Many credit disputes arise from real causes: failure to make a minimum credit card payment, defaulting on a loan, etc. Others are misunderstandings or arise from identity/credit card theft, causing a consumer to be saddled with a credit report that doesn’t reflect reality.
The available remedies revolve around whether the consumer in fact followed established laws and regulations. If so, there is an excellent chance of correcting errors by following a credit dispute process. The first task is to establish the facts.
Getting Your Credit Reports
The U.S. has three major credit bureaus — Equifax, TransUnion and Experian — that prepare and sell credit reports to prospective lenders, landlords, employers and others who want to assess your credit risk or your general reliability.
The bureaus summarize your credit history into a single number, your credit score. Errors in your credit report can lower your credit score and compromise your access to credit.
The Fair Credit Reporting Act (FCRA) requires the three bureaus to provide you with a free copy of your credit report once every 12 months, but you have to ask.
Do so by going to annualcreditreport.com, a site set up by the three main bureaus and authorized by the government to process your free credit report requests. You’ll have to submit identifying information such as your Social Security number, date of birth and answer a short quiz to verify your identity.
You can also get a free credit report whenever a credit bureau supplies information that results in a negative action, such as being denied credit or a lease, but you have to request the report within 60 days of the action.
Other justifications for a free report include an inaccuracy arising from identity theft or other fraud, being on welfare or looking for employment.
The FCRA requires the credit bureau and the source of the error (i.e; the company reporting information about you to the reporting bureaus) to make the information on your report correct and complete. You need to contact one or both parties to get your report fixed.
The process of correcting credit reports is a bit of a dance — formal and stylized actions that must be timed precisely. All communications must be in writing. Here are the steps:
1. Send a dispute letter to the credit bureau
You can use the sample provided by the FTC to craft your letter, in which you specify each point of dispute on your credit report, describe the facts from your perspective, request a correction and include copies of any evidence or documentation.
Send the letter by certified mail with a return receipt. Naturally, keep copies of all your correspondence and postal receipts. The bureau should get back to you within 30 days unless they don’t take your complaint seriously.
2. The bureau investigates
The bureau will share information with the information provider, which must investigate your claims. If it agrees with you, it must notify the three credit bureaus to make a correction.
The credit bureau will send you the results of the investigation in writing, and if it issues a correction, you can request it send the updated report to all past recipients dating back six months.
3. The bureau sends you its judgement
If the original investigation didn’t pan out in your favor, repeat the process directly with the provider of the information in dispute. This may take 30 to 90 days.
If the information provider agrees with you, it must direct the credit bureaus to correct or delete the misinformation. If the information provider persists, it must inform the provider that the item is in dispute.
If you win your dispute, request a new set of credit reports and verify that they are now correct. If you lose your dispute, you can send in a 100-word explanation that the bureaus must append to your report.
If this process seems like a painful chore, consider hiring a credit repair service to do the heavy lifting for you.
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