Filed under: Personal Finance, Credit Report, Credit Card, Lynnette Khalfani-Cox
Usually, by the time someone has contacted me for help on my free financial advice blog, AskTheMoneyCoach.com, they're serious about trying to turn their financial life around. Those with past credit problems have typically started making payments on time, are trying to negotiate with creditors or have taken other steps to re-build their credit rating. Unfortunately, people with spotty credit records often turn to high-priced "credit repair" clinics that make all kinds of promises about how they can "wipe the slate clean" and get all sorts of negative information removed from a person's credit files.
Some unscrupulous companies go so far as to claim that they can remove any and all late payments, charge-offs, judgments or repossessions from a person's credit report. They treat these credit infractions as if they were "mistakes" on a credit report.
Under a federal law, the Fair Credit Reporting Act, you are legally entitled to have mistakes removed from your credit reports. The FCRA states that any negative information about you that is "outdated," "erroneous" or "unverifiable" must be removed from your credit reports. For the record, therefore, I think it's important for consumers to understand that there is a big difference between a mistake that you made that landed on your credit report versus a mistake that someone else made that now shows up on your credit report.
A "mistake" by someone else can likely be corrected - provided you have proof of the error.
A "mistake" by you - like being late paying your credit card bill or failing to pay your car note - cannot be "fixed" in the traditional sense, no matter what the folks from those shady credit repair clinics say. But if you work with your creditors, the information about some of your past credit transgressions may be updated, and perhaps even removed from your credit too.
Here are some tips for handling each of these scenarios.
How to Handle Mistakes By Others
Each credit bureau has a dispute resolution process that requires you to you write a letter to the credit agency and state what information is inaccurate or incomplete in your credit file.
Under the Fair Credit Reporting Act, the credit bureau has 30 days to investigate your claims and notify you of the results. Writing the credit bureaus is typically most effective when there is identity confusion, when personal information about you is listed incorrectly, or when your file contains completely wrong data - such as account that you never opened.
Here are the websites and phone numbers you should use for the credit bureaus when you contact them to dispute errors:
http://www.investigate.equifax.com or 888-800-8859
http://www.Experian.com/disputes or 866-200-6020
http://www.Transunion.com/investigate or 800-916-8800
But let's say that you find an error based on misinformation that was supplied by one of your creditors. This would be the case if you closed an account, yet the account still shows as open; if you have been reported as paying late, but you actually made your payment on time; or if you long ago paid off an account, but your credit report still shows a balance.
In all of these instances, it's best to contact the source of the information and ask them to fix the mistake. If it's a legitimate error, without much to dispute, the company will readily address the problem. Even if they have to do their own investigation - perhaps because your claim is not so cut-and-dried - it's usually better to start with the creditor.
The reason is that when you dispute something with the credit bureau, that information may initially get changed, but then the next month it's possible that it could re-appear in your credit file. Errors that are disputed and resolved at the creditor level are far more likely to remain off of your credit report. Updates to your credit file usually take about 30 days to happen.
However, if you're in the market for a mortgage, you can have mistakes in your credit report fixed in as little as 48 hours. It's through a process called "Credit Re-Scoring." It allows mortgage bankers to submit proof of a mistake in your credit file directly to the credit agencies. In turn, those agencies give your file priority status, and quickly update your credit information electronically. This way, an error in your credit file doesn't cost you more money or jeopardize your chance to get that mortgage.
How to Handle Your Own Mistakes
If you've messed up in the past and didn't pay a bill for whatever reasons (divorce, illness, unemployment, etc.), your financial lapse might be a personal mistake, but it doesn't qualify as a legitimate credit "mistake" that would require a credit bureau to delete information about you - even if you were out of work or hospitalized. Under the law, negative information can remain on your credit files for 7 years. Bankruptcy can stay on your credit reports for 10 years.
So if you're trying to get something negative off your credit reports, you'll have to negotiate with a creditor and see if they're willing to update your credit records or delete that past negative information.
Here's a tip: These folks get lots of calls from people just like you "demanding" that negative (but accurate) information be removed for a whole host of reasons. Don't be belligerent. On the contrary, your approach should be to "charm" them a bit - or at the very least acknowledge your responsibility in the matter.
Admit your mistake. If you're a current customer, explain what led to your delinquency, and most importantly, let them know that even though you had a late payment in the past, you've been current since then. If you're no longer doing business with the company, let them know if you'd like to become a future client again. All these things may help your case.
Of course, a little cash to sweeten the pot won't hurt in getting some serious attention to your request. If you can afford it, pay off whatever was past due, or at least arrange a payment plan.
If you take this approach, get an agreement in writing - before turning over any money - that states that the company will delete all negative information from your credit files, in exchange for you paying "x" amount of dollars.
Above all: talk to people with courtesy and respect. When you're in the position of asking someone to delete negative information from your credit files, always remember that you'll catch more flies with honey than vinegar.
Lynnette Khalfani-Cox, an award-winning financial news journalist and former Wall Street Journal reporter for CNBC, has been featured in the Washington Post, USA Today, and the New York Times, as well as magazines ranging from Essence and Redbook to Black Enterprise and Smart Money. Check out her New York Times best seller 'Zero Debt: The Ultimate Guide to Financial Freedom.'