Each day, millions of adults across the United States contend with the realities of having bad credit. Some are turned down for credit cards or vehicle loans, others learn their applications for a new home loan have been denied. If you’re dealing with the restrictions that can result from having poor credit, you may already realize that your credit reports are in need of repair. Today, understanding what you can do to repair your credit rating doesn’t need to be frustrating or stressful, thanks the abundance of financial resources available to consumers.

The first step in taking control of your credit situation is learning what information is listed on your credit files. You can do this by ordering your credit reports for free from AnnualCreditReport.com or by calling 1-877-322-8228. This service is provided by the three largest credit bureaus in the United States; Equifax, Experian, and TransUnion. The Fair Credit Reporting Act entitles you to receive, by request, a free copy of your credit report from each of the credit bureaus once every 12 months.

Tips to Increase Your Credit Score

Based on the information in your credit reports, credit scores are an important tool used by lenders to calculate the probability that a consumer will repay his or her loan. Fortunately for those with lower credit scores, these figures are not set in stone. there are ways you can improve your credit score.

* Pay your bills on time – Your payment history accounts for 35 percent of your credit score. Missing multiple payments will quickly drop your credit score but since the effect of a late payment wanes over time, concentrating on making all payments on time from today on will get your score moving in the right direction.

* Try to maintain low balances on your credit cards – Outstanding debt accounts for 30 percent of your credit score. The closer you are to maxing out credit cards, the less stable your finances appear. Keeping credit card balances below 30 percent of the limit will make your utilization ratio look better which will be reflected positively in your credit score.

* Avoid shifting your debt on numerous credit cards – Transferring debts to a low interest rate credit card is a good strategy when working to pay down debt, but constantly transferring balances between credit cards makes it look like you are robbing Peter to pay Paul instead of making your monthly payments.

* Carefully study credit applications before accepting – Some loans, including department store cards, are loaded with strings attached that can end up causing big problems down the road. For example, some no payment, no interest financing programs offered by retailers include rates that can skyrocket if you are late on a single payment and clauses where you may still be responsible for making payments on interest calculated during the “no interest” period.

* Use your credit cards responsibly – Keeping balances below 30 percent is a start, but you should also be careful to keep the number of cards you have in check, make all payments on time, occasionally use older cards, etc. For the most part, best practices for all credit accounts apply to credit cards as well but given how frequently people let their credit card spending get out of control, and how eager credit card companies seem to be to jack up interest rates or adjust limits, responsibly using credit cards deserves special attention.

* For people who need additional assistance addressing their bad credit, another excellent resource for consumers are professional credit repair services. Professionals can provide their valuable expertise on important matters like legally disputing the questionable negative items on your credit report and specific steps you may be able to take to make the most of your credit score.

According to a survey performed by VISA, 4 in 5 American consumers don’t realize that a bad credit score can affect their chances of getting a job. What many people don’t appreciate until they see it firsthand is that employers have the right to reject applicants because of the information recorded in their credit reports.

Companies who reference your credit record as part of the employment process contend that your credit history is a good predictor of your judgment and dependability as an employee. Some consumer advocates disagree with this and claim the practice is an unjust method of discriminating against job applicants. Regardless of which side you agree with, the truth remains that the data recorded in your credit file could have influence on your being hired for a new job.

Tory Johnson of Good Morning America authored the article How Bad Credit Can Affect Job Prospects that listed a handful of helpful tips to think of when looking for a new job. The first tip is seeing if the employer will be requesting a copy of your credit reports. Prospective employers have to get your approval before performing a credit check so read through the fine print of employment application. You will commonly find the consent statement in the small print where you provide your consent upon signing the document.

If you have a decent credit score, you probably won’t have anything to worry about. If, however, your credit reports show difficulties making payments on time or other credit problems, it is advised that you take steps to minimize their impact. Of course, if you haven’t checked your credit reports recently and don’t know what’s on them, make sure you order a copy of your reports before beginning the job hunt. You can order your reports free of charge at AnnualCreditReport.com.

If your credit score is lower than it should be because of credit reporting errors or other questionable damaging information saved in your credit reports, work to get this information corrected or removed. If you don’t have time to take care of these issues before applying for a job, there are substantial benefits to correcting these issues so it is still advisable that you do so for the future. But for the time being, you will have to try to help a prospective employer see past your bad credit score.

If you know an employer wants to perform a credit check, consider preemptively coming clean instead of trying to perform damage control after they have seen your credit reports. Many people with poor credit have perfectly reasonable circumstances such as unexpected unemployment, divorce, or medical issues that can wreck havoc their credit rating. After explaining your situation confidently and truthfully, you may find employers will be sympathetic to your troubles.

The credit repair industry has become a crowded place. The credit crisis has led to increased lending restrictions that resulted in making a good credit rating much more important than it had been in years. Finding themselves no longer being considered good candidates for loans because their credit score isn’t as good as it now needs to be, thousands are turning to credit repair services for help. Hoping to capitalize on the trend, new credit repair providers are popping up all the time claiming to be experts at repairing bad credit.

With so many new and inexperienced credit repair providers entering the market, many of which are simply turnkey credit repair businesses using third party software as the backbone of their product, it becomes difficult to know who you can trust with your credit. To help separate the quality credit repair companies from the amateurs looking to make a quick buck, here are three tips for spotting a reputable credit repair service:

1) Check for experience – Setting up a credit repair company is surprisingly simple. All a person needs is a web site and a little money in the bank to pay for a credit repair software package. Staying in the business and generating good results for customers is more difficult. The leading credit repair services typically have an established history of helping people which is not only indicative of a stable business, but it is also a sign that the company operates within the confines of the law since most shady companies have a short lifespan.

A credit repair company’s BBB report will show how long the company has been in business, although not necessarily how long they have been providing credit repair services. If the companydoesn’t have a BBB report, it may be a red flag since the company may be very new. When you are unable to determine how long a company has been operating, you can try performing a WHOIS lookup of their website’s domain name to see how long it has been since the domain was registered, but if it requires that much work to track down the information, you’re probably better off looking elsewhere.

2) Look for a “brick and mortar” presence – The Internet is perfect for commerce, but the process of repairing your credit is more effective when conducted offline. Trustworthy credit repair companies usually have a physical location that you can use as an indication of how stable the company is. Satellite imagery services like Mapquest are great tools for checking out the company’s home office. Get the company’s address, load a map and see if the company has their own building, is headquartered in an office complex, rents out a space in a strip mall, or has the mailing address of a personal residence.

3) Look at pricing and payment options – Drafted in the mid nineties, the Credit Repair Organizations Act CROA sets guidelines credit repair companies must abide by. One of these is to only accept payment for services after the agreed upon services have been performed. This restriction was put in place to protect people from fraudulent companies who would charge large upfront fees and never provide the expected credit repair services.

Naturally, you should steer clear of credit repair providers who require an upfront payment (yes, there are still many in operation today despite this regulation).

In addition to finding out when and how much you will be expected to pay for credit repair services, make note of the payment options. Most reputable companies will, at a minimum, give you the option to pay via credit card on their website or over the phone. Additional payment methods may also be accepted.

Be wary of companies who require checks or money orders as you do not have the same level of protection in case you need to recover your money if something goes wrong. Also watch out for companies who employ third party payment processing on their website such as Paypal since this can be indicative of a fly by night service. Finally when providing payment information online, make sure the webpage is secured. Before entering your credit card on a webpage, make sure the address of the page starts with “https” and your browser (Internet Explorer, Firefox, Safari, etc.) displays a padlock or similar icon indicating the connection is secure.

There is an institution in our society that affects everything from your ability to purchase a home, get approved for automobile insurance, and land a job with many companies. It’s an element that affects each and every adult in this country but it is something rarely covered in schools and is not well understood by a huge portion of the people it affects.

What we are referring to here is the modern consumer credit system. This is the system where credit reporting agencies (credit bureaus) receive, organize and store personal information about consumers provided by a variety of sources that is then purchased by lenders, employers, and others. This information is then used to make decisions about whether or not you are a stable, credit worthy person.

After a short time dealing with banks,credit card providers and other lenders, most find out the rudimentary basics of the credit scoring system. They know that their credit reports contain information about them and they know it is beneficial to have a high credit score. But from there, functional knowledge of credit drops off and many of the things people believe to be true are in incorrect or incomplete interpretations of the facts.

Many do not know how a credit score is calculated, what steps they can take to improve their credit rating, the tools they have for disputing questionable credit listings, and how the law protects their right to receive fair treatment from credit bureaus, creditors, collections agencies, and credit repair firms.

Much like how the pigs exerted control in Animal Farm, this lack of knowledge leaves people at the mercy of, and frequently victims of, the organizations whose profits are tied to consumer credit. When left unchecked, even upstanding companies will err on the side of generating more money. As a result, every day, people are paying exorbitant interest rates that pad the pockets of lenders because these people are not informed enough about the credit system to fight back. They are allowing themselves to be taken advantage of by those who are taking more of their money than is reasonable.

The more people know about credit, the more empowered they become. The credit system is a powerful and necessary tool in today’s society, but as with all sources of power, it must be kept in check. Those who learn how it functions are the ones who will be able to enforce their right to a fair and accurate credit score.

Lexington Law, the trusted leaders in credit repair, believes that learning about your credit is the first step in improving it. To assist consumers with this, Lexington Law has provided credit education resources including videos, lawyer interviews, expert articles and more.

Anyone who has researched credit repair can tell you, you can work to repair your own credit. In fact, Dr. Randy Padawer, who co-wrote the best selling “FICO(R) 850” seminar for The Motley Fool and “Credit Revolution: Path of the Smart Consumer“, became a credit expert by becoming an uber-do-it-yourselfer when it comes to credit improvement.

You have likely also read that you can dispute the questionable negative items recorded in your credit reports free of charge. Equifax, Experian, and TransUnion even provide a dispute tool on their websites to make this process that much easier.

Something you likely will not hear as frequently is that improving your credit is rarely as simple as it first seems. On its surface, fixing your credit sounds like an uncomplicated proceedure. You order a copy of your credit reports (free at www.annualcreditreport.com), find each of the questionable negative listings, formally dispute them with the credit bureaus, and then sit patiently as the bureaus conduct their investigations. Of course, if the process were that trouble free, there would be no need for any of the many reputable credit repair companies.

As you continue researching self credit repair, or begin the work of repairing your credit, you will start to understand the potential difficulties of working to clean up your credit. You will learn that it is typical for the credit bureaus to reject your disputes or to verify a negative listing that is truly incorrect. You will find that repairing your credit reports may also involve working with your creditors and, if they are unresponsive to your needs, utilizing your rights under the FCBA to force them to correct or remove inaccurate listings. If you have inaccurate collections accounts listed on your credit file, you may find that you also need to deal with the reporting collections agencies in a similar fashion by taking advantage of your rights under the FDCPA.

Add to this additional workload that when communicating with each of these entities, there are protocols that, if not observed, could hurt your efforts. Even more, there are some pitfalls you will need to avoid to make sure your credit score does not lower beacuse of your credit repair efforts.

The upside of repairing your credit reports can be life changing but the journey is not always easy and not without risk. If things go poorly, your attempt to repair your own credit could damage your credit score and even result in you getting sued. For this reason, anyone looking to repair their own credit reports should thoroughly research the process before getting started.

As mentioned before, Dr. Padawer became a credit expert by educating himself about how consumers can correct their own credit. For most people, however, becoming a credit expert is not the goal. The goal is to remove the negative items their credit reports and this is why credit repair companies exist.

In 2004, Lexington Law, the leading firm in credit report repair, conducted a study of over 2,000 clients. A finding from this study showed that almost 40 percent of those surveyed had attempted to repair their own credit before enlisting the help of the firm. Even though it is something you can do for yourself “at little or no cost” according to the FTC, these people found it was easier to pay for Lexington Law’s credit repair services than to keep trying to repair their credit on their own.

The Fair Credit Reporting Act’s failure to produce a credit system where the “accuracy, relevancy, and proper utilization” of your information is protected has resulted in a credit system that is hardly “fair and equitable” to consumers. In defense of Congress, the FCRA has been heavily influenced by industry lobbyists who are motivated to maintain the status quo. In fact, when the Fair Credit Reporting Act was passed in 1971, Senator William Proxmire, one of the bill’s primary sponsors, felt defeated at what had become of his original intentions.

Since that time, the Fair Credit Reporting Act has been amended to become more consumer friendly, but there is still a ways to go and as was the case in 1971, those in the financing industry are still keenly interested in making sure the system continues to work in their favor.

For example, while the credit bureaus are no longer permitted to record information such as your ethnicity and religion, they also are not required to record other personal information that is relevant to your credit worthiness. If you are a model citizen who has worked with the same organization for 10 years, has a perfect criminal record and takes home enough income to cover your expenses , it seems fairly obvious that you are more creditworthy than a career criminal who is a continual burden on the system. That makes sense, but none of the traits that prove you are a responsible person are recorded by the credit bureaus . If you and the professional criminal have the same types of accounts on your credit reports, your credit scores will be identical.

Also, while amendments to the Fair Credit Reporting Act give you the right to see what information is recorded on your credit reports, you do not have the ability to learn any more than the very basics of how it is used to formulate your score. What impact will paying a long overdue debt have on your credit? Which of a handfulof credit cards should be paid down first? Should you apply for a new credit card? We have unclear, unproven answers for these questions, but the exact formula is known only by those who invented the model and is subject to change at any time.

Finally, you have the right to dispute the questionable listings in your credit reports, but it is not always the case that this process is easy or necessarily effective. Depending on your situation, repairing your credit can be as easy as submitting an online form or as difficult as tracking down creditors, fighting with collections companies, and possibly involving legal counsel.

The same organizations who benefit from inaccurate credit reporting are the ones who contributed to watering down the FCRA and who continue to fight attempts to work towards adding equity to the credit system. And it is these entities you have to contend with when working to enforce your right to a fair and accurate credit report.

Fortunately for today’s consumer, half a century ago Congress recognized that the system of credit reporting needed revision. The practices of the credit reporting agencies and the agencies using the credit reports they provided were abhorrent. American consumers were being abused by a system they had no way of influencing and no way of keeping in check.

To counter this, Congress passed the Fair Credit Reporting Act which with its subsequent revisions has become the keystone for constructing your consumer credit rights. It is because of the Fair Credit Reporting Act that you have the right to see what is being reported on your credit reports and to dispute any inaccurate negative items they contain.

In addition to the Fair Credit Reporting Act, there are a few other consumer protection acts that give consumers certain rights when it comes to working with creditors or collections companies who report to the credit bureaus. By making use of their rights under each of these consumer protection laws, consumers have been able to successfully repair their credit score.

Fair Credit Reporting Act
The Fair Credit Reporting Act is what got credit repair started. Because of this act, you have the right to see your credit file and to dispute inaccurate credit listings directly with the credit bureaus.

Fair Debt Collection Practices Act
Along with protecting your against abusive behavior from collectors such as contacting you in the middle of the night, screaming at you, cursing, misrepresenting their identity, or threatening physical violence while trying to collect a debt, the Fair Debt Collections Practices Act (FDCPA) gives you powerful debt validation tools that give you the right to challenge any debt.

Fair Credit Billing Act
Similar to how the Fair Debt Collection Practices Act governs collections agencies, the Fair Credit Billing Act (FCBA) affords you the right to dispute questionable negative credit directly with your original creditors in order to modify how they are reporting your accounts to the credit bureaus.

Credit Repair Organizations Act
With all the laws surrounding credit repair, it can be overwhelming for a newcomer considering repairing their credit rating. Fortunately, there are legal credit correction organizations who help consumers work towards a fair and accurate credit score. These credit repair organizations are regulated by the Credit Repair Organizations Act which helps prevent consumers from becoming a victim of a credit repair scam.

Creditors want to have confidence that you will repay your debts and a charge off on your credit reports is an indication that you cannot be counted on to do so. For this reason, a charge off will significantly lower your credit score and can be cause for you to be denied credit.

It is because of the severity of a charge off, just about everyone would want to have this derogatory listing erased, but few realize there is anything they can do about it. What they are not aware of is that there are steps you can take in an effort to remove charge offs from your credit reports. In fact, Lexington Law, a consumer advocacy law firm with 18 years of experience helping over 1/2 million Americans work to improve their credit, reports that their clients had over 100,000 charge offs removed from their credit reports in 2008.

You have a number of options when it comes to repairing your credit. For starters, under the Fair Credit Reporting Act, you have the right to request the credit bureaus verify any items in your credit reports you feel may be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear (known as “questionable” items). Essentially, as the name of the act implies, you have the right to question any items in your credit reports that you feel give lenders, insurance providers, and others an unfair or inaccurate impression of your credit worthiness; including charged off accounts.

If your credit bureau dispute is unsuccessful or if the reported charge off doesn’t qualify as a questionable negative item, there are still options available to you. Your creditors and collections agencies have the ability to remove the items they have added to your credit reports. On occasion, simply as a result of you asking nicely, they will agree to stop reporting a negative item. If a friendly request doesn’t do the job, there are a number of more confrontational steps you can take that make use of your rights under consumer protection statutes such as the Fair Credit Billing Act and the Fair Debt Collection Practices Act.

It isn’t necessarily easy, but with time, effort, and proper knowledge, you may be able to remove charge offs from your credit reports. Of course, if you do not have the time or the desire to attempt repairing your own credit, there are a number of reputable credit repair companies who can make use of their experience to aid you in working towards achieving your credit goals.

The credit repair world can be a frightening place. With the number of news articles, television segments, and opinion pieces cautioning against fraudulent credit repair services that get published by well regarded media outlets, it can appear as if the best option is to steer clear of credit repair companies altogether – something the news outlets seem to support.

There are dozens of articles talking about how to keep yourself from becoming the victim of a credit repair scam. Most itemize a list of warning signs such as companies that charge large upfront fees, claim to help you create a clean credit history, don’t keep you informed of your right to repair you credit yourself, and otherwise make misleading or inaccurate statements. At this point, however, a very small percentage of articles mention that there are credit repair services like Lexington Law who do not participate in the practices that are common to a credit repair scam. In fact, some articles from established news agencies such as CNN close by suggesting people “get legitimate help” from consumer credit counseling services.

Not only is this advice incomplete, but it is also completely useless to people who are in need of credit repair. Credit counseling may be able to assist people who are unable to pay off their debts, but it will do nothing to improve your credit score. Some credit counseling programs even have the potential to make your credit look worse.

Unlike credit counseling services that aim to bring your finances under control, credit repair services are designed to help you increase your credit score. They are not mutually exclusive services and in many cases, a person who has used a credit counseling service to help overcome their debt issues becomes a good candidate for credit repair once they have completed the program.

Legal credit repair services serve a purpose and it is a disservice to imply otherwise. Hopefully as consumers and news columnists alike become more familiar with the services credit repair organizations provide, we’ll start seeing more of a balance between news stories warning of credit repair scams and news stories detailing qualities to look for in a legitimate credit repair organization.

Negative items on your credit reports can have a huge impact on your credit rating. A handful of late payments can be the difference between getting approved for a good interest rate on a mortgage or other type of loan and having to make a large down payment in order to even qualify for financing. Major derogatory items like charge-offs, liens, and bankruptcies have the potential to drop your credit score so much that you will have difficulty getting approved for credit at all.

So what are the options if there are negative listings on a credit report that should not be there? Mistakes do happen and damaging information gets incorrectly added to peoples’ credit reports very frequently. And what about negative listings that are accurate but there was a legitimate reason for why they exist? Is it fair to have to deal with a low credit score for up to a decade or more when the blemishes in your credit history were essentially outside your control?

The Fair Credit Reporting Act provides consumers with a few options for dealing with bad credit, and enforcing their right to a fair and accurate credit score. This includes the right to request free copies of your credit reports so you can see what information they contain as well as the right to request verification of any items on your credit reports that you feel may be inaccurate, untimely, misleading, incomplete, ambiguous, unverifiable, biased or unclear.

Another antiquated option you have as a result of the Fair Credit Reporting Act is the right to add a one hundred word statement to your credit reports explaining to creditors the circumstances behind negative items on your credit reports. The idea is that when referencing your credit reports, lenders will be able to consider the reasons behind these negative listings when considering your loan application.

What makes this statement antiquated is that these days, lenders rarely consider the individual listings in your credit reports. In fact, they may never see your reports at all so your meticulously crafted 100-one hundred word statements would never even be read.

On top of that, lenders are primarily interested in your credit score, which does not take the 100 word statement into account. No matter how good your justification is for having a negative listing on your credit reports, your credit score will remain unchanged.

The only way to prevent negative items from lowering your credit score is to have them removed from your credit report. One option people have for attempting to do this is the credit bureau dispute described in the Fair Credit Reporting Act. Additional credit repair options are made available through a number of other consumer protection acts targeted towards creditors and collections agencies.