You’ll see a lot of companies offering credit restoration, fast credit repair, credit report repair or other “solutions” to miraculously improve your credit rating, but the fact is that credit restoration is a slow tedious process. Most people don’t go to sleep one night with excellent credit and then simply wake up the next morning with bad credit, it’s usually a slow descent into bad credit and getting out of the hole takes both time and work.

Although some of these credit restoration companies are legitimate and may offer you some help in improving your credit, you need to be aware that some of these companies are scams, so you need to do your homework. You should check out the credit restoration company with the Better Business Bureau (BBB), verify that the company is licensed, and I’d also do a quick Google search to see if any customer complaints or lawsuits pop up. I also would strongly caution against paying exorbitant fees to use a credit restoration company, after all, you already have bills you haven’t paid, why accumulate more debt.

I think the main reason people seek out credit restoration companies is that the average individual feels that credit repair is beyond their skill set and this is usually simply not the case.  A credit restoration case worker is simply more familiar with how the system works, but this doesn’t require a special skill set, it just requires tenacity. Most people can set up their own credit restoration plan, put it into motion and achieve the same results they would using a professional company. A lot of people go with these credit restoration businesses, because they simply don’t want to do the work, or feel that they don’t have time to do the work involved in dealing with creditors. It involves a lot of time on the phone, letter writing, and more time on the phone.   

In a nut shell, what you need to do to start improving your credit is simply pay your bills on time. Every time you pay a bill late, even a day late, this is a negative mark on your credit. You should also begin paying down the debt you owe, as a big part of your FICO score is determined by how much credit you have available vs. how much credit you are using. For example, if you have a credit card with a $5,000 limit and you have it maxed out, this is not as good as having a $5,000 limit and you have only charged $400. You also do not want to cancel any of your existing credit cards because this can affect both the equation mentioned previously, but also part of your FICO score is based on the amount of time you’ve had credit. So, canceling a credit card would reduce your amount of credit available and the amount of time you’ve had this credit available, so this may negatively impact your credit.

Another thing to consider since the length of your credit history plays a part in your overall score is to occasionally rotate your credit card use. Every now and then, buy something with an older credit card and immediately pay it off. This will effectively “age” your credit and boost your credit.

If you get to the point where you are so over your head that you can no longer pay your debts then you may have to consider bankruptcy as an option. Due to the current economic climate, this no longer has the stigma that it once did. This will effectively remain on your credit report for up to 10 year, but within 2 years you could qualify for a new home loan providing that you meet all the other criteria such as work history and current good credit use.

So, credit restoration is possible, but consumers need to realize that there is no quick fix. With a plan and deliberate action, you can begin to slowly raise your credit score. The process takes time, but you should see a small yearly increase in your FICO score for each year that you show a responsible use of credit. Although bankruptcy can be an emotionally and ethically hard decision to make, for some people it will prove to be the right decision. With upside down mortgages and no employment, even a credit restoration company can’t work miracles.