Jesus, Robin, and Tim are all right on. You do not NEED good credit, especially when you're new and first learning about everything, but as you progress, good credit will definitely make things easier for you and borrowing money will be cheaper. I.E. Having to always use hard money or private money versus a line of credit from your bank, zero interest periods on credit cards, etc. Though there are ways to do everything in this business with bad personal credit, I believe it is less challenging to simply clean it up.
Beware of credit repair services. Some are great, most are a waste of time and money. My suggestion would be that while you delve into real estate investing, you also learn the ins and outs of how credit and credit reporting work, and clean it up yourself. Get started on it now, so it will be there down the road when you need it.
There are three major credit bureaus that creditors report to; Experian, Equifax, and Transunion. Some report to just one or two, others will report to all three. This is the main reason for variations in your score from one bureau to the next. When checking your credit, some will pull from all three and use your average score, some will use your highest score, and some may only pull from one bureau.
To start on the road to repair... Pull a copy of your credit report from all three bureaus from https://www.annualcreditreport.com/index.action. If you do not meet the criteria for free reports, just go ahead and buy them. Select the view online option. Print it out, don't have a hard copy mailed to you unless it has to be. (Sometimes that happens.)
Examine the reports and dispute only the incorrect information that is not close to falling off the report. Negative items only stay on there for seven years, (If they are still being reported, it is in error and can be removed.) ten years in the case of bankruptcy and a few other things. You can do this by clicking the "Dispute" button on any of the incorrectly reported entries. What happens when you initiate a dispute is that the bureau contacts the creditor and asks them for supporting evidence for how they are reporting the account. The creditor then has 30 days to provide it. If they do not, the bureau removes the entry from your file. We all get behind on paperwork sometimes, even creditors. Sometimes they miss that 30 day deadline. Because there is a chance of that happening, some people will tell you to just dispute everything negative, even if it is a legitimate debt. Be your own judge on that one.
After disputes are initiated, start with the accounts remaining and negotiate for settlement. Though this can be done over the phone, don't. Do this part the old fashioned way, with a pen and paper and send it via certified mail with signature conformation. Payment plans are great, but at this point most creditors will not be too interested in that (except for collection agencies), so you will need some money. If you have it, great. If not, I have some ideas to help you get it. Either way, before putting that money towards debts, give me a call and I will go over some things you should set up first.
It use to be illegal for the same bad debt to be reported by more that one creditor. I do not know the legal status of it now days, but it is a common finding that "Creditor A" is reporting your account, but they also sent it to "Collection Company B", who is now also reporting it. And since they didn't have any success collecting, they subsequently sold the debt to "Collection Company C", who is reporting it as well. For cases like this, negotiate with the original creditor. If they are not able to accept payment on the account, they will end up having to remove it from your report. If they are able to accept payment, get it in writing from them that the account will be reported as "Paid As Agreed" with zero late payments. Negotiate for a lower pay off if you can, but make sure they are willing to report it like that.
Of course, that applies to the original creditor only. A collections account will look bad even if you pay it and they report a zero balance. For these, your negotiation letter needs to state that they will be required to remove the entry completely. Again, get this in writing. They will outright lie to you over the phone.
The next step will be to get some positive accounts reporting for you. I have some places you can go to for this. Feel free to call me an we can discuss that more.
