Q: Can bad credit be erased?

A: Bad credit can be erased one of two ways; the first of which is time. Negative credit data must be removed from your credit report after seven years, although oftentimes you have to ask the credit bureau to remove it. The one exception to this seven-year rule is Chapter-7 bankruptcy, which stays on your credit report for ten years.

The other way to erase bad credit is simply to ask. If the negative information is incorrect, then you can demand that it be removed from your credit report. The credit-reporting agency will then contact the supposed creditor, and if the information really is inaccurate, the creditor will either admit that it's wrong or will be unable to provide documentation proving otherwise -- either way, the blemish on your credit report must be removed.

Of course, you can use this loophole to your advantage even if the information is accurate. If you have reason to believe that your creditor does not keep good records, simply tell the credit-reporting agency that you believe the negative information to be inaccurate, and then the onus will be on the creditor to prove that you ever owed the money. Some people find this practice to be unethical, but others just think of the unethical methods used by creditors and consider this to be fighting fire with fire.

A slight variation on this strategy is to approach the creditor directly. For example, if you have an unpaid debt of $1,000 on your credit report, you may be able to go to the creditor and say, "I'm sorry about letting this debt accumulate, but now it is really damaging my credit score. Let's work this out between us. If I give you $1,000 right here and now, will you tell the credit-reporting agency that this was all a misunderstanding?" Your creditor may even be willing to settle for less than the total amount owed. However, be aware that credit card companies are much less likely to do this. It's not because they're hard to deal with, (they can actually be quite accommodating if you only ask), it's that they sell their debts to debt-collection companies rather quickly, and once this happens, the credit-card no longer has a claim on the debt, and the debt collector cannot say, "It was all a misunderstanding" -- your credit report already reflects that the debt was sold to a third party.

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