Disputing Credit Report Errors
As the lending manager at Union Settlement, a federal credit union in Harlem, N.Y., she'd spent years advising clients on how to avoid the exact situation she suddenly found herself in. But it wasn't negligence that landed Haro in hot water with lenders -- it was an error on her credit report.
Because of a transactional mistake by her bank, it appeared that she had made a late payment on her mortgage. The erroneous report was then sent to the credit bureaus, which caused her impeccable credit score of 810 to plummet nearly 50 points overnight. Then came the embarrassing collection letters.
"I went ballistic," Haro said. Her bank had credited the payment to the wrong account, and in the process, put a dent in her credit score that would take months to repair.
Haro's not alone. According to the U.S. Public Interest Research Group, one in four reports can have an error serious enough to hurt one's chances of getting new credit. The findings are especially troubling for homeowners in today's market, whose credit history is under constant scrutiny by lenders. To safeguard against a costly slip up in your future, it's important to know how to dispute a claim on your credit report -- and more importantly, how to follow up with your creditors.
Scour Your Credit Report for Errors
To receive a free copy of your credit report, visit annualcreditreport.com, the only federally sponsored credit reporting website. Since each of the three credit bureaus (Experian, TransUnion and Equifax) are required to provide one free report per year, Haro suggests staggering the requests once every four months to keep a vigilant eye on your records.
Reporting an Error
Once you identify an error on your credit report, you need to make sure every step of the process going forward is recorded. "The bureaus don't pay attention to what consumers send them," says Haro, who's helped hundreds of clients with their credit disputes. "Thousands of letters get thrown out."
To prevent this, make sure to send your letter by certified mail with return receipt requested. That way, you'll have proof of the letter being sent, which will come in handy if more complications arise. The letter itself should be addressed to all three credit bureaus and to any lender that may have caused the error to occur. Because so many credit report mistakes are based on identity mix-ups, include copies (never originals) of your state photo ID, a utility bill as proof of address, your Social Security number and date of birth.
Be straightforward in your letter and make sure to enumerate each item in question on your credit report. Explain why the item is false and be prepared to back up your claim by attaching photocopies of any relevant records. Always err on the side of over-preparedness and attach any paperwork that corroborates your story. Remember that your letter is only one of thousands that the credit bureaus receive, so get straight to the point and make it easy for them to understand the problem.
Making the System Work for You: FCRA
Under the Fair Credit Reporting Act (FCRA), the credit bureaus are required to respond to your claim within 30 days of receipt of your letter. Include a passage similar to the following, Haro says, to cover your bases:
According to the provisions of the Fair Credit Reporting Act, these disputed items must be reinvestigated or deleted from my credit record within 30 days. In the interim, these items should be noted on my credit record as "in dispute." I am also requesting the names, addresses and telephone numbers of individuals you contacted so that I may follow up.
Bruce McClary, a credit counselor for ClearPoint Credit Solutions, knows firsthand the importance of getting it in writing. Before entering the credit counseling industry, McClary was just a well-meaning consumer. When he found out his score had been dinged for late fees on a credit card that he had closed months prior to it being reported, and that because of it he had been denied the best financing on a car loan, he thought the best way to settle the issue was to call the credit card company directly. Unfortunately, that wasn't good enough. For nearly eight months, the late fees remained on his account, even after the creditor promised to report the error.
"Don't take the creditor at their word," McClary says. "Send all disputes to both the bureau and the creditor," that way both parties are made aware of the situation and the 30-day deadline forces cooperation between parties.
"Prevention is the best medicine," says McClary, and staying abreast of changes to your report could mean the difference between early mediation and massive headaches down the line. In McClary's experience, the errors that cause the most damage are those that confuse the borrower with another person, often a spouse or a relative with a similar name. "Those can be devastating," he says. He recalls one instance in which a father went in to refinance his mortgage only to discover that his son's court judgment of $10,000 was appearing under his name.
For borrowers with limited credit history, be on the lookout for missing accounts, because every bit of up-to-date credit information could improve your score. According to the Federal Trade Commission, while certain credit reporting companies are not required to report to the credit bureaus (local retailers, gasoline credit cards, etc.) many of them will add your account information for a fee. But your main concern should be keeping the information that does appear on your report completely accurate.
If the credit report investigation results in a change, the credit reporting company is required to mail you a free copy of your corrected report. And, if you ask, the agency must also send a notice of correction to any parties that received your report in the last six months.
While following these steps usually resolves the issue, provided you have sufficient evidence of your claim, it's not unheard of for disputes to become long and arduous battles. One piece of advice that Haro offers is to show the credit bureaus (and especially your credit provider) that you mean business. In cases where you can prove, beyond a shadow of a doubt, that an error has been made, she suggests sending copies of your dispute to the Better Business Bureau, or even your state attorney general's office. It seemed to work in her case, as just eight days after sending her letter to the bank she was issued an apology and eventually received an amended copy of her report.
Of course, as with any legal dispute, you can hire an attorney, but make sure the effort is worth your time and money. "What does this error prevent you from doing? Financing a home?" McClary asks. "If your goal is being kept at arm's length, you may want to consider an attorney."
Ultimately, the borrower is the first and last line of defense against credit report errors. There are two important take-aways for any consumer to know. First, don't expect your credit score to rebound immediately, even after the error is resolved. Haro estimates that it will take nearly six months to get back to her original score of 810, and for McClary, nearly a year. The second and most important lesson is patience. Hope for the best, but be prepared for a protracted dispute. If you keep records of all your paperwork and follow-up with your creditors often, your vigilance will pay off.
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