letters easily as the sign of someone attempting to repair their credit. As such, these letters generally earn a swift "frivolous and irrelevant" response.

Dueling with the credit bureaus and credit grantors requires an aggressive and tenacious personality. You must be willing to wade through rejection after rejection until you achieve your desired credit repair.

The credit bureaus will shoot down the majority of your claims and disputes. They will treat you like a disreputable person and a liar. You must take this rejection without becoming discouraged. If you are the kind of person who tires quickly from an emotional struggle, you should seriously consider hiring a professional to repair your credit. If you are the kind of person who becomes angry when dealing with the slow, bureaucratic employees of big bureaucracies, you will not fare well. Patience is an absolute requirement. If you are thick-skinned and have the fortitude to fight the credit bureaus and your creditors for as long as it takes, then you may have the proper disposition to repair your own credit.

In the process of repairing your credit, you will have to track and monitor dozens of communications at once. This will require organized, disciplined habits. Every day, you must check up on each of these communications to make sure that the credit bureau or credit grantor hasn't overextended their time limit. You must spend at least one-half to one hour per day tracking your responses, results, and taking appropriate actions. Remember, you will be dealing with three credit bureaus per person, plus you will be communicating with each credit grantor appearing on each credit report. In most cases, the number of simultaneous communications will exceed twenty or thirty. If you are not a very organized person, you are definitely not in a good position to attempt to repair your own credit. Click Here To Learn More About Credit Repair.