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Credit Report Cleaning

Challenging incorrect information on your credit report and getting credit reporting bureaus to correct it.


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Understanding credit reporting
Obtaining your credit report
Correcting the report

A problem related to creditor abuse is negligent credit reporting. Some experts estimate that as many as 40 percent of all credit reports contain incorrect or outdated information. The good news is that such problems can be completely erased from your credit report. The bad news is that it takes patience and a lot of work.

Understanding Credit Reporting

As you know, probably only too well, everyone has a credit history. The big three companies who keep track of your bill-paying habits are Experian (formerly TRW), TransUnion, and Equifax. Each company, or credit bureau, has a file on you. When you apply for new credit, such as a car or home loan, the potential creditor will want to investigate your credit history. It does so by contacting one of these companies and buying a copy of your credit report.

Credit reports are valuable to potential creditors because they show individual financial patterns. A lone thirty-days-late notation will not hurt your chances to get that car loan; a history of continuous late payments will.

The report will include your name, Social Security number, address, history of paying bills either timely or tardily, the amount of your total indebtedness, a roster of people who have made credit inquiries about you, a list of who has and has not given you credit, and finally, a schedule of your current debts. Whereas credit reports used to be almost impossible to decipher, they are much simpler and more understandable today.

There is a lot of incorrect information on a lot of credit reports. The big three credit reporting agencies receive more than a billion pieces of credit information every month, and produce more than 500 million credit reports every year. The chances are quite high that there are mistakes on your report which negatively affect your financial life.

William Johnson II had always prided himself on paying his bills on time. He was, therefore, shocked when he was turned down for a new car loan. After much investigation, it turned out that a credit reporting agency had mistakenly put his son's previous auto repossession on William's credit report. As his son still lived with him, and as his son's name was William Johnson III, the error was not hard to understand.

Besides information that does not belong to you, other common errors include:

  • Outdated information. Other than a bankruptcy (which can legally stay on your credit report for ten years), any derogatory information can stay on your report for only seven years. If something older than that is on your report, it can and should be removed.
  • Lack of updates. There are many instances where a negative credit situation was reported to the credit agency, but your later rectification of the problem was not.

In order to rid your report of these sorts of mistakes, the first thing you will need to do is to get a copy of your report.

Obtaining Your Credit Report

It is a fairly simple matter to obtain a copy of your credit report, and a smart thing to do. Not everything you think will be on it, and some things you may have forgotten about likely will be. You will also discover what you look like to potential creditors. Most importantly, negative information can be discerned and possibly deleted.

1. Experian
(800) 682-7654
www.experian.com

2. TransUnion
(800) 851-2674

3. Equifax
(800) 685-1111

A report normally costs about $10. Experian (which, by the way, changed its name because of the negative association many people had with the name TRW) offers all consumers one free copy of their report each year. If you have recently been denied credit, insurance, or employment because of a credit report, you can also get a free copy from any of these agencies. Pursuant to the Fair Credit Reporting Act (FCRA), the credit reporting agency that issued the report causing the denial must give you a copy of your report, gratis, if you request one within thirty days of the denial.

Correcting the Report

After reviewing your report, you may find several items that you feel are in some manner incomplete or incorrect and should not be on your credit report. If so, the FCRA permits you to challenge the entry and force the credit reporting agency to investigate and prove the item.

Here is how to challenge any item on your credit report: Write a certified letter to the agency in question (so you can verify when the letter was received) and explain in succinct terms the nature of the dispute. Give the agency your name, Social Security number, and current address. Explain the problem with the report, and attach a copy of the report to your letter.

If you can actually prove that an item is in error, all the better.

Click here if you would like to use USLaw.com's Build-a-Document feature to craft a customized request for a credit investigation. There's a $5 charge for this document, and it is the third item down on the page you will be linked to.

Moesha bounced a check to Larry's Hardware, and cleared up the debt a few months later. When reviewing her credit report generated by Equifax, Moesha saw that the debt was listed as unpaid. Moesha found her receipt for the payment, photocopied it, and sent it along with a letter to Equifax, demanding that the item be corrected. It was.

Any item that you dispute, even ones that you cannot prove are false, must be investigated by the credit bureau, and the bureau must then report back to you the results of its investigation. If the bureau cannot verify that its version of the disputed item is correct, then, by law, the item must be removed from your credit report. The standard in the industry is that the credit bureau should get back to you within thirty days. If it cannot prove the item is true within a month, then the item comes off your report.

Now, you can likely see that there is a lot of room for abuse here. Some people use this law to dispute every negative item on their report, even if they know items are correct, hoping that the credit bureau will be unable to prove the veracity of at least some of them. If a credit bureau suspects that this is your actual intent, it can legally refuse to investigate a dispute. So, here's your tip: try to challenge only those items that are disputable or unverifiable.

It may take several letters to get an item removed. If a month has gone by from the date the bureau received your initial letter and you have received no response, then write again, and demand that the item be taken off your credit report. It is critical that all correspondence be in writing so that you have a paper trail. If a bureau refuses to remove an item that you think should not be on your report any longer, then you have several options.

First, you can always go back to the original creditor and see if it will delete the item. But, unless you have paid the debt in full, removal using this method is unlikely.

Next, you can contact the proper authorities. File a complaint with your state's department of consumer affairs or attorney general, or with the Federal Trade Commission. While satisfying, this option requires time and patience in order to get the item(s) removed and your credit cleared.

Your final, and probably best, choice, is to sue. The FCRA permits lawsuits against both the original creditor and the credit bureau (whoever you think is to blame) for reporting incorrect information. If you can prove that someone is mistakenly reporting a bad debt, then file suit in small claims court. If you win, the FCRA allows you to receive money damages for your hassles. While each state is different, the most you can likely expect to see from a small claims victory is less than $5,000.

The Important Legal Concept to Remember: Credit reporting bureaus make a lot of mistakes. If an item on your report is incorrect, then it can and should be removed.

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