Can a credit repair clinic help me raise my credit score?

Don’t fall for the claims of a credit repair company that it can fix your credit or get you a loan or a credit card. Even legitimate companies can’t do more than what you can easily do yourself.

But many of these companies are outright scams. Some have been caught using stolen Social Security numbers to give people new credit histories, or advising people to get an Employer Identification number from the IRS and use it instead of their Social Security number (an illegal practice). Others simply take your up-front fee—typically from $500 to $5,000—and disappear.

What can I do to get a collection agency to stop calling me all the time?

A bill collector who works for a collection agency (as opposed to working in the collections department of the creditor itself) is forbidden by federal law from calling you at an unreasonable time. Calling before 8 a.m. or after 9 p.m. is considered unreasonable; other hours may be unreasonable, too, such as daytime hours for a person who works nights.

It’s also illegal for a collector to:

• harass you
• use abusive language
• make false or misleading statements, or
• add unauthorized charges to your bill.

Under the Fair Debt Collection Practices Act, you can demand that the collection agency stop contacting you (except to tell you that collection efforts have ended or that you’re going to be sued). Make your request in writing.

If I file for bankruptcy, will I ever be able to get a good credit score again?

It’s no surprise that if you file for bankruptcy, your credit score will take a hit. But although bankruptcy stays on your credit report for up to ten years, you can start rebuilding your credit much sooner.

To build a good credit record, you have to borrow—and then keep up with your payments. Your good behavior is reported to the credit reporting agencies, and your credit report then shows potential lenders that you can be trusted. If you have debts that survived your bankruptcy, such as student loans, car payments, or a mortgage, making payments in full and on time will rebuild your credit.

You can also get new credit. It’s not difficult to get a credit card with a low limit soon after you finish your bankruptcy. However, these cards often come with a high interest rate and a lot of fees. You can also get a secured credit card, which is a credit card backed by a money deposit. With a secured credit card, your credit limit is the amount of your deposit.

Do I have to pay to see my credit report?

You are entitled by law to one free credit report from each of the three big reporting agencies every year. You can request the reports online and review them to make sure they are accurate. If you find any incorrect items—debts you’ve paid, incorrect balances, or debts that just aren’t yours—you can file a dispute with the credit reporting agency. The agency will investigate and make any corrections that are warranted. You may need to provide documentation to support your dispute.

What’s a credit score?

Credit scores are intended to measure your likelihood of repaying money on time. The higher your score, the less likely you are to default. The most commonly used number is the FICO score, which goes from 300 to 850.

All kinds of lenders—credit card issuers, banks, landlords, car loan lenders—then use your credit score to judge the risk of lending to you. Having a high score will help you qualify for all kinds of loans and get you lower interest rates.

The majority of credit scores are in the 600s or 700s. About 25% of all people with credit scores have a FICO score of 785 or better.

How is a credit score calculated?

Credit scoring companies (such as Fair Isaac, which produces the FICO score) make their calculations based on information in your credit report.  Although they won't reveal their formulas, the FICO score is generally thought to consider these factors:

Payment history. This is the biggest factor, accounting for about 35% of your score. Your score will be pushed lower if you pay bills late, have had an account sent to collection, or have filed for bankruptcy. The more recent the problem, the lower your score.

Debt (30%). If you carry debt in an amount that’s close to your credit limit, it is likely to keep your score down.

Length of your credit history (15%). The longer your accounts have been open, the better.

New credit (10%). If you have recently applied for many new accounts, that can negatively affect your score.

Types of credit you use (10%). If there isn’t much other information, FICO will look for a “healthy mix” of different types of credit, both revolving and installment accounts.

I’ve run up a lot of credit card debt. How should I approach the problem of getting it down?

If you pay only the minimum each month, you’ll be in debt for years. Your credit card statement tells you just how long, and also the total amount you would pay. For example, if you charge $1,000 on a 17% credit card and make the minimum monthly payments, it will take more than seven years to pay off and cost more than $1,760.

You may, however, be able to negotiate with the credit card company. Call and ask for an interest rate reduction (which will lower your payments), elimination of fees you have been charged for late payments or over-the-limit charges, smaller monthly minimum payments (if you need that for a short time), or even a reduction in the balance.

If you’ve missed payments for a few months but can scrape together a third to a half of the amount you owe, see if the company will settle the whole debt for that much. The company might go for it if you can pay all at once or in a few payments.

If there’s just no way you can pay all your debts, you’ll probably want to put credit cards at the bottom of the list. Most people are better off making car payments and keeping the family car, for example, than keeping a credit card.

A nonprofit credit counseling agency such as Consumer Credit Counseling Services may be able to help you. Also, credit card statements include a toll-free number where you can get contacts for three (if available) local credit counseling agencies.