About once a week on my answering machine I receive a message like this one: “Hi. My name is Bob and I work for Consolidated Credit. We can help you lower the interest rate you’re paying on your credit card debt to 1.5 percent and help you pay off your debt in about a third of the time. Call us at this toll-free number, and be sure to have a current copy of your debt statements. I can help you.”

It’s a tempting offer. And, thousands of people will jump at it, expecting Bob to solve all of their crushing debt issues.

Too bad this isn’t really the answer to everyone’s prayers.

Many people who are in debt end up getting suckered by credit repair scams that promise vastly improved credit scores (for a large upfront fee) but can’t deliver without doing something illegal, like setting up a fake social security number. Others end up working with a credit consolidation company, but are unaware that being in a debt management program can torpedo their credit scores.

According to the National Foundation for Consumer Credit, the typical client of the non-profit Consumer Credit Counseling Services is 38 years old. Of all CCCS clients, nearly half are married, while 20 percent are either separated, divorced or widowed. There is usually one or more children in the family.

CCCS’s clients average annual gross income is just under $30,000. Their total outstanding debt, which does not include their mortgage, is $26,531. They typically owe money to more than 9 creditors.

It isn’t a pretty picture. How did someone end up in this situation? Nearly half of all CCCS clients say the source of their financial problems is poor money management. Other contributory factors include taking a job that pays less money or being unemployed, medical expenses, an accident that forces someone on disability, death of a family member or even substance abuse.

There are endless reasons why someone might fall into financial difficulties, but there are only a few ways you can repair your credit history and credit score – none of which include hiring someone else to do it for you.

According to Freddie Mac’s free brochure, “Don’t Borrow Trouble,” if you want to protect your borrowing power, you must always pay your bills on time. If you pay a bill even 30 days late, it will be recorded as a late payment on your credit history. Two or three late pays in a year can sink your credit score.

Getting yourself out of debt will require that you pay more than the minimum amount due. Depending on the interest rate, you could spend the next 30 years paying off a $10,000 credit card debt. Paying more than you owe will speed things up considerably. And, by repaying the scheduled amount or more on a given loan, you’re showing a future creditor that you are a good credit risk.

Many would-be first-time buyers don’t realize that maxing out a credit card does more damage to your credit history than spreading out the debt over a number of cards. Better to borrow 50 percent of your available credit on two cards than 100 percent of the available credit on one card.

Also, try to keep your balances low. Lenders say your debt should not exceed more than 20 percent of take-home net pay, excluding your mortgage.

One mistake people in debt often make is choosing to build up their savings for a down payment while paying a high interest rate on their credit card debt. It never makes sense to save cash if you’re only earning 2 percent if you’re paying 15 percent on a debt you have.

That’s a fast trip to the poor house. It’s smarter to use almost all of your available cash to pay off your balance as quickly as possible, and then save for your down payment.

Making smart financial choices is the key to repairing your credit history and raising your credit score. And there’s no better person to make the tough decisions than you. Here are some places to go to get additional information about money and credit: For websites, try FreddieMac.com, NFCC.org, and DebtAdvice.org. Consumer Credit Counseling Services and other nonprofit credit counseling agencies provide free or very low-cost budgeting services. Check your local housing authority for credit and homeowner education classes.

Published: Nov 11, 2002