While my family's ultimate goal is to build up savings and investments and to never rely on credit again, that is a long-term goal that may take a while to reach. We have had times when our credit-rating was bad both from faults of our own and from other mistakes made by creditors and by dishonest practices of collection agencies. We are in a slightly better position now. We have made great strides in increasing our credit scores and eliminating those items from our credit that are negative. We did it ourselves through a lot of difficult to research and labor-intensive tasks. But, we did it and we keep working on it. If you do not feel that you are able to handle the tasks on your own, there are a number of companies to which you can turn for help and advice. Click here for some companies to check. Be aware of the scams though: one recent scam reported on MSN Money was of creating "new" identities. Credit repair companies were suggesting that people get new social security numbers and addresses and receive credit using those identifying features. This sounds illegal and, no surprise, actually may be illegal. Yet, people followed this advice out of desperation. If it smells wrong, it is probably wrong.
There are many companies out there who will offer to "repair" your credit score. However, for the most part, they cannot offer to do anything that you can't do yourself. There are three major credit companies: Equifax, Experion, and Trans-Union. These companies look at a number of factors to determine your scores: the amount of outstanding credit you have, how many requests for credit you have made in the recent past, your payment history, how much used and unused credit you have, and any major incidents in your life such as bankruptcies, foreclosures, charge-offs (debts that companies have tried to collect but could not), defaulted loans, etc.
You may not be able to do anything with the items that exist in the past. If they are accurate, you cannot change the past, and they will remain on your credit report and affecting your score for a fixed period of time, when, theoretically, they will be removed. You may, however, have to ask to have them removed when the time has passed. When you go for a loan, you may still be able to get one if you can explain the circumstances surrounding these incidents. However, you should get a copy of your reports, because there may well be errors, or debts reported that you do not know about or have already paid. Each of the three companies has their own forms that you should use when disputing a charge.
For example, after a long dispute with a company, we finally paid off a debt they claimed was owed. We paid it because we got tired of fighting it -- those people do not exist anymore. But, this was many years ago, and the company, also a lease finance company that was sued for some of their horrible practices, agreed to remove the charge-off they had placed on our credit in exchange for our payment. Even so, it kept coming up here and there. I wrote to all three credit reporting agencies with proof of payment, one took it off, one claimed it was not there and the other never responded. A few months ago, our home equity company wanted to increase our line of credit with no fees. Sure, I figured (still in my nasty debt developing mode). Well, they ran a credit check, and, there it was again causing us trouble. I was livid. I contacted the lease company, spoke to the "supervisor" and demanded it be removed as promised or we would contact the Attorney General's office. We are waiting to order our reports to see if it has been removed.
I have also had a long-standing problem with a doctor's bill that I paid, but that was sent in to collection anyway. As a consumer, you have a right to have the credit reporting agencies look into any disputes you have, and to have a claimed report removed if the company reporting you cannot prove that you owe the debt. This requires tremendous persistence, but is well worth the effort: when you need to borrow for a house, car, school, or an emergency, you will be approved quickly, you will not have to go through a series of hoops, and you will get preferential credit rates. That's worth it. That's why you must look at your report and deal with any issues.
Beginning August 15th, a new law was passed entitling you to write to all three companies for a free copy of your report. This will not include scores, but many of your credit card companies may offer a service that does include scores, and there are lots of on-line companies that will allow you to have access to your reports and scores for a fee. However you do it, you should do it and clear up mistakes and look at what you are doing wrong to cause negative reporting and fix it.
Now, aside from attempting to correct the past, you can do something to change your credit scores in the future: pay your bills on time and do not ask for credit unless you absolutely need it. Every time you put in a request for credit or pay your bills late, you have a good shot at decreasing your score. If you get organized from here on out, using the filing system, the spiral notebook and, maybe, online bill payment, you might be able to improve your credit scores dramatically within the next two years. And you don't have to pay anyone to do it for you.