1) I Got My Credit Report, Now What?
Once you get your credit report, get comfortable and really study it. This
means first learning to read it. Your report will include a set of instructions that will
help you decipher the symbols and notations used by the credit bureaus. Once you
familiarize yourself with the coding symbols used by the credit bureaus, look for and mark
any damaging information recorded on your report. You should especially be looking for
negative information that is erroneous. Some of the common negative marks are the
following.
Past Due History Collections or P& L Inquiries Public Records
2) How do I determine my credit rating?
See above for common ways creditors score your
"credit-worthiness." Normally each account on your credit report provides you a
summary rating based on your payment history. The basic ratings are negative, non-rated or
positive based on the number and severity of the negative information for that particular
account.
3) I found some errors on my report, what are my
rights?
The Fair Credit Reporting Act codified at 15 USC section 1681a through 1681t, provides
the framework designed to help you eliminate erroneous or unfair credit information from
your credit report. All consumers have the right to challenge the accuracy of their credit
report. Once you challenge the accuracy of a particular item of information, the credit
bureau must investigate that item within 30 business days (before September 30, 1997 it
was within "a reasonable period of time").
If the credit bureau finds that the challenged information is erroneous or cannot confirm
or deny it, it must be promptly removed it from your credit history. Even if the bureau
confirms a particular item that you have appealed, you have the right to a Consumer
Statement (100 words or less) that explains your side of the story included on every
credit report copy that the bureau sends out.
4) Before I challenge items on my credit report
what should I know?
A credit bureau is required by law to investigate the information that you
challenged on your credit report unless it is "irrelevant or frivolous."
Therefore, in order to avoid such a charge, it is best to challenge each item separately
because a general challenge may be considered frivolous. Pursuant to United States Code,
Title 15, Chapter 41, Subchapter III, Section 1681I an item must be removed if upon
investigation by the credit bureau it is found to be "inaccurate, incorrect,
erroneous, misleading or outdated" (see code section here). Therefore, it is
important to use one of these reasons in your challenge as the grounds for your dispute.
5) What steps should I take to correct negative
information on my credit report?
One of the most effective ways to have negative marks removed from your
credit report, is to challenge the accuracy or completeness of the information through a
letter to the credit bureaus pursuant to FCRA 15 USC section 1681i. The only limit that is
placed on your right to challenge information on your report is that the challenge should
not be frivolous or irrelevant. It is best (though not necessary) for you to include
documentation that supports your challenge. A sample letter challenging items as inaccurate
and demanding their immediate removal is provided here.
A sample letter requesting the removal of outdated information is
provided here. Also, a sample letter requesting that excessive inquiries be merged
or removed is provided here. Be sure to send the letter by certified mail with
return receipt requested so that your efforts are fully documented.
If after a reasonable period of time (usually 4-6 weeks) the credit
bureaus have not responded to your letter you should write a letter reminding them of
their obligation under the law to investigate your challenged item(s). (see sample letter here).
If the credit bureau fails to reverify the items that you challenged within a reasonable
time (defined as 30 business days) from the date the credit bureau received your
challenge, the Fair Credit Reporting Act gives you the right to have the disputed item
removed from your report. A letter demanding that the items be removed for failure to
re-verify the challenged items within a reasonable time is provided here.
After following the above procedure get another copy of your credit report
(this should be for free) and make sure it reflects the proper changes.
6) Why is challenging erroneous entries on your
credit report so effective?
Often it is possible to eliminate many of your negative marks simply by
disputing them using the above methods. Why is this true? For three reasons:
First, credit bureaus may be so busy during a particular period that they
were unable to re-verify the challenged information within the time limit and therefore
must remove it. Second, due to human error information inadvertently deleted in the
process. Third, after two or three years a closed or inactive file is often stored offsite
by a creditor making it not readily accessible. Accordingly, when credit bureaus contact
creditors for verification of an item (especially an old item) that you challenged,
creditors frequently fail to respond due to the amount of work that it takes to dig up
your file. This failure to respond helps you clear your credit record even when you do not
have documentation to corroborate your challenged item(s).
7) What to do if a negative entry is confirmed by
the credit bureau?
If some of your negative marks were in fact verified by the creditor(s),
wait 1-6 months and try repeating the above process.
If this is still futile you have the right to have the credit bureau
include a Consumer Statement of 100 words or less to be added to your credit report
explaining your side of the story. (See sample demand letter) In the mean time
follow the credit building steps below to offset your negative items with positive ones.
8) What if the items are true and creditor
repeatedly verifies the information to the bureau?
If after you’ve tried the above procedure and you still have accurate
marks left on your report, you must attempt to directly persuade the creditor to remove
the information from your credit report. First, determine the reasons that caused the
negative information. For example, did you make late payments due to your moving and a mix
up at the post office? Were you temporarily laid off from work and when you returned to
work you quickly paid your bills? If you feel that your reasons are good ones, try writing
directly to the creditor explaining your position and asking for the removal of the
negative information. (see sample letter).
9) Can I get the negative marks removed by
paying off the creditors part of what I owe?
Depending on the kind of debt you owe, frequently it is possible to pay
part of your debt for the removal of the negative information on your credit report.
However, it is much easier to negotiate on a general unsecured debt (e.g. Visa MasterCard
and most department store cards) than secured debt (backed by collateral like a car loan).
Secured debt usually cannot be settled for a lesser amount than the property is worth or
amount you owe, but payment plans usually can be worked out.
The extent to which you will be able to negotiate the partial payment of
an unsecured debt is usually commensurate with the creditor's perception of your
ability to pay that debt in the near future. If your are up to date on all your
payments and you try to negotiate partial payment you probably won’t get too far.
On the other hand if the creditor believes that you are unlikely to be
able to pay back the debt any time soon and they have written your account off as
"bad debt", you may be in the driver's seat. This is frequently the case when
the creditor has had no luck in collecting from you and has essentially given up. In this
case you may be able to offer the creditor a fraction on the dollar in satisfaction of the
debt and the deletion of negative information from your credit report.
If your account has not been written off yet as "uncollectable,
" it may be more difficult to negotiate a partial payment in return for removal of
negative information. If you can’t pay it in a lump sum, offer payments in
installments in exchange for the deletion of negative items.
Keep in mind that if a creditor believes that your on the edge of filing
bankruptcy and that this is their last chance to get something out of you, you will be
usually be able to call the shots. Also, it may be wise not to emphasize the importance to
you of having negative credit information removed from your credit file. However, I cannot
emphasize enough, whatever you agree on verbally with a creditor reduce it to writing and
have the creditor sign it. (see sample agreement)
10) When negotiating with a creditor, is it
sometimes preferable not to mention that you want negative credit info removed from your
credit report?
Alternatively, when you are negotiating with a creditor with regard to the
amount of your debts, you may not want to bring up the issue of erasing the negative
credit item. Instead, along with the check for the amount of the negotiated settlement,
attach to the check a writing that states as a condition of cashing the check that the
creditor remove the negative listing from your credit report. This is called a
"conditional endorsement."
You must ultimately decide what negotiating technique to use. In the
latter technique, a creditor will often be tempted by the fact that the check is right
there and consequently will cash it. The problem may be enforcing your rights under the
conditional endorsement. On the other hand, the creditor may return your check and you are
back to the drawing board in terms of the negotiation process. |
