1. Closing Accounts

A number of people become very fed up with their credit card debt due to their helplessness to meet the rising interest rate and debt balance to settle. Therefore, most opt for the easy way out, which is to close their accounts. Despite the fact that this solves one aspect of your problem, it presents another type of dilemma. Doing so may cause your credit rating to take a massive dip, depending on how many credit cards you have and what their limits are.

If you have a lot of credit cards, your credit score risk factors may report that you have "too many credit cards." If that's the case, you can probably close some of those accounts without affecting your score. If you have cards that you don't use or don't use often, close those accounts.

However, most consumers have the opposite problem - too few cards with high balances. Closing these accounts will most likely have a negative impact on your credit score because doing so increases what is known as the "utilization rate" in the scoring system. To determine your utilization rate, take all your credit cards and add up the balance. Then take the same cards and add up the amount of the credit limit. Divide the total balance by the total limit. If you will still have plenty of open credit after closing some accounts, then the impact on your score should be minimal.

Sometimes, you just have to exercise common sense, which should be the ultimate deciding factor - not your credit score. If you have one card that has an annual fee and none of your other cards charge an annual fee, then consider paying off and closing the account with the annual fee, or the one with the highest annual fee. The same is true for the terms - pick the card with the worst terms, pay it off and close the account or put the card aside and don't use it any more. If you find you cannot exercise self-discipline and credit cards make it too easy for you to overspend, that should be a major factor in whether or not you close your credit accounts. Your financial health is just as important as your credit score!

2. Debt Consolidation

Debt consolidation is a debt relief alternative that is already becoming relatively prevalent among people with debt problems. While this has helped, not many people resolve their debts and go back to a smoother financial status. It is not always the best choice to relieve yourself of debt. If you're unfamiliar with this method, debt consolidation is when you move all your credit card and other non-mortgage debts into either a refinancing of your home or a second mortgage. There are pros and cons to debt consolidation. (1) convenience of only paying one bill, where before there were many; (2) there may be tax advantages to a mortgage loan that aren't available for credit card debt and (3) you may be able to get better interest terms and lower monthly payments. On the down side: (1) you will most likely be putting your home up as collateral and failure to pay the consolidated debt may result in loss of your home; (2) the loan period will be extended; (3) there are fees associated with refinancing or a second mortgage that may negate the convenience and savings; and (4) if you have a bad credit score, you may have difficulty getting debt consolidation financing or favorable terms.

Of course, these debt consolidators don't do it if there's no benefit for them. Debtors are given up-front fee for some consolidating agencies while a statement of getting "third party assistance" will be reflected on your credit report.

3. Credit Counseling

At the end of the day, you may feel you are so far in the hole, feeling so overwhelmed, that you cannot possibly deal with creditors and balances. At that point, you may want to consider credit counseling and debt management. Reputable credit counseling services can advise you on managing your money and your debts, help you develop a budget, and they will contact your creditors to work out favorable terms for settlement or repayment. Creditors are interested in getting their money - working with a credit counselor demonstrates to them that you are earnest in settling your debts and improving your financial outlook. You will pay a fee for the service, but the benefits will almost always outweigh the cost and peace of mind you'll get.

First, make copies. You're going to be marking up the copies but you want to maintain the original without markups in case you need more copies or the original. Then, go through it very carefully using a highlighter and pen to make notes on the report itself. Some things to look for:

Personal Information

• Names and Addresses: Are the names on your report correct? Are there names or combinations that are incorrect? Are there addresses you don't recognize? Glaring errors will be most noticeable. Make note of any personal and address information that is incorrect or that you don't recognize. You want to identify any potential identity theft issues, as well as inaccuracies.
• Employment Information: Be sure to check that your employment information is correct. Again, the purpose is to identify any potential identity theft.

Collection Accounts

• The name of the collection company
• The account number
• The last activity date on the account
• The amount owed
• The orginal creditor (who the debt was originally owed to) <-- this is important

Check for duplicates and accounts that are not yours. It is very common to find duplicate collection accounts on a credit report. Even if a collection is showing as paid, make a note of the last activity date on the account, as this will be important in the process of fixing your credit.

Public Record Information

Public Record information will include bankruptcy information. If you have filed for bankruptcy, make a note on your list of the court location and the court reference number, the date the bankruptcy was filed and the date it was closed.

Judgments are also public record. This may include any Small Claims actions or rental property disputes. Note the case number that is being reported.

Tax Liens: You only need to be concerned with any tax liens that are being reported as upaid. Of course, if they are not yours or if they have have already been paid, make a note of it on your list. For unpaid tax liens that you are certain are yours, highlight the amount and case number.

Derogatory Accounts

Derogatory accounts are where most people take a hit on their credit score. These can be accounts claimed in bankruptcy, foreclosures, repossessions, charged off accounts, and late payments. For each negative account listed on your report, make note on your numbered list of the type of derogatory (foreclosure, 120 day late, etc.). For multiple lates or derogatory information in one account, list the worst derogatory and concentrate on the past 2 years.

Concentrate your efforts on negatives in the past 2 years. When negative information on your credit report is accurate, only time can assure its removal. The clock on these starts from the date the event took place. You will want to follow up and make sure these are removed promptly after the required amount of time has passed. When you review your credit report, you are making note of these in order to make sure they're accurate - you will not be able to have them removed if they are. These can remain on your record for up to 7 years; bankruptcies can remain for 10 years. Again, there is nothing you can do about these.

After the Credit Fix - Going Forward

In light of the fact that you cannot remove accurate negative events, what do you do now? Make sure you maintain healthy credit habits going forward and your credit score will start to improve.

Credit fix tools

Credit fix tools work! They can be effective in reducing errors on your credit report, getting better credit scores, and assisting you to achieve your fiscal objectives. Make no mistake - this doesn't mean that credit fix tools are a quick fix to credit report problems. The undertaking may result in some speedy return on efforts, but usually it takes a couple of months to arrive at all your objectives with regard to improving your credit score. An informed approach to credit repair will involve a brief education in the laws that govern each contributor to the reporting process, a practical grasp of scoring platform, and some competent application of basic finance principles. Here are several of the necessary steps that must be taken to arrive at your goal.

Learning about Credit

Credit repair is necessary for a variety of reasons. Regrettably, many individuals are not knowledgeable of the amount of the errors that are inherent in the credit reporting system. Over three-quarters of all credit reports have errors of some kind. Some of the mistakes are somewhat benign, but many can cause consumers to be assessed higher interest rates or even to be rejected for financing. If you look at the problem, you will notice that these errors are universal, expected, and even tolerated. It's your money - nobody will watch over it as carefully as you will..

Pay Close Attention to Your Credit Reports

Obtain a copy of your credit report from all three of the major reporting bureaus, or a good triple score report, and then plan on spending however long it takes to do some meticulous proofreading. The quality of your credit has never been as valuable as it is now. It is reasonable to say that every point counts, so you will need to examine every single line of your report if you want to fix credit report effectively. Obvious derogatory items will be easy to spot, but then you should keep digging to find further slight problems, like underreported credit card limits, duplicate accounts (even advantageous ones) and closed and paid accounts that still report a balance.

Take Action on Credit Report Errors

Once you have completed the careful review step of your credit fix project, it will be necessary to do something about the errors you have discovered. Your errors should be reported to the agency or agencies in writing and in the most uncomplicated way that you can. Remember - just the facts, ma'am! Dispute letters should always be right to the point. Don't get sidetracked with complaints or explanations - the reporting bureaus don't care and don't have time to read it. Include copies (not originals!) of any supporting documents. This might include something like the bill in question and your proof of payment, such as a canceled check. It may be very helpful for you to make three file folders, one for each credit bureau, and plan on saving copies of each letter that you send to each agency (that's what the folders are for). The credit bureaus have 30 days to look into your dispute and an additional 5 days to send you a response. If you don't get a satisfactory result the first time, send another letter. Credit repair can require determination. Create a "tickler" system for yourself, so you know when you should expect a response back for each query you sent, then make sure you follow up on each one.

You may also be able to dispute errors with the reporting company. Be sure to do this in writing and include a copy of any supporting information. Follow the same guidelines as those given above for disputing errors with the credit report bureaus. If your dispute is found to have merit and the negative report is in error, the company may not report it again.

Remember that while you may be able to remove inaccurate information from your credit report, you cannot remove accurate negative information. Only the passage of time will remove accurate negative events. In this case, the only way you can prove yourself to prospective lenders is by establishing a history of meticulous credit habits, so they can see that you are determined to protect your credit score and be fiscally responsible.

Plan Ahead Before Applying for Credit

Your credit fix effort is intended to fulfill a purpose. When the time comes to submit an application for a loan you want to be approved for the best possible financing. People with good credit scores get more favorable terms from lenders. You should complete the examination and repair of your credit report in advance of your loan submission. But there are some other credit repair tactics that you can employ, as well. Fair Isaac's credit scoring model (commonly referred to as the FICO score - and the standard used by virtually all lenders) puts heavy weight on the ratio of your credit card balances and their respective limits. If you have the ability to pay down your balances, do so; it can mean as much as a one hundred point difference on your scores.

Expert Credit Fix Help

If you find yourself struggling with sorting through your credit reports don't let it get you down - you aren't the only one! There are many resources and publications for self-help credit repair. If you get totally bewildered in the process, there are professional solutions. Locate a dependable credit repair service and ask for a consultation. Most professional services are very reasonably priced and offer some form of subscription membership and uncomplicated termination. They will insure that every promising opportunity is explored and that you get the result that you deserve. Your credit is critical, make the most of it. Credit fix tools work!