Consumer credit repair: what you need to know

You may have heard horror stories about people whose credit has been permanently ruined by glaring errors in their credit report.

But you might not realize that even a seemingly innocuous little mistake, like a payment falsely flagged as late or missing, can make a big difference in your ability to get the best possible rates on financial products like loans. real estate and automobiles.

A Federal Trade Commission study of the U.S. credit reporting industry between 2004 and 2012 found that 5% of consumers had errors on at least one of their top three credit reports, which could lead them to pay more for auto loans, insurance and other products. A more recent Consumer Reports survey, conducted between February and April, found that more than a third of the nearly 6,000 consumers who voluntarily checked their credit reports found errors.

Although it can be intimidating to correct a mistake on your credit report, it is important to try to correct a mistake as soon as possible to avoid the consequences of a default on your credit report.

With that in mind, we’re answering some frequently asked questions about finding and correcting errors on your credit report.

How can this happen?

Errors can occur for a number of reasons, but this is often a case where a creditor sends incorrect information to one or more credit bureaus – Equifax,

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and TransUnion.

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Mistakes can also occur when debt is sold as part of the collection process. Sometimes an error is something relatively minor, such as a wrong address or wrong phone number, but it can also be something of more concern, such as an account falsely flagged as overdue or overdue, or a payment error. pay. There are even cases where the files are mixed with those of another person on the basis of similar names and social security numbers.

Mistakes in your credit report can adversely affect your credit score, making it more difficult and more expensive to purchase expensive items like a house or a car. It can also make other loans and insurance more expensive, or make it difficult to rent an apartment, according to Chi Chi Wu, an attorney with the National Consumer Law Center who focuses on consumer credit issues.

How do I know if there is an error?

Federal law allows consumers to obtain a free copy of credit reports every 12 months from each of the three credit reporting companies. Due to the pandemic, consumers can get free weekly online reports until April 20, 2022. Go to annualcreditreport.com/index.action to request a downloadable copy from each agency.

“The sooner you react to a mistake, the better,” says Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling. “The longer it stays on your credit report, the harder it can be to sort out, and the damage could be long lasting.”

What if the negative information is correct?

Consumers should seek to correct only inaccurate information on their credit report. They shouldn’t expect a missed or late payment to be erased from their record if it is correct, even if it could hurt their credit. People with broader credit issues might consider speaking with a credit counselor from the National Foundation for Credit Counseling or the Financial Counseling Association of America. These organizations offer free or low cost credit counseling services to help consumers improve their financial situation.

Can I correct an error myself?

Trying to correct a mistake on your own should be everyone’s first step, says McClary, because it’s free and there’s information on how to do it on each of the three credit bureaus’ websites. “It’s a lot easier than before,” he says.

You can dispute a credit report online at the respective bureaus’ websites or by regular mail, following the process described online. For those choosing the postal route, the Consumer Financial Protection Bureau has a sample dispute letter available at consumerfinance.gov/ask-cfpb. You’ll want to make sure you correct all errors with each agency, as correcting one with one might not fix the problem with the others, according to the National Consumer Law Center.

More in ‘Need to know’

The credit bureau has 30 days to investigate your complaint (or 45 in some circumstances) and must give you the results in writing. If your dispute is not resolved, you can ask the office to include a statement of the dispute on your record and in future reports, according to the Federal Trade Commission, which provides consumers with information about consumer dispute errors. ftc.gov.

You can also ask the credit bureau to provide this statement to anyone who has recently received a copy of your credit report, possibly for a fee, according to the FTC. The FTC also provides a sample letter you can send to a company that provided incorrect information, available at consumer.ftc.gov. With that letter, include the credit bureau dispute form, if applicable, and copies of supporting documents, and carefully keep records of the process, the FTC says.

What documents do I need?

It depends on what you are disputing. Typically, you will need to include your name, date of birth, and Social Security number, along with the reason for the dispute and the documents that support your claim that an error was made. This could be a letter from a lender showing that an account has been corrected, for example, or proof that an unauthorized account is the result of identity theft. When you submit a dispute online, you will be given the option to attach supporting documents. For postal mail disputes, check with each credit bureau to make sure you are following their procedures and providing the required information.

What if I need professional help?

While you can often resolve issues on your own, there may be situations that require the help of a paid professional, such as a lawyer who focuses on credit-related issues. Ms. Wu recommends visiting the National Association of Consumer Advocates at consumeradvocates.org/find-an-attorney to find attorneys by state.

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There are also credit repair companies that, for a fee, help consumers with these issues, but you will need to be careful about choosing a company that does not engage in illegal or shady practices. Under the Federal Credit Repair Agencies Act, credit repair companies cannot make false or misleading statements or require payment in advance, and they must also provide a written contract that includes certain details. on the work they will perform as well as the right of withdrawal.

Some states also have specific regulations that apply to these businesses, so try to make sure the business is in good standing with the state. You can also check the Consumer Financial Protection Bureau’s Enforcement Database at consumerfinance.gov/enforcement/actions to see if a business you’re considering shows up.

Consumers should also avoid a provider that guarantees to raise a consumer’s credit score, promises to remove negative information, even if it is accurate, or encourages consumers to make false claims, according to the American website. Association of Consumer Credit Professionals, a trade organization that includes the nation’s largest credit repair companies.

Is Congress doing something to make it easier for consumers to correct credit errors?

Complaints about credit reports are on the increase and legislative efforts are underway to improve the accuracy of credit reports and the dispute resolution system. Two bills were passed in the House of Representatives in 2020, where new legislation was also introduced this year. Last year’s House bills were not taken up by the Senate. In June, the House Financial Services Committee held a hearing on the overhaul of the credit reporting system.

Glossary

Credit report: A summary of a consumer’s personal credit history, including detailed information about the consumer’s payment history for credit cards, mortgages, car loans, and other debts. A strong credit history can make it easier to borrow money and secure better terms, while a poor credit history can make borrowing more difficult and costly.

FICO Rating: A three-digit number (300-850) based on the information on your credit reports that helps lenders determine the likelihood of your loan being repaid. The score is used in over 90% of loan decisions, according to myfico.com.

Credit bureaus: Three national credit bureaus collect and update your credit information. Here’s how to reach them in the event of a dispute:

Equifax.com
866-349-5191

Equifax Information Services LLC

P.O. Box 740241

Atlanta, Georgia 30374

Experian.com
888-397-3742

Experiential

P.O. Box 4500

Allen, Texas 75013

TransUnion.com
833-395-6938

Consumer solutions TransUnion

P.O. Box 2000

Chester, PA 19016-2000

Ms. Winokur Munk is a writer in West Orange, NJ. She can be contacted at [email protected]

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