Your Credit: How to Repair it & Protect it

By Carol Paolillo

More people in our present economy are finding themselves facing financial difficulties with overwhelming debt. In some cases, this is the result of poor spending habits, while in other cases it is the result of a job loss or extensive medical bills. Whatever the source, regaining financial stability is a daunting task for many.

Financial Education
Fortunately, there are resources that can help. One such organization that offers assistance is NovaDebt, a non-profit special service agency, with offices in Freehold, NJ. According to Senior Counselor Sandra Shore, NovaDebt’s mission is to provide financial education to the public. This includes free credit counseling to families and individuals in need of this service.

As a counselor, Sandra says she looks at individual situations, makes suggestions and offers materials to help her clients set a realistic budget. She also acquaints her clients of the various programs available to them to assist with such areas as child care, legal issues, gambling and substance abuse, medical expenses, etc.

The first session with a credit counselor takes a minimum of 45 minutes, according to Shore. During this session, the counselor will review all financial information and design a personal plan of action filled with practical advice. The credit counselor will offer materials to help the client organize their bills and form a strategy to pay them off.

In the event the client cannot make payments on their own, Shore explains that they may be referred into a Debt Management Program. In this program, one monthly payment is sent to NovaDebt; the agency then takes over payments to the various creditors. They will also work towards getting payments reduced, credit card interest lowered, late charges eliminated and over limit charges waived. Only clients for whom this is the appropriate solution are referred into the Debt Management Program, which could entail a fee.

NovaDebt can also make the appropriate referrals to Housing Counselors and Bankruptcy Counselors when required. Shore reiterates, “the solution may not be painless, but we can find a solution.”

Credit Score

Let’s look now at credit scores and their importance. As a way of determining your financial responsibility, creditors, lenders, landlords and even employers will review your credit score. This score is determined by information gathered from banks, credit card companies and other financial institutions based on your credit history.

Protecting your credit is extremely important if you intend to take a loan for a car, school, business or home mortgage. There are steps you can take to protect your credit. In the event your credit has already been damaged, there are also steps you can take to repair it. Be aware, though, that services stating they can remove negative information from your credit report are often fraudulent and best to be avoided. If the negative information is accurate, it is nearly impossible to be removed by anyone — even you!

In the event your credit report is legitimately inaccurate, you can dispute it. Write to the credit agencies advising them of the inaccuracy and request that they remove it. The credit agency has 30 days to investigate and receive a response from the creditor to validate the debt. If they do not receive a response from the creditor, the credit agency is then obligated by law to remove the entry from your credit report. You need to contact all three credit reporting agencies – Equifax, Experian and Trans Union, to assure the inaccurate entry is removed by all.

Here are several tips you can follow to protect and/or repair your credit.
1. Review your credit report. You are allowed one free copy of your credit report each year from each of the three credit agencies listed above. You can request a report every four months from one of the three agencies to spread it out over the year.
2. Protect yourself against Identity Theft. Report lost or stolen credit cards immediately; do not carry your Social Security Card in your wallet. Look at credit card and bank statements to verify all transactions are legitimate. Report any questionable transactions ASAP.
3. Create a budget. Track your spending for 30 days. If you have outstanding debt, figure out how much you can a lot to pay down your debt each month. Make payments on time.
4. Cut up your credit cards. Keep one major credit card for emergencies, but don’t make it too easy to use — keep it at home rather than carrying it in your wallet.
5. Contact all creditors when you realize you won’t be able to make the minimum payment. Many creditors will work with you and accept smaller payments.
6. Consult a credit counseling service (such as NovaDebt) as soon as you realize you need assistance – you do not need to be on the verge of bankruptcy to get help. Try to avoid bankruptcy if possible. Bankruptcy will show up on your credit for the next ten years. Although it takes a lot of hard work and dedication to stick with a budget and pay off your debt, in the long run you will be glad you did.

Remember, there are lots of resources out there to help you regain and stay in control of your financial situation. It may be difficult to take the first steps towards your financial goals, but in the end you will find yourself free of the financial stress facing millions of people today.