Ken Paxton

Credit Repair

A good credit standing provides consumers with the ability to obtain competitive interest rates and loans for major purchases such as cars and homes. Having a poor credit rating can be costly to consumers. A poor credit rating could be an obstacle to major purchases such as appliances, cars and houses. If you have a poor credit rating, you will find it hard to obtain a good credit card with a reasonable interest rate.

Thus, consumers have an interest in obtaining and maintaining a good credit rating. Of course, the best way to have good credit is to start out in that manner and continue. However, circumstances can sometimes play havoc with our best intentions and you may find yourself behind on credit card or loan payments or even in default.

Repairing bad credit takes time but it will be worth the effort. However, be aware that no one can legally remove accurate and timely negative information from a credit report. Only the passage of time can assure removal of a negative item. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for ten years. Other items such as criminal convictions have no time limits.


In Over Your Head?–Ask for Help

If you feel you are in over your head in debt, contact your creditors. Explain your circumstances, and ask for reduced payments or to reschedule your payments–for example if you are paid on the first and fifteenth and must pay your rent or mortgage on the first, ask that credit card payments or car loans be reset so you can pay it on the fifteen. This will save you interest and keep your payments timely. You could ask to waive payment for several months if you are having a temporary setback but expect to be earning at your same capacity in a short while -for example, during unpaid leave or a layoff.

Note: you are the customer of your creditor and should be treated with respect even if you do owe money or are overdue on a payment. Report rude personnel to their superiors and make complaints to our office. Do not let the rudeness and overzealous collections efforts stop you from seeking help

Consider going to a consumer credit counseling service or seeking credit counseling over the internet. A reputable credit counselor can advise you on managing your money and debts, help you develop a budget and offer free educational material and workshops.

Sometimes credit counseling results in a referral to debt management plans. There are some companies that promise to lower your monthly payments for a fee. They negotiate on your behalf with your creditors to lower your interest rates, waive penalties and set up a payment plan of your debt. These companies offer debt management plans and must be registered with the state pursuant to Chapter 394 of the Texas Finance Code.

Choose such companies carefully and seek this help only if you have already tried and failed in getting your own monthly payments reduced or are unable to negotiate on your own behalf. Click on "Is debt management for you?"

Bankruptcy is an option, but not one to be considered lightly. Bankruptcies stay on your credit report for ten years. Moreover, with the new laws, that became effective October 17, 2005, you may be required to undergo credit counseling from a government-approved organization within six months before you file for bankruptcy relief. You can find a state-by-state list of government-approved organizations at


Proceed With Caution When It Comes To Credit Repair Companies

If you have poor credit, you may be tempted by a company offering to "erase" your bad credit for a fee. However, again only time will erase poor payment history that is accurate and timely. If it is not accurate and timely, then you can dispute the untimely or inaccurate items yourself. See section III "Steps to repair your credit."


Steps To Repair Your Credit

Once you have found a way to manage your current debt, you can start taking steps to repair your credit.

First: Make timely payments. This will began establishing your new payment history, which a creditor should take into account.

Second: Get a copy of your credit report. Under the Federal Credit Reporting Act (FCRA) consumers are entitled to receive a free credit report each year.

Third: Carefully review your report. Are items in your report accurate? or are they incomplete? Are they untimely [over 7 years for debts, 10 for bankruptcy]?

Fourth: If your answer to any item in step three is yes, dispute it.

Fifth: Even if you find no inaccurate, incomplete or untimely items, order your free credit reports annually to stay on top of any changes that may appear.

Sixth: Whether or not you can or do dispute an item, consider closing unused charge accounts, (starting with the most recent), limit credit inquiries, and rebuild your credit by starting small and building up gradually, making sure to pay on a timely basis.

Easy Credit Loan Scams

"Guaranteed Credit Approval" "Bad Credit Okay" are classic bait used by predatory lenders. Legitimate lenders require you to apply and pass a credit check. A "guaranteed" approval should be a red flag.

These "easy credit" scams can cost you in different ways. Your guaranteed credit approval may come with a hefty interest rate, or with a low initial interest rate that can be adjusted exponentially as we have seen in the subprime mortgage industry. Read the fine print carefully for any such easy credit loans. Know the interest rate you will be charged. The scam could also hit you with hefty initiation or funding fees. In most loans other than home loans, there should be no funding fees and you should not have to pay any fees in advance of the loan being funded.