How to Avoid a Bad Credit Home Equity Loan

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Home equity loans are often an easy way to borrow money. Even persons with bad credit can often qualify for a bad credit home equity loan. The loan is secured by the equity in your home so even with bad credit the interest rates are often better than other sources of loans. You will still however pay more interest if you have a bad credit rating.Persons having bad credit can often improve their credit score just by knowing a few tricks. These tricks begin by obtaining a copy of each credit report that you can order from the credit agency that has given you a poor rating.The Fair Credit Reporting Act requires that each agency that collects credit information about you provide annually a credit report for you to review. Additionally, you qualify for another free report if you are turned down for a loan based on that report.Once you obtain and review these records look closely for any inaccuracies being reported. In addition, a bad debt can only affect your report for seven years after it went delinquent. If any debts are beyond the seven year mark, you should ask that they be removed from your credit report. Make all requests by certified mail and to be on the safe side, pay for a return receipt on all correspondence. This procedure will cost about five dollars, but is a necessary part of the process.Best you should know the statute of limitations for collecting debt in your state. If you are in the right state, a company only has four years to collect the debt. If any debts are out or your states statute of limitations, ask for an investigation by the credit reporting agency. Dispute the debt as not yours, since you are no longer legally responsible for the debt. Many collectors know that there is nothing they can do about such debts, so they will let them fall off your credit report rather than waste any more effort on trying to collect what are in effect uncollectable debts.You will also need to send a letter to the company that reporting the bad debt. Their address is listed on the credit report. Ask them for proof that the debt is yours. If they cannot provide the proof they must stop reporting it on your credit report. They only have thirty days in which to investigate and answer your request. Your return receipt will have the date they got the mail so that’s when the clock starts ticking.As mentioned earlier, the cost of certified mail and the return receipt is small compared to the amount of money this may save you in interest charges on any loan you may take out.Many times these two letters are all that are needed to change a bad credit report into a decent one. In a matter of just a few months you may qualify for a much better interest rate on your home equity loan than if you had only qualified for the bad credit home equity loan. It is certainly worth making the time to give it a try. The work can save you several hundred dollars over the life of your loan.

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