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Credit Repair after Debt Negotiation

Although debt negotiation, also known as debt settlement and debt workout, will damage your credit, you can legally work on repairing it. Credit repair is a three-step process. It is mainly recognized for the part involving the dispute of any incorrect, missing or outdated information and having it updated or removed from your credit reports (Step 1). Follow these three steps to repair any damage done by inaccurate information and to help rebuild your credit after your debt settlement.

Step 1: Check Credit Reports for Accuracy and Dispute Inaccurate Information
Under the Fair Credit Reporting Act, (FCRA), agencies, such as banks, credit cards and mortgage companies, that are providing the information to the reporting agency, must correct information that is wrong, or incomplete. To determine if the information is accurate, you need to get your credit reports from the three credit bureaus: Equifax, Experian and TransUnion.

Once a year, you can get your credit reports from each of the three credit bureaus from annualcreditreport.com online or by phone at 877-322-8228. Hearing impaired consumers can access our TDD service at 1-877-730-4104. Or, you can order by mail:

Download, print and complete the Annual Credit Report Request Form and mail it to:

Annual Credit Report Request Service

P.O. Box 105281, Atlanta, GA 30348-5281.

The report will take about 15 days to arrive.

AnnualCreditReport.com is the only place where you can get your credit report for free under the Fair Credit Reporting Act (FCRA) and Fair and Accurate Credit Transactions Act (FACT Act). Some states allow consumers to get free credit reports all the time. These states are: Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey and Vermont. If you live in any of these states or have already used up your annual allotment for a free credit report, you can order your reports directly from the credit bureaus:

Equifax
P.O. Box 740256
Atlanta, Georgia 30374
800-685-1111

Experian
P.O. Box 9532
Allen, Texas 75013
888-EXPERIAN (888-397-3742)

TransUnion
P.O. Box 6790
Fullerton, CA 92834
800-916-8800

Once you have your reports, contact both the lender that has issued a bad record and the reporting agency or bureau. Put your concerns in writing, detailing the problem by noting the wrong information as well as the correct information. Any documentation that can support the discrepancy also should be included. And, you need to indicate the course of action the information provider and credit bureau needs to take: delete the item or update it.

For example, if your debt settlement is still showing on your credit reports as a charge-off and the balance is still showing what you used to owe, you'll want to dispute this information so that it is updated to reflect the proper balance of $0 and so that the status of the account is also correct. Some creditors are willing to report that the debt was satisfied and paid in full, which is why it's a good idea to first contact the information provider. But, most will report that the debt was settled for less than what was owed. This is less damaging than the charge-off, so getting your reports updated to this status will help.

All correspondence associated with the request for correction of financial information should be sent certified mail with a return receipt requested. Be sure to keep copies of all your correspondence and documentation, as well as all your receipts from the credit bureaus and information providers. This provides the paper trail you need to prove when you sent correspondence and what was included in the dispute.

The credit bureaus must perform an investigation by contacting the information provider. If the information listed is found to be inaccurate or otherwise erroneous, the bureau will notify other reporting agencies of the information that needs to be corrected. Then, the bureau will notify you to let you know what action was taken on the disputed item or that the information was verified as accurate.

Step 2: Monitoring Your Credit
Another part of credit repair is monitoring your credit reports on a regular basis to make sure the information reported remains accurate and to detect and remedy early signs of identity theft--where someone uses your identifying information to open new credit accounts or fraudulently use your existing accounts. Most credit card providers offer credit monitoring for a reasonable fee. Experian and TransUnion also offer credit monitoring.

Step 3: Re-establishing Good Credit
The final step of credit repair involves the process of re-establishing good credit, also known as credit restoration. One of the fastest ways of re-establishing good credit is to get a secured credit card. These are cards that use whatever amount you deposit in your savings account as collateral. The amount you deposit is your credit line. For example, if you deposit $500. You have a $500 credit limit. To raise your credit limit, deposit more money. Keep the balances on your secured card low and make regular, on-time monthly payments to it. After about 6 months, you should start seeing some results. Keep the account open, because closing it will lower your scores.

Another way of building good credit is to get a small bank loan. Explain to your bank that you are trying to re-establish your credit and you'd like a small loan. If necessary, offer your savings account as collateral. This could increase your chances of approval. They'll probably put a hold on your account, so you won't be able to use it. But, a bank loan can really do a lot to increase your scores. Make each monthly payment on time throughout the term of the loan. You may even want to pay it off early. If you do, be sure to keep it open at least 6 months so it can make the desired impact on your credit scores.

If you are overwhelmed with debt, contact us immediately ! We'll go over your options and help you determine what is best for your financial situation.