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Personal Loans and Credit Repair

[Dec 30, 2009.]


Borrowers who repair their credit may boost their chances of qualifying for a personal loan. It's important, however, to avoid quick-fix credit repair schemes. In many cases credit counselors offering super fast results may be running a scam.

Credit Repair Scams

A Federal Trade Commission (FTC) survey found that about 2.1 million people were taken in by credit repair scams. Many of these counselors claim they can get negative information deleted from an individual's credit report, which isn't true, according to an article at Military.com.

Those who want to repair their credit before applying for a personal loan should be skeptical if a credit counselor tells them to:

  • Create a new credit identity

  • Avoid speaking to credit bureaus

  • Pay money upfront to receive help

Credit Repair Checklist

Many people can put together their own credit repair plan. If you have the time and inclination to do so, keep in mind the following steps:

  • Obtain and examine your credit report from the three credit agencies, Equifax, Experian, and TransUnion.

  • Have any errors on your credit report(s) corrected by contacting the agency and the original lender.

  • Close short-term, unused accounts; however, leave open any long-term accounts you have that are in good standing.

  • Make a habit of on-time payments for all accounts.

If you need help from a professional, carefully vet any credit counselor before signing up. Important things to find out about a counselor include:

  • The name, address, and phone number of the business

  • What services does the company offer?

  • What fees are involved, and how they are structured?

  • Will they give you plenty of time to read through the contract before signing up?

  • Are there former clients you can contact as references?

Loans with Better Interest Rates

The best interest rates on loans go to people with higher credit scores. That's why it pays to repair your credit before applying for a personal loan. Although it may be tempting to apply for personal loans with bad credit, it's tough to get one of these deals without paying high interest. Furthermore, despite all the ads offering personal loans with bad credit, many lenders just are not willing to loan this type of money in the current economic environment.

If you take the steps to repair your credit now, you are sure to reap the rewards at some point in the future--whether applying for a personal loan, or any other type of loan or credit.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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