Many people are confused as to the legality to repairing their credit.  First, it is helpful to understand what is illegal to repair your credit.  

1. It’s illegal to change your Social Security number to get a clean credit.  If any company offers you this as a type of credit repair, you should immediately report them to the proper authorities.
2. Disputing every item on your credit report, regardless if you know it to be true or not is illegal.  Per the Fair Credit Reporting Act, only items that are unverifiable, misleading or inaccurate should be disputed.  Items that you know to be true and reflect your credit history should not be disputed.
3. It’s illegal for any credit report service to charge you for services not completed.  This will protect you the consumer of any fraudulent companies that charge for services they never complete.

So, what exactly is considered legal credit repair?

Legal Credit Repair involves removing negative items from a credit report. There are several different methods of going about this; however, the most common and effective are as follows:

“Goodwill” Negotiation – Negotiating with creditors to remove negative items from your credit reports for mild late-pay accounts. No law exists that requires negative items stay on your credit reports for any amount of time.  As a result creditors have the ability to remove these items if it works to their benefit, even if it simply pleases a customer.

Credit Disputation – The Fair Credit Reporting Act gives consumers the right to contact credit bureaus directly and dispute items on their credit reports. Consumers have the right to plead “not guilty” to negative information on their credit reports and the burden of proof is on the credit bureaus, just like in a court of law.  Consumers can dispute any and all items on their credit reports that they believe is inaccurate, unverifiable, or misleading. If the credit bureaus can not verify that the information on a credit report is correct, then those items must be deleted.

A good source to get help repairing your credit is Lexington Law.

Most people don’t realize that having a poor credit score will cost them hundreds or even thousands of dollars per month.  The reason they aren’t aware is because most people don’t run the numbers.  If they did, they’d be surprised!

Many people with bad credit when purchasing a car or home don’t realize that if they had better credit their interest rate would be lower, thus their monthly payments would be lower.  Many people purchase cars and homes and just look at the monthly cost and not the interest rate.  

Most prime credit cards are out of reach from consumers with bad credit.  The few credit cards that are available (known as “sub-prime” credit cards) typically require expensive setup fees or recurring monthly fees, often require cash deposits, offer very low credit lines and most of the time don’t report as positive credit activity to the credit bureaus.

Let’s take a look at automobile financing and determine the cost of poor credit. If you plan on financing a car, you will end up paying $5,000 to $9,000 more because of your bad credit. The higher the interest rate, the higher your monthly payment which adds up to significant money over the years.  See sample calculation below.

Another area where having bad credit can really hurt is your home mortgage.  A typical house will cost you $50,000 to $130,000 more in interest if you are buying the home with poor credit. See sample calculation below.

Improving your credit score is vital before making major purchases.

Related Articles:

• Frequently Asked Questions About Credit Repair
• Can Negative Information on Your Credit Report Be Erased?
• Repairing Your Credit

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If you are applying for a loan, obtaining a copy of your credit report is the first place you should start.  Your credit report more than likely is the first thing a potential creditor will look it.  Even if you pay your bills on time and have a good credit score you want to ensure that all the information in your credit report is accurate and up-to-date.

Studies have shown that many credit reports contain inaccurate information what could affect your credit rating and even cause your loan application to be rejected.  If you discover a problem, you can fix it before potential creditors access it.  

You can get a free copy of your credit report from AnnualCreditReport.com. You are entitled to 1 free credit report within a 12-month period from each of the three agencies.   This free credit report doesn’t show your score, but will show items listed on your credit report.  To get your score you will have to purchase your credit report from services such as Equifax.

Before applying for a loan, check your credit report for the following items:

Clerical Errors
Credit reports sometimes contain errors that are a result of clerical (human) error or a computer glitch.  These may include late payments, payments not credited, or data mixed in from a credit file of someone with your similar name.  

Excess Unused Credit
The fewer charge accounts you have the more attractive you are to a potential lender.  You may want to consider reducing the number of revolving charge accounts listed as active in your credit report.  Lenders sometimes view too many revolving debt as a negative when considering a loan application.

Inactive Accounts
If you have accounts you have stopped using, it’s a good idea to close these accounts if you don’t plan on ever using them.  When you close an account, make sure your creditor notes the account as “closed at consumer’s request”; otherwise, a potential lender might assume the creditor closed the account for other reasons.

Credit Card Accounts
Well managed credit cards may improve your chances of getting a loan at a good rate, especially a mortgage loan, where lenders use stricter qualifying guidelines.  It’s also advised to keep credit card balances around 75% of the available credit limit.  Ironically, credit cards with high credit limits are viewed as potential debt, while maxed-out cards make consumers less desirable credit risk.  Both of these scenarios could limit your ability to get a loan.

30-day and 60-day Late Payments
If your credit report contain a couple 30-day late payments entries that are accurate, lender may over look the occasional late payment if you explain the situation and your credit score is good.  Try to avoid late payments over 60 days because it will raise a red flag to some lenders.  Even if you obtain the loan, it may come with a higher interest rate and will less favorable terms.

Most lenders are interested in the last two years of data on your credit report.  Therefore it’s a good idea to maintain on time payments and verify that the payments are credited properly on your credit report.

Avoid Unnecessary Inquiries
Every time your credit report is accessed by a creditor it is noted on your credit report.  Most inquiries stay on your credit report for up to 2 years.  Inquiries made by you, for drug screening, pre-approved credit offers, background checks for employment are not reported on your credit report.

Excessive inquiries may cause lenders to think you are trying to get credit due to financial difficulty or you are taking on more debt than you can repay.  However, lenders do realize that some inquiries are a result of shopping around for the best loans and will overlook a block of inquires within a recent period.
 
The key to smart credit management is to fully understand how your credit report affects your financial future.  Reviewing your credit report is a vital part of financial planning and is one of the best ways to ensure you meet your financial goals especially when it involves major purchases.  Unknown inaccuracies on your credit report could cost you hundreds or thousands of dollars in the long run because creditors my grant you loans with higher interest rates and stricter guidelines.

Related Articles:

• What is a Credit Report?
• How is Your Credit Score Determined?
• Get Your Free Credit Report and Score at Quizzle.com
• Top 4 Credit Reporting Products
• Get Your Free Credit Score From Credit Karma

Will a negative item on my credit report come back after I succeed in deleting it?

Credit bureaus will sometimes delete a negative listing temporarily if they haven’t heard from a credit grantor within 30 days.  If a credit grantor then reports a negative listing, the credit bureaus will often reinsert the negative listing on the credit report and reverse the credit repair.  However, many times, the creditor will fail to respond and the negative listing is permanently deleted and repaired.

Credit bureaus must follow strict procedures, per the Fair Credit Reporting Act, to notify you if they decide to re-report a listing on your credit report.    

Are negative items such as bankruptcies and foreclosures impossible to remove from the credit report?

There is no type of negative listing that can’t be removed and repaired from a credit report.  It has been done many times.  However, negative items such as unpaid debt and bankruptcy are very difficult to remove and repair.

Do I get a new credit report if I declare bankruptcy?

Bankruptcy is to the credit rating what a nuclear bomb is to the battlefield.  When an individual files for bankruptcy, every credit account that’s included in bankruptcy becomes an “included in bankruptcy” item. Bankruptcy discharge listings and filings will appear in the court records section of the credit report. With so many negative items are attached to a bankruptcy, it will be extremely difficult to remove all trace of the bad credit, if at all.  As a result, it is advised that you should avoid bankruptcy at all cost.

It is true that disputing items on my credit report is easy and can be done by myself?
 
It is true that disputing items on your credit report is very easy. However, getting results (and actually repairing bad credit) is very difficult, complex, and can be very infuriating. Repairing your credit is like repairing your car transmission or representing yourself in court; it is possible, but is it smart to do. It can be very time consuming and risky.

The Federal Trade Commission (FTC) receives more complaints against credit bureaus than any other type of business. As a matter-a-fact, if you call the FTC to report a complaint about a credit bureau, their phone system will prompt you to press one if your complaint is about a credit bureau or press another number if your complaint is about another type of business anything else.

Will my account show as “paid” and no longer considered negative when I pay off a past due account?

It is very difficult to repair your credit without taking care of your outstanding debts.  Paying off your debt will improve your credit rating by much, if at all.  Negative credit stays on your credit report for a maximum of 7.5 years, except for bankruptcy which can stay on your credit report for 10 years.

Paying off outstanding diligent debt will change the account status to “paid was charged off”, “paid collection, or “paid was late”.  This will stand out as a very negative item.  When you have outstanding debt, it is recommended that you seek professional help to settle it without further damaging your credit.  Sometimes, it is possible to negotiate a deletion of negative credit as part of the payoff.

Do creditors read my 100 word statement on my credit report explaining my side of the story and do they take my statement into consideration?

Most creditors do not look at the credit report when a credit application is completed.  They are most interested in the numerical credit score to determine whether or not they should extend you credit.  Your FICO score does not take into consideration the content of your statement.

However, the statement does very that some of the negative listings on a credit report are technically accurate.  This makes a credit repair job more difficult and the word statement should be the first thing to delete from your credit file.

Can I trick the credit bureaus into starting a new credit file under my name if I change my social security number or by using an EIN (Employer Identification Number) tax number?

This scheme is know as “file segregation” and is promoted by many credit repair operators.  Some individuals have been successful in using a false Social Security Number and have tricked the credit bureaus into giving them a new identity.  The scheme is totally illegal and lying on any personal information on a credit application is a federal crime.

The scheme is very complicated because you must change almost all identifying information about yourself and be very careful to never use the old information again.  Some people make the error of using their old information only to mix the old with new and get in trouble.  They will end up with both credit reports merging their information which then becomes suspicious to the credit bureaus.

Worst yet, some people have been charged with crimes, or terminated from jobs for using the false information.  

Will by bad credit be improved if I build enough good credit?

Any amount of bad credit limits your chances of being approved by a credit grantor. Most creditors do not look at your credit report but instead have a computer pull your credit report, rates your credit standing, income, indebtedness, and stability, generates a number (or FICO score,) then determines an acceptance or denial.
A simple one or two slow payment can trigger a credit card or personal loan denial. The smallest amount of negative credit will cause the interest on a loan (home, auto, personal, etc.) to skyrocket

Is it illegal for creditors to take an accurate negative listing off my credit report?

The fact is that the law demands that negative listings appear on your credit report for no longer than seven years. The credit bureau or credit grantor can choose to delete the negative credit listing whenever they like.

Will the Consumer Credit Counseling Service help me repair my credit, especially if I can’t pay all my bills?

CCCS or Consumer Credit Counseling Service is a nonprofit debt counseling service funded and controlled by the credit grantors and the credit bureaus. CCCS helps individuals who are over their heads in debt.
 
Often, CCCS provides beneficial services to consumers, however, because there is an allegiance between CCCS and the credit bureaus, you cannot reasonably expect CCCS to do anything that the credit bureaus would not like such as help you repair your credit.

If you decide to leave CCCS before finishing their program, they can list your failure to complete the program as a negative listing on your credit report (although this is rare.) When you participate in the CCCS program, your creditors will often note it on your credit report. If you want to keep your perfect credit, do not use a credit counseling service because their process will generally make you late on your bills at least 30 days, thus creating negative listings on your credit report.

Using a debt counseling program is a red flag for prospective credit grantors. Paying off your debts is a good start in the right direction, but it does not repair your credit.  Consumer credit counseling can really help you if you’re over your head and need some help.

How difficult is it to repair my credit?

Repairing your own credit by yourself is possible, however, the credit bureaus want you to fail and have experience in discouraging consumers.  However, some consumers have been successful in repairing their credit without professional assistance.  Keep in mind that the process can be very time consuming and you have to educate yourself of the process.  The process can take 12 and 18 months and take a lot of hours per month.  It is definitely a good idea to get some help from companies like Lexington Law.

Green appliances for your home can put money in your pocket.  Household appliances account for about one third of your homes energy consumption excluding heating and cooling.  Green appliances also help the planet!

Energy efficient appliances often are more expensive; however, you’ll make the money back because eco-friendly appliances use up to 30% less energy.  Eco-friendly appliances are usually better designed, such as clothes washers holding more clothes, dryers that are more efficient and stoves that heat up faster.  This all adds to the hundreds and eventually thousands of dollars in savings over the years.

Washing Machines
Front loading washers save money because they use less water and less energy saving you about $100 per year.  Front loaders use considerably less detergent which is gentler on your clothes.  This allows you to save on detergent and your clothes lasting longer.

Clothes Dryers
Save money by choosing a model with a moisture sensor that will shut off the unit when your clothes are dry.  This saves on electricity and saves your clothes and linens from unnecessary destructive overheating.  Stay away from dryers that measure the temperature of the exhaust air to determine when the laundry is dry.  These units are not as effective.

Dishwashers
Choose a dishwasher that gives you the option to use the heated dry function, which allows your dishes to air dry thus saving you money.  In the winter time you can open the dishwasher door to release warm air that will humidify you home.  An internal water heater will allow you to increase the water temperature when needed allowing you to turn down the temperature of your home’s water heater thus saving you money.  Finally, find a model that uses less water.  This can reduce your water consumption by 1,000 gallons per year and electricity usage by up to 25%.

Water Heaters
About 14% of a household energy cost goes to the water heater, according to the Department of Energy.  Unfortunately, the majority of the money used to power your water heater maybe going right down the drain because traditional water heaters fill to capacity and heat the entire tank.  Your home may not need as much heated water.  You can avoid this waste by installing a tankless water heater that heats the water on demand.  A gas fired tankless water heater can pump 5 gallons per minute keeping up with the busiest family.  Electrical tankless water heater cost between 10% and 20% less per year to operate than a tank-based heater, according to the National Association of Home Builder.

Refrigerators
Your refrigerator is most likely the most power hungry appliance compared to the ones listed above.  An old refrigerator can cost you about $300 per year in electricity cost.  Purchasing a smaller unit will reduce your electricity cost.  Find a model with the freezer on the top or bottom because these units use 13% to 16% less energy than units that are side-by-side.  If you can give up the icemaker and cold water dispenser, this will reduce your energy by 13% to 20%.  Models with an “anti-sweat” heater to eliminate moisture on the exterior will add 5% to 10% in energy consumption.

Below is a finance calculator that determines how much money you can save by reducing your spending. You'd be amazed how much money you can save over the years by making simple sacrifices.