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Money Girl
351 MG Should I Use a Credit Repair Company?
(upbeat music) - Hi everyone, I'm Laura Adams, author of the award-winning book, "Money Girl, Smart Meets to Grow Rich." In addition to this show, I also write a free newsletter with tips that are not in the weekly podcast. So be sure to sign up at quickandertietips.com. While you're there, connect with me on social media, subscribe to the podcast on iTunes, or read a transcript of this show, which is episode number 351, called "Should I Use a Credit Repair Company?" I recently received several questions about using credit repair companies. Latanya asks, "My husband and I have poor credit, "even though we paid someone $2,800 "to repair it a couple of years ago. "Do you know how we can fix our credit "without spending money that we don't have?" Ashley asks, "I checked my credit report "and found three accounts that I don't recognize. "They show delinquent payments. "No wonder my credit is so bad. "Should I hire a credit repair company to fix this?" And Ron asks, "I have very poor credit "because I've made a lot of bad financial decisions "and now have a ton of debt. "Should I use a credit repair company "to get my credit cleared up?" In this episode, I'll answer these questions and tell you the truth about credit repair. You've probably seen or heard TV and radio ads that say something like, "Got credit problems? "Let us help you erase your bad credit forever, guaranteed." Unfortunately, these kinds of ads are likely a scam. There are no legitimate organizations that can make those kinds of claims. As much as you might wanna believe it, there's no quick fix for poor credit. No one can legally remove negative information from a credit report if it's accurate. Only time can help. It takes seven years for bad marks to go away, except for bankruptcy, which sticks around on your credit history for up to 10 years. According to the Credit Repair Organization Act, it's illegal for a credit repair company to misrepresent their services or even to charge you before they've delivered those promise services. Credit repair companies are forbidden to suggest that you do anything illegal, such as making false statements on a loan or credit application, altering your identity to change your credit history, applying for an employer identification number to give creditors instead of your Social Security number or misleading a credit reporting agency in any way. Following illegal advice means you're committing fraud and maybe subject to fines or jail time. If you're like Latanya and have been burned by a bogus credit repair company, you can sue them for your financial loss and even seek additional punitive damages. Be sure to report problems with a credit repair company to your state attorney general and to file a complaint with the Federal Trade Commission at FTC.gov/complaint. But let's say you're like Ashley and have inaccurate information in your credit file that's hurting your credit. Errors could range from fraud to mistakes in reporting from creditors. You have the right to dispute credit errors and get them corrected for free. The credit reporting agencies and the companies that provide your information to them are responsible for correcting errors in your credit history. So you should never pay any person or organization to clean up your credit report. The truth is that anything a credit repair company can do legally, you can do for yourself at little or no cost. You're entitled to a free report from each of the three nationwide credit reporting agencies, Equifax, Experian and TransUnion, once every 12 months at annualcreditreport.com. You can get all three reports at the same time, which is a good idea if you suspect a problem or haven't checked them recently. Or you can stagger your credit report request throughout the year, which is what I recommend. I created a free video tutorial called the Credit Score Survival Kit that shows you step by step how to get your credit reports and dispute errors at no charge. I love learning and anything that makes learning easier. If you're a parent and your child needs some homework help, then IXcel is a right for your family. IXcel is an online learning program for kids covering math, language arts, science and social studies. IXcel has interactive practice problems for topics from pre-K to 12th grade and everything is organized by grade and subject. As kids practice, they get positive feedback, awards and explanations for wrong answers. IXcel figures out what your kids need more help with and recommends more topics to practice. Their videos, lessons, sample problems and learning games too. One subscription to IXcel gets you all subjects and all grade levels. Membership started just $9.95 a month. It's no wonder IXcel is used in 95 of the top 100 school districts. I think the positive feedback that IXcel gives is really crucial when it comes to learning. So make an impact on your child's learning, get IXcel now and money girl listeners can get an exclusive 20% off IXcel membership when they sign up today at IXcel.com/moneygirl. Visit IXcel.com/moneygirl to get the most effective learning program out there at the best price. Staying informed about what's in your credit report is a smart way to catch an identity thief who may be on a spending spree using an account opened up in your name. To win the credit game, it's critical to have credit accounts in your name and to manage them responsibly. Some common causes of bad credit are making late payments, having a short credit history, having a thin file with no or too few accounts and having high debt balances. Many people who are struggling with poor credit are like Ron who said he's accumulated more debt than he can handle. We get into debt for lots of different reasons like racking up student loans, having unexpected medical bills, losing a job or being a shopaholic. You have to gauge your own debt situation and face up to your ability or inability to help yourself. Here are five debt management solutions to consider. Number one, earn more. Get a better paying job or a second or third source of income for a period of time. So you'll have more money available to pay down your debt. Number two, cut costs. Be ruthless about eliminating expenses and becoming more disciplined with your money. Make extreme sacrifices like moving into a less expensive home, selling a car or relocating to a less expensive town or city. Number three, settle debt. Contact creditors to negotiate discounted final settlements. This is an effective strategy that could substantially reduce your debt but usually requires you to have cash to offer. Number four, consolidate debt. Pay off debt with a less expensive debt. Consolidation makes sense when you can reduce your interest rate and monthly payment. However, if lower payments are achieved by simply extending the length of a loan, be sure you won't end up paying more interest in the long run. And five, enroll in a debt management plan. Seek out a credit counseling organization, which is different from a credit repair company for guidance on this. If you qualify for a debt management plan, you deposit money each month that they use to pay your debts according to an agreement they work out with you and your creditors. In some cases, a creditor may reduce your debt, interest rate or fees if you have a debt management plan. A reputable credit counseling organization can offer free information and workshops to help you create a budget, manage your money and reduce debt. Certified counselors discuss your entire financial situation and work with you to develop an action plan. The National Foundation for Credit Counseling is a nonprofit network that can refer you to a member organization in your area. To sum up, there's no magic bullet for curing an ailing credit report. If it's riddled with errors, you can and should clean them up on your own. And if your credit is poor due to making terrible financial decisions, take ownership of your mistakes and make better decisions going forward. Never compound financial and credit problems by paying a person or company for something you can do for yourself and risk receiving bad advice or getting scammed. I'm glad you're listening to Qing. That's all for now. Courtesy of Money Girl, your guide to a richer life. [MUSIC PLAYING] (upbeat music) [BLANK_AUDIO]