When buying a car, those of us with credit problems would love to wave a magic wand and have our credit score instantly skyrocket from 500 to 700, right? If only. This fantasy, though, keeps hordes of so-called credit-repair agencies in business.

You've watched their ads on TV, seen their claims on billboards and even noticed their contact info on those little wire-and-paper signs at the top of an exit ramp. "We'll raise your credit score!" "We'll erase your bankruptcy!" "We'll fix your credit report!" "You'll be able to finance that new car you want!" they claim. Sounds like the answer to your prayers, doesn't it? Well, maybe. But anything they can do, so can you, and usually for free.

Can Credit-Repair Companies Help?

For example, paying a neighbor's kid to mow the lawn because you don't want to bother is fine, but if you took the time, you could do it yourself. It's pretty much the same with credit-repair agencies charging hundreds of dollars. If you're willing to pay someone else to avoid a little hassle, knock yourself out, but it doesn't make sense. A credit-repair agency will charge you to fix the very same things that you can fix on your own. There are no magic wands and there are no quick fixes.

The Federal Trade Commission, the nation's consumer-protection agency, goes so far as to advise that companies claiming that they can remove bankruptcies, judgments, liens and bad loans from your credit file probably aren't legitimate. "Anything a credit-repair company can do legally, you can do for yourself at little or no cost," it states in its report entitled "Credit Repair: How to Help Yourself" on its website.

Still determined to hire a credit-repair company? Be sure to check the company out with the Better Business Bureau. If there are any unresolved complaints, move on to the next one.

If you do end up picking one, know that there are some regulations that the company must follow. To help protect consumers from unscrupulous credit-repair companies, Congress passed the Credit Repair Organizations Act. It makes it illegal for credit-repair companies to make false promises about what they can do for a consumer with damaged credit, or to collect a fee before performing their services. Such agencies must provide a contract specifically stating what services they will perform, how long results will take, the total cost for those services and any guarantees that they make.

All for Naught?

Sadly, whether you take all the steps necessary to rebuild your credit yourself or you enlist the services of a credit-repair agency, securing a car loan from a mainstream lender -- such as a bank, credit union or the lending division of an automaker -- may be months or years away. Neither you nor even the most effective credit-repair company can fix things overnight.

There is some good news, however. If you absolutely must buy that car tomorrow, there is almost always a lender out there somewhere that will take a chance on borrowers with a full-time job and an address, despite a rocky credit past. Some car dealers even advertise financing for borrowers with bad credit or who are recently out of bankruptcy. An Internet search for "car loans with bad credit" produces all manner of websites ready to loan money to borrowers with spotty credit. Borrowers financing through such lenders, however, should expect to pay interest rates far above today's 4.5-percent average for 36-, 48- and 60-month auto loans. Think double-digit interest rates.

If buying a car can wait, here are some steps to take to rebuild your credit and elevate your credit score:

Order Your Credit Reports

Three agencies collect and report consumer credit information nationally: Experian, TransUnion and Equifax. Each is required to provide you with a free copy of your credit report every 12 months if you request it. Go to Annual Credit Report.com to order your reports. Because these agencies don't share their information with one another, you should have one from each agency.

Fix What You Can

Scour each report for errors and duplicate information. These bureaus only report the information that creditors provide. Sometimes it's incorrect, outdated or duplicated. Each credit bureau has a procedure for disputing erroneous information. They, as well as the creditor reporting it, are responsible for correcting it. Also, address any other negatives you can, such as paying off balances turned over for collection or catching up on past-due payments.

Open New Accounts

Reestablishing your credit requires opening new accounts and making timely payments. Gasoline companies and major department stores are historically more receptive to issuing credit lines to credit-challenged consumers. There are also banks that will help jump-start your credit with a charge card secured against a balance you have on deposit with them.

Fixing your credit enough to finance a car will take some time. Do it yourself, and you'll save some money.

author photo

Russ Heaps began covering the automotive industry in 1986, first overseeing the automotive pages of the Boca Raton News and then the Palm Beach Post in Florida. In 2001 he became managing editor of AMI Auto Week and NOPI Street Performance Compact magazines. Since leaving AMI he has freelanced his auto reviews and industry analysis to the Washington Times, Hispanic magazine, Journal-Register Newspapers, Bankrate.com, MyCarData.com, Interest.com, and others. He resides in Greenville, SC.

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