ABC7 On Your Side: Credit Cleanup

April 27, 2009 (CHICAGO) It can be overwhelming, but there is a way out of debt and a way to better credit.

An Alaskan adventure awaited Neal Youngerman but not what he had in mind. Youngerman says someone stole his social security number and wrote thousands of dollars in bad checks. He spent four years clearing his credit.

"Just be vigilant. Keep going at them because they're relentless," said Youngerman.

Jennifer Smith says she lost hundreds of dollars in a scam to improve her credit. She realized afterwards the repair was hers to make.

"Through being persist and hard work, I was able to fix my credit myself and it didn't cost me a penny," said Smith.

Companies may offer to clean up your credit history for a fee. But the power is in your hands and experts say it can be as easy as writing letters and picking up the phone. They say the process starts by checking to see what's on your credit report from one of the three credit reporting agencies.

Lucy Duni is the vice president of marketing for the consumer division of TransUnion, one of the credit reporting agencies. She says the keys to repairing your credit: dispute inaccuracies, pay monthly payments on time; and pay down balances on credit accounts.

"If they're maxed out right at their limits that is something that can bring down your credit score that's why you want to pay them down to below 35 percent is a good rule of thumb," said Duni.

She also warns against excessive requests for credit.

"You apply for say three or four store credit cards, you really want to get that discount or what ever you were after. That could have an impact," said Duni.

On a recent afternoon at Wright College, a free seminar about credit repair is conducted by Cate Williams. Williams is the vice president of Financial Literacy for Consumer Credit Counseling Services, a non profit debt counseling agency. She says the secret to improving your credit report often means resolving debt.

The organization's counselors offer guidance in debt management as well as well as consolidating and reducing debt.

But Williams says debtors can do some of that on their own by negotiating directly with the creditor.

"Could you reduce my monthly payment for six months? Could reduce my interest rate to 6 percent for six months," said Williams.

Williams advises those with debt to:

  • Put together a budget (your expenses for one month)
  • Create a list of creditors (and what's owed)
  • And consider your options to reduce debt (whether temporary relief from creditors or a permanent shift in spending habits)
  • "You have a make a commitment to stop spending. You can't pay down debt while you're still out there spending," said Williams. "I think along the way people learn some new habits. They learn how to manage their money better and they have a deeper appreciation for the disposable income that they do have."

    For a free credit report from one of the three credit reporting agencies (Transunion, Equifax, Experian):
    Click here to download a sample letter to dispute items on your credit report.
    Consumer Credit Counseling Services: State Licensed Debt Management Organizations:
    US Housing And Urban Development Approved Counseling Agencies (Some of these agencies also do credit/debt counseling):

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