Clean Up Your Credit

Introduction
Living with debt or bad credit can be very stressful, but help is closer than you realize. Improving your credit rating requires that you take positive action and change your attitude toward money. Not always easy, but can be done if you honestly want to.

Steps:
1. Request a copy of your credit report from a credit bureau. You are entitled to one free copy per year from each of the major credit bureaus. (http://www.experian.com/, http://www.equifax.com/, and http://www.transunion.com/ )If there is an error, write to the bureau and ask it to fix the mistake. It might also help to contact the creditor who reported the error. Some creditors will contact the bureau on your behalf.
2. If the bad marks on your credit report result from outstanding debts, repay them as quickly as possible. Pay off those with the highest interest rates first. Make sure that nothing is past the Statutes of Limitations. Check the SOL with your state. Some states have credit card debt SOL as low as 3 years.
Check your state's Statutes of Limitations here: http://www.fair-debt-collection.com/statue-limitations.html

Why should you care about the Statute of Limitations (SOL)?
Every day, consumers pay off collection accounts and charge-offs which they do not have to pay off because the Statute of Limitations has already expired for the open account. Consumers pay off these accounts because the accounts still appear on their credit reports.
This information can be a powerful weapon in unburdening yourself of old debts, as creditors have a limited time in which to sue you. Remember: the Statute of Limitations begins to run from the day the debt - or payment on an open-ended account - was due. Tthis has nothing to do with how long an negative credit item can remain on your credit report.
Consumers also pay off these accounts when they are not on their credit reports. Even though an account was removed from their credit file, a collector watched their credit report for any activity (actually the computer was watching any credit activity). When the collector spotted the activity, he called the consumer for payment. All the consumer needed to say to the collector was, "I have an absolute defense--the Statute of Limitations has expired."
The Statute of Limitations does not cause your debt to go away after it expires. If the creditor files suit, the consumer has an absolute defense. The consumer must offer the new evidence to avoid a judgment. The evidence will consist of papers the consumer files to support his claim. If the creditor sues you, and you do not prove to the court that the Statute of Limitations expired, you will have a lost lawsuit and a judgment against you.


When does the Statute of Limitations start?
You might be asking yourself, "It has been such a long time since my "open account" has had any activity. When does the Statute of Limitations started ticking?” Use your credit report as a reference. Your credit report will tell you the date of last activity for your account.
Depending on what state you live in, if you make a partial payment, you could be postponing the Statute of Limitations' taking effect on your collection account or charge-off. A collector might call you one day and say you waived your rights when you made a deal with the collection agency. Do not take anything a collector tells you for granted. Make them prove it to you, in or out of court. For about half the population, the Statute of Limitations started ticking the day they made the last payment for their account.

4. Steer clear of any services that offer you credit-repair or debt-consolidation loans. These companies will plunge you further into debt. Be suspicious of any company that advertises aggressively or sends unsolicited mail or phone calls.

5.Cut up the credit cards but do not close the accounts. Creditors like to see long time credit history. Sell valuables or liquidate assets that will help you repay your debts. Buy the essentials (food and gas) and use the rest of your earnings to pay off your consolidated debts.


6. Work diligently to repay all of your debts. Meanwhile, live a life that will help you re-establish good credit. Pay rent and utilities or mortgages promptly, keep the same residence and job, maintain savings and checking accounts, set a budget and stick to it.

7. Once you have repaid your debts, apply for a new credit card to build a good credit history. It might be easier initially to get a department-store or gasoline credit card or one from an employee credit union.

8. Promptly pay off the balance of the credit card monthly to build good credit and do not pay interest. Use the card responsibly.

9. If you don't qualify for a regular credit card, apply for a secured one. With a secured credit card, you fund an account up front and then "charge" expenses on it. This card will show up as a credit card on your credit report and, if used responsibly, can help you build a good credit history.

Tips & Warnings

Get a copy of your credit report once a year even if you think you have good credit. You may find errors that will damage your credit rating.

Filing for bankruptcy is always an option, although your credit history will reflect it for 7 to 10 years, making it very difficult for you to get a car or home loan in the future.

Creditors agree to reduce or eliminate interest rates under a debt-consolidation plan because it saves them the expense of collection efforts and increases their chances of recouping the balance.

Every application you make for a credit card shows up on your credit report, and multiple applications can hurt your credit rating. To avoid this, use an online service that matches you with credit card companies that will extend credit to you. Search online for "credit card finder" or "credit card search."