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Don’t Let The Ghosts Of Old Debt Kill Your Credit Score

shocked man looking at documentsVirtually everyone messes up their credit at some point in time – usually when they’re young and naïve. We know because we certainly made our share of bad decisions when we were young and inexperienced. The good news is that even if you really messed up your financial life, most of those mistakes will eventually be expunged from your credit report. For example, if you have unpaid or delinquent accounts, they will fall out of your credit report after seven years. On the other hand, a chapter 7 bankruptcy will stay there for 10 years.

If you’ve made mistakes with your credit, you should know that the credit bureaus usually remove bad information somewhat early. This is to prevent mistakes. In the case of delinquencies, most of the credit bureaus will automatically delete the information after six years nine months or sometime around that. The problem is that negative debts don’t always vanish on schedule. There can be misunderstandings or mistakes that allow debts to stay on your credit report much longer than they should. And they can be damaging your credit score significantly.

The ghost of debts past

You’ve undoubtedly seen Dickens’s “A Christmas Carol,” either as a movie or TV show. In either event, you probably remember that one of the ghosts that haunted Scrooge was the ghost of Christmas past. If the ghost of debt past is haunting your credit report, there are things you could do to get them off of it and here are the steps to take.

Step #1: Determine how old are the debts

If there are debts on your credit report that should have fallen off, it may be because the credit bureaus didn’t receive the correct data. So the first step is to determine how old the debt really is. In the case of a judgment or bankruptcy, this is very easy. You just count seven years from the day it was filed. But it’s more difficult to determine the age of a delinquency. Regulatory language in this area is very complicated. But what should count is the date you first became delinquent and then never caught up on the debt. As an example of this, suppose you missed a payment in January then made it up and also paid in February. If you then missed March and your bill eventually went into default your delinquency date would be March. Unfortunately, determining the date of a delinquency can be challenging. Some creditors may let your string of non-payments go on for several months before they tag your account as delinquent, while others will do it almost immediately.

Step #2: Understand there is no separate clock for sold-off debts

Your debt actually has a birth day. It’s when the account became delinquent with the original creditor. So it doesn’t matter how often your debt is sold and resold. The seven-year clock starts when you became delinquent with the original creditor. This means that if a collection agency were to buy your 10-year-old credit card debt and starts putting it on your credit report with a different date, that’s a big no-no.

Step #3: Get all three of your credit reports

You may not be aware of this but you have three different credit reports, one each from the three credit reporting bureaus. They are Experian, Equifax and TransUnion. You are allowed by federal law to get a free copy of each of your reports once every 12 months. You can either download them from the credit-reporting bureaus or get all three simultaneously at www.annualcreditreport.com. This will allow you to see which bureaus are listing the old debt. You should then contact them. This is relatively simple because your credit reports will include contact information and instructions as to how to dispute items you believe are erroneous.

Step #4: Write the credit bureaus

If you find debts that are too old and should not be on your credit report, you will need to write the appropriate credit bureau (s). While it is possible to dispute items with the credit bureaus on their websites, most experts believe it’s better to send a letter. When you dispute an old debt, the credit bureau will request the company that provided the information to verify it. If it is unable to do this, the debt must come off your report.

To dispute an old debt successfully, you need to make a case so powerful that your creditor will have to either show that the item is correct or admit that it’s not. Be sure to include copies of anything that backs up your claim. This could be copies of court filings that show the date of the judgment or bankruptcy or a letter from your original lender with information as to when the account became delinquent. In the event that a collection agency is reporting that one of your accounts is different and new debt, be sure to include paperwork showing that the two accounts are actually the same debt.

Send your letter as certified with return receipt requested. This is so that you could prove that you did send the letter and that it was received by the credit bureau.

You will also have to write your creditor as explained in the next step. This is because the way that the credit bureaus handle your dispute internally is not exactly what you would expect as revealed in this video.

Step #5: Write the lender

You should also write a similar letter to whichever creditor is reporting the debt. You can do this by reframing the letter you sent to the credit bureau, attaching copies of your documentation or just send a copy of the same letter with copies of the documents you have that prove your case. Again, you should send the letter and your documentation certified and with return receipt requested. When you do this, your creditor has a total of 30 days to review your claim and respond. One thing you shouldn’t do is make the letter sound angry. We understand that you might be very upset and that your letter might reflect this. But this can be damaging. Instead, keep all of your letters and your conversations to everybody calm and businesslike.

Step #6: Get special attention

In the event you find your initial letters don’t get the job done, you may have to kick up your approach. You could go online, spend a few minutes researching the company that reported the debt and get the name of its president. Send your next letter to that person at the company’s corporate headquarters. You should get a different kind of response from the president of the company than from its customer service department. Be sure to send the letter certified and keep a copy for your files. The Association of Credit and Collection Professionals has a searchable database of companies you could reference to get the president’s name and the company’s address. You might also follow up your letter after a few weeks with a phone call. In the event that some officious gatekeeper keeps you from speaking with the president, call the person after hours and leave your message directly in his or her voice mailbox.

Step #7: Contact the regulators

If the collector is from or associated with a bank, there is a federal agency that regulates it. These agencies actually take individual complaints and will contact the companies regarding them. This should not be your first choice. The regulators want to see that you’ve tried to solve the problem yourself so you need to be able to demonstrate that you contacted your creditor and got no response or resolution. Again, you should mail your complaint and keep copies of your return receipts. To shorten the process you could print out the agency’s complaint form, fill it in and send it attached to your documents.

Note: The primary regulator of a bank might be the Federal Deposit Insurance Corporaton (FDIC), the Federal Reserve Board or the Office of the Comptroller of the Currency. Credit Unions are regulated by the National Credit Union Association (NCAU). If your bank is state chartered, it is subject to supervision by that state’s regulatory agency. In the event your problem is with a debt collector, your best choice would be to contact the Federal Trade Commission.

Many states have agencies that regulate debt collection. When you complain to them, they may actually contact the agency on your behalf. In fact, it’s best to try your own state first as you are a constituent and would have a bit more leverage.

Step #8: Talk with an attorney

The final thing you could do is talk with an attorney. When you consult with one, this doesn’t always mean that you will file suit. In some cases all you need is a letter on the attorney’s stationary to get the creditor to review your records. If your collector or creditor refuses to take that old debt off your report, an attorney would then advise you about filing suit. If it comes to this, be sure to choose an attorney that specializes in consumer rights. You will be dealing with the Fair Credit Reporting Act, which is very convoluted. You really need someone who has worked with it, who understands the law and knows where the holes are. Another possible source for help is the National Association of Consumer Advocates. It is an organization of attorneys that specializes in debt and credit law.

Things Can Get Messy When You Have Unresolved Credit Disputes

How would you feel if you had paid off five credit cards but then got your credit reports and saw they had been marked “uncollectable?” We know of one woman who had this exact thing happen to her. She had borrowed money to pay off her credit cards. But these payoffs were never recognized by her lenders and appeared as charge-offs on her credit reports. She started being hounded by debt collectors and had potential employers ask about her debts. You can just imagine what this did to her credit score.woman making financial decisions

For six months

For the following six months, this woman sent and resent letters along with copies of payoff notices to the credit reporting bureaus and the card issuers. However, nothing worked and she eventually gave up. She felt that she didn’t have enough money to hire an attorney and fight the credit bureaus.

Not unique

Unfortunately, this woman’s credit situation is not unique. There are millions of credit reports that contain errors, some of which are much worse than others. One recent study by the FTC (Federal Trade Commission) found that one in 20 consumers had an error so bad on one of his or her credit reports that they are probably paying higher interest rates on their loans.

Thousands of dollars

Even though an error in your credit report could seem innocent, it can cost you thousands of dollars in higher interest charges over a year or two. Plus it could cost you additional money in the premiums you pay for your auto and homeowners insurance. This is why it’s so important that you get your credit reports from the three credit bureaus – Experian, Equifax and TransUnion – at least once a year. When you do get these reports, it’s important to go over them very carefully looking for the following items.

  • Charge offs
  • Items that have gone to collection
  • Defaults
  • Tax liens
  • Bankruptcies
  • Foreclosures
  • Lawsuits or judgments

Credit ReportIf you find errors

If you do find one of these credit score-killing items in one or more of your credit reports, it’s important that you dispute them. You have the right to do this under the Fair Credit Reporting Act. Here’s how this works.

Step one: Write a letter to the appropriate credit-reporting bureau disputing the item. Make sure you have documentation supporting your claim. You must include it with your letter.
Be aware that there are some important things to know about writing a dispute letter as explained in this video.

Step two: The credit reporting bureau must respond to you within 30 days of the date that it received your letter. However, it may have extra time if you didn’t send in all of your documents at the time you filed your dispute.

Step three: The credit bureau is required to investigate your dispute. Unfortunately, the word “investigate” is defined very loosely. In many cases, the credit bureau will simply go back to the creditor that furnished the information and ask it to verify it.

Step four: In the event the creditor is unable to verify the item or if it fails to respond within 30 days, the credit bureau is required by law to delete it from your credit file.

Resolving credit disputes

You should get your credit reports at least three months before you apply for a mortgage or some other loan. It’s important to do this before you apply and not afterwards. This is essential for two reasons. First, you want to make sure the information you’re looking at is current. A report that’s six months old could actually have been updated with bad information between then and now. Second, the report you receive as a consumer is much easier to read and understand than the report a lender receives. Some people will get a copy of their credit report from the lender and use this as the basis for their dispute. But the report a lender gets is coded so that a computer can read it. There have been cases where this information was merged with other information or other reports and so turned out to be very confusing.

The documentation you will need

When you do credit disputes, you need to send in copies of all the documentation you have regarding it. You should send this to the credit reporting agencies and the original creditor. This would include emails, letters or faxes, canceled checks – copied back and front – and billing statements. You should send this information to the creditor at least a week before you file your dispute with a credit bureau. This is so that when the credit bureau contacts the creditor, it will have all the important information in hand.

Roll in the big guns

If you can’t get the dispute successfully settled with the credit-reporting bureau there are other things you could do. You could add a statement of dispute to your credit file explaining why you disagree with an item. Second you could get the Consumer Financial Protection Bureau involved. It accepts complaints online but only after you have filed a dispute with the credit bureau. The CFPB will send again your complaint to the credit bureaus and request another investigation. Third, many attorneys who deal with credit report disputes will work on what’s called a contingency basis. This means you are not required to pay them unless you receive damages from a settlement or a lawsuit. Some also offer free consultations that would help you put together your disputes, including even drafting the dispute letter. You might be able to get help from a consumer advocate group. And a credit-counseling firm that is part of the National Foundation for Credit Counseling might be able to help guide you through filing a dispute.

How To Handle Credit Report Errors

Holding credit card and looking at laptopCan you imagine how it would feel if you were to pay off five credit cards and then find that they had been recorded as “uncollectible” on your credit report? It can and does happen and can lead to messy problems.

Millions have errors

If you review your reports and find credit report errors, you’re not alone. I have seen reports that there are millions of credit reports containing mistakes, some of which are worse than others. This study also revealed that 1 in 20 consumers have errors on their credit reports so serious that they are probably paying higher interest rates on credit their cards and loans. This actually comes from the Federal Trade Commission.

Can cost thousands of dollars

Errors on your credit report can actually cost you hundreds of dollars over the course of a year or two in higher insurance premiums and higher interest charges. The fact is that even if the error seems innocent, it can have a negative impact on you.

You have rights

Several years ago our Congress passed the Fair Credit Reporting Act. This gives you the right to dispute items on your credit report with the appropriate credit bureau. If you find such an error, you will need to write the credit bureau and dispute it. You will need to send documentation supporting your position to both the credit bureau and the company responsible for the erroneous item. This could include any pertinent emails, faxes or letters, canceled checks (both the fronts and backs) and billing statements.

The credit bureau is legally required to respond within 30 business days from the day it received your letter. These 30 days are meant to give the credit bureau time to investigate your claim. However, the word “investigation” is very loosely defined. In fact, all the credit bureau has to do is go back to the entity that provided the information and ask it to verify the item.

The problem

The problem is the credit bureaus (Experian, Equifax and TransUnion) are not in business to determine who is right in these disputes. They will usually go with whatever the company that furnished the information tells them as they believe it’s in the best position to know.

At least three months prior

Most experts recommend that you get your credit reports at least three months before you apply for credit on a big items such as a mortgage. This will boost your chances of quick success. You can get your three credit reports free at the www.annualcreditreport.com. There are two reasons why you need a recent report. You want to see your current information and not information that’s six months out-of-date. Second, the personal report you will get is much easier to read (and understand) than the one the lender gets.

What else you could do

If you cannot settle your dispute with the credit bureau you still have some alternatives available. You can add a statement about your dispute to your credit file explaining why you disagree with the item. If you’re lucky, future creditors may take this into consideration when reviewing your credit applications. You can also involve the Consumer Financial Protection Bureau. The agency takes complaints online regarding credit report disputes but only if you first disputed the item with the appropriate credit bureau. The agency will send your complaint to the credit bureau and ask that it investigate it again.

Hire an attorney

Finally, you could get help from an attorney. Many attorneys will deal with these kinds of disputes on a contingency basis so that you pay nothing unless you get damages as the result of a settlement or from a lawsuit. You can usually get a free consultation upfront and the law firm might even help you draft the letter you would send to dispute the item.

Revealed – How To Deal With An Error In Your Credit Report

There you are doing the right thing. You ordered a copy of your credit report and are carefully reviewing it. Wait! What’s this? There’s an item you don’t recognize. Is a company trying to dupe you or has your identity being stolen? What if your credit report is rampant with errors?woman with help sign

It happens more often

Unfortunately, this happens more often than you might think. You find a transaction on your credit report you don’t believe is yours or maybe it’s on your credit card statement or even your bank statement. Yes, this could indicate your identity has been stolen or, more probably, that an error has been made.

Check the company’s name

If you find an item you don’t recognize, the first thing that you should do is check the company’s name. The reason this commonly happens is because a financial institution or company, whose name you don’t recognize, has turned your name over to a debt collection agency whose name you also don’t recognize.

The creditor may operate under more than one name

Another reason why this can happen is because a company operates under one name but uses its legal name to process payments. As an example of this, an umbrella corporation that owns multiple jewelry stores happens to own one in your city. These corporations often have numbers instead of names. So if you thought you had purchased a ring from LeMode’s Jewelry but you see a number on your credit report instead of the name LeMode’s, it’s probably because the umbrella corporation processed it this way.

Jump on the Internet

The first thing you should do is go to the Internet and do some research to learn more about the corporation. Is it a debt collector? Could it be the umbrella for a company where you actually made a purchase?

Get on the phone

Second, call the company and ask about the transaction you don’t recognize. And be sure to get the name of the creditor that initiated the item.

Get all the details

Third, get all the details you can about the item. Typically this would include the store or location where it took place, what was purchased, the purchase date and the amount of the transaction. This will help you decide if it’s something you now recognize or that it’s an error.

If you now recognize the transaction

If after you have done these three steps and do acknowledge the transaction, you need to figure out what to do about it. For example, you might arrange a plan to get it paid off. If you still don’t recognize the transaction, you might want to dispute it with the credit bureau or dig deeper to make sure it wasn’t the result of identity theft.

How to dispute an error

If you are sure the item in question was an error, you need to write the credit-reporting bureau and is dispute it. The bureau is required to then contact the company that reported the transaction and ask for proof that it was really yours. The reporting company has 30 days to respond to the credit bureau. If it does not, the credit bureau is required to remove the item from your credit report.

Mistakes aplenty

Credit bureaus process thousands of transaction reports daily. No matter how diligent they might be, errors can be made. However, just because you don’t recognize an item or transaction in your report doesn’t mean that a mistake has been made. Be sure to learn why it’s there. And don’t forget that the name that appears on your credit report may not be the same as the company from which you bought the item.

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