Go Ahead and Apply Online for a Credit Card – You Have a New Credit History (Or Not)

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August 09, 2007

You may have seen the commercials for credit counseling companies. They claim that they can work with your creditors to lower your debt by reducing your payments as well as your rates. While companies like that are completely realistic and the results they boast quite plausible, there are other companies out there more than willing to dupe people that have a bad credit history into thinking he or she can make their bad credit go away with just the wave of a magic wand.

These companies claim that within just a matter of days they can clear up your credit report and erase all traces of negative items in your report, thus freeing you from the limitations of a bad credit history. Not likely. Because it is your credit history that you have created on your own, you need to do a lot of your own work in repairing it and deciding whether or not you truly need outside help. In the end, it will be up to you whether you continue to build a bad credit history or if you start to turn things around and create a better credit history.

Useless companies usually have two methods of approach when it comes to getting you this so-called "new credit history." The first method is to bombard the credit bureaus that keep track of your record with disputes over all the negative items in your report. They do this because they have no other access to your credit report. They are not allowed to go in an edit all your credit information; it is against the law for them to do so. Only authorized parties (usually just the credit bureaus) can do something like that. So they take the only other way into changing your credit report; prodding the bureaus about it.

A few things you should know before paying some random company to do this. First of all, if you have bad credit and you know it, then you also know it was you who put yourself in that position. That means a lot of those items will not be removed from your credit report. If you get one item removed that happened to be an actual error, then that is a good thing, but in the big picture it will make little difference. Sometimes a negative item will be removed even though it was correct. However, it won't take long for the bureau to go through all the information and put it right back where it was. Otherwise the bureaus will go through the information, find nothing wrong, and make absolutely no changes. Therefore, you will have gotten absolutely nowhere and have just paid a company for a useless service.

Secondly, even if disputing every negative listing in your report appeals to you, this is something you can easily do yourself. Many people regularly check their credit report to make sure it is error-free. If they do find something wrong, a simple dispute should take care of it. The bureau investigates, double checks the information, and makes the necessary change. It costs you absolutely nothing and is a very easy process requiring you to do next to nothing.

Another method used by illegitimate credit companies is to tell the consumer to request an Employer Identification Number that has the same amount of numbers as a Social Security Number. You would then use the new number in place of your Social Security Number when opening new accounts, such as when you apply for a credit card online. The claim is that with the new number, you can create an entirely new credit report and start from scratch, leaving your old bad credit history behind.

Not so. In fact, attempting to do this could possibly land you in jail. By using this number instead of your Social Security Number, you are lying when you apply for credit cards or loans. Doing so is a federal crime - not exactly something you would like to replace your bad credit history with. A move like this is totally obvious to credit bureaus and you would stick out like a sore thumb.

Then what is the best method of fixing a bad credit history? Slow and steady will win the race. You have to be patient and learn to use your credit responsibly. Reduce the number of credit cards you have to just one or at most, two. Only use your credit cards when absolutely necessary. If you have a balance on your cards, try paying it off first before making any new purchases. You are already paying finance charges; you should not be adding to the amount you will have to pay, as it will become more than what you initially wanted to spend. Once you are out of debt on your cards, pay off any new balances in full each time you receive your bill.

Eventually, with responsible, limited use, you will create a newer and better credit history. Over time, this credit history will push the older, bad credit history out of the way, showing you to be a good credit investment. From there you can use your good credit for all sorts of things. Obtaining a mortgage or other large loan. Getting a rewards card or asking your credit card company for the lowest APR credit card. People with good credit have many options open to them - isn't it about time you got a piece of that pie?