How do you fix bad information on your credit report? Inaccurate or outdated information about claims of unpaid bills is not only annoying, but can damage your credit profile and make it harder and more expensive to obtain a mortgage, auto loan, credit cards or other types of credit.
Not only that, but the incidence of inaccurate credit reports seems to be on the rise. The Consumer Financial Protection Bureau recently reported that the number of complaints it received about credit reports jumped by nearly 50 percent over the past year - from an average of roughly 3,500 a month in mid-2014 to more than 5,100 a month from May to July of this year.
Credit reports have also become the second most common complaint received by the CFPB this past summer, trailing only debt collection agencies in the number of complaints the agency receives about consumer financial services and products.
So what can you do if there's wrong or outdated information on your report that's damaging your credit and ability to get loans? Moreover, what can you do if a company is providing inaccurate information about you or your debts to a credit reporting agency and refuses to correct it?
But first, a review of the basics:
How credit reporting works
There are three major agencies that track the credit records of individual consumers: Equifax, Experian and Transunion. Companies that you owe debts to will typically report your payment history to one or all three agencies, which will then keep track of your record of payments to each one. This record is what's known as your credit report.
The information in your credit report is used to generate your credit score, which is a three-digit number that is supposed to reflect your credit worthiness and is used by mortgage lenders, credit card issuers and others when deciding whether to approve you for a loan, credit card or other types of credit.
Your credit report will typically contain two types of information: positive reports, about records of debts paid on time, which help improve your credit, and negative reports, about late payments, debts in default, bankruptcy and the like, which hurts your credit.
Not all information is reported
Some consumers are disappointed to learn that not all positive information about your debt payments gets reported to the credit reporting agencies. Typically, only lenders that have extended you credit - such as for auto loans, mortgages, credit cards, personal loans and the like - will report your history of on-time payments to the credit agencies.
Payments for services provided or items purchased, either on a one-time or ongoing basis - such as for rent or your electric, cable or internet bills, or bills for medical expenses, homeowner services or other one-time expenses that are billed to you by invoice - are typically not reported as positive information to the credit agencies, although that is beginning to change for some month-to-bills.
However, a missed payment or a debt referred to a collection agency is highly likely to be reported to the credit agencies as a negative item, even if they don't report on-time payments as positive ones. So while paying your bills on-time won't always help your credit, failing to pay one will almost certainly hurt it.
Getting your credit reports
By law, you're entitled to receive a free copy of your credit report from each of the three credit reporting agencies once a year. The official site for doing so is www.annualcreditreport.com - that's the site jointly operated by Equifax, Experian and Transunion. Your credit report is free, but you'll typically have to pay to get your FICO credit score, the one lenders usually rely on. that number may be quite different from what your FICO score would be,
It's important to get all three reports, because individual creditors may not report your information to all three agencies. So two of your reports could be just fine, while a third may have a bit of bad information that drags your score down from that agency.
When you obtain your reports, go through them and check for erroneous or outdated information. What you're looking for are any errors regarding your payment history on individual debts. Minor errors, such as misspelling the street name in your address or showing the wrong year when you changed jobs, usually won't hurt your credit.
Another lesser error is inaccurate account information, such as showing a lower limit on a credit card than you actually have, or an account marked closed when it's still open. These can have a slightly negative effect on your credit score by showing you have less credit available than you actually do, so you'll want to have these corrected.
The big things to look for are inaccurate claims of bad debts. These can include reporting that you missed a payment you actually made, that you are in default on a debt you've paid off or a claim for a debt you do not owe.
Correcting bad credit report information
If you find such an error, you need to contact both the credit reporting agency and the company making the claim. You may be able to clear up the matter with a simple telephone call or email; if that fails, you'll need to follow up in writing with a certified letter to both.
Tell them exactly which information you are disputing and explain why you believe it is wrong. Provide copies of any supporting documentation you may have but DO NOT send your original copies - you'll need to keep those for your own protection. Send a copy of the relevant section of the credit report as well, with the item in question circled.
The CFPB recommends sending your dispute letter by certified mail and asking for a return receipt, so you can document when it was received.
The credit reporting agency is required to investigate any claim you make, unless deemed frivolous. If the company reporting the information does not reply to the inquiry or contest you claim, the item must be dropped from your report.
At the conclusion of the investigation, the credit reporting agency must provide you with a copy of their findings (this may take six months or more). If your claim is found accurate, it must inform the other two credit agencies of the finding as well.
If the company maintains the information is correct, you can require the credit reporting agency to add a note to your credit report that the item is disputed. You also can follow up with the company directly. Seek the name of the person with the authority to make the correction and send them your explanation of the situation and supporting documentation by certified mail.
If they still refuse to accept your claim and withdraw the information, you need to decide if it would be worthwhile to hire an attorney. The extra clout that a letter from a legal representative brings is sometimes all that is needed to bring them around.
What if the company no longer exists?
What if the company that provided the negative information is no longer in business? In that case, it cannot contest your claim during the credit agency's investigation, so the item should be withdrawn.
If the company has merely been acquired by another one and merged into its operations, you need to take up the matter with the new parent company, which can be challenging. However, if the original company is still operating as a division of the parent under its own name, you should be able to contact them directly.
Outdated credit information
In addition to erroneous reports, you may also encounter situations where outdated information continues to appear on your credit report. Most negative items should drop off your report after seven years, though bankruptcies may continue to be reported for 10. If you have a negative item on your report that's older than those timelines, you can ask the credit agency to remove them.
The seven-year timeline generally runs from the time an event took place, so if you missed a payment in October 2008 it should drop off your report by October 2015. Be aware, though, that this timeline can be extended if the debt remains unpaid or the company continues to seek action against you. Each month the debt is reported as delinquent starts the seven-year clock anew, until some sort of final action such as a foreclosure, delinquency judgment or bankruptcy takes place.
Certain personal information can remain on your report permanently, including criminal convictions, and information provided in job applications for positions paying more than $75,000 a year or applications for credit or life insurance in excess of $150,000.
Getting erroneous information removed from your credit report can be a time-consuming and frustrating process, but well worth it if you can correct an item that's been dragging down your credit score and making it difficult or expensive for you to get loans.