Can 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.