The following article was taken off the National Association of Consumer Advocates (NACA) web site of which I am a member. NACA is a fantastic resource and it allows me to connect with hundreds of other similarly like-minded lawyers whose practice areas are on protecting consumers from overreaching and unscrupulous businesses who often profit at the expense and ignorance of the consumer. And this article is a great primer on how to set your consumer credit report straight.

Correcting Your Credit

Background Main Reporting Agencies: There are three main, national, consumer credit reporting agencies (CRAs): 1) Experian Information Solutions, Inc. 2) Equifax Information Services, LLC 3) Trans Union LLC (the "Big Three").

How CRAs Get Information

Experian, Equifax and Trans Union all collect information from court records, banks, credit card companies, finance companies, department stores, cellular phone companies, court records, and many other companies issuing credit. The Big Three do not necessarily have the same credit information because not all creditors send reports to all three agencies and the agencies do not all collect information from the same public records. One CRA may have incomplete information, for instance reflecting a tax lien but not the amount or the fact that it was released. Another might not even report the first lien.

Credit Report Is Changing

A credit report is not a paper file kept in one place at a credit reporting bureau. This is part of the reason correcting credit errors can be so frustrating. The credit reporting bureaus have all your information saved in a particular format in a big, interconnected database. Your information is maintained with everyone else's. When a credit reporting bureau receives information from creditors and others, it all goes into one big "vat" of information or a few different vats owned by affiliated companies. When a business inquires into or "pulls" your credit report, a search program or algorithm pulls information from this vat based on your "personal identifiers" such as your name, address, date of birth and social security number. 

It is kind of like an internet search engine algorithm, except of course the credit reporting algorithm should be very selective in what it includes. The search algorithm is supposed to filter out obsolete credit information and credit information that doesn't belong to you. The remaining information is combined into one report. Your credit report isn't something fixed since the information used to create your credit report is constantly changing as creditors pour information into the vat.

Correcting Your Credit in 5 Steps

Step 1: Get A Credit Report Get A Copy Of Your Report: Consumers may obtain a free credit report online once every 12 months. You are also entitled to a free report within 60 days of credit denial. The agency on which denial is based will be mentioned in the notice. 

Step 2: Reading the Report When you get your credit report the credit reporting agency may include a pamphlet or similar paperwork explaining how to read their particular format. There are generally five sections as follows:

• Identification Information: This section usually includes your name, address, social security number, date of birth, former addresses, your employer's name, your job description and possibly your home phone number. Credit History: This section shows various accounts and how timely you paid on them. There are two main types of accounts you see under "credit history." The first is revolving credit – meaning the minimum amount owed may be definite, but the payment due each month can be variable. This is typical of credit cards.

   

  Second is "installment accounts" – a definite amount due in fixed installments. A mortgage payment is typical of these, as are student loans. Underneath the accounts, it may reflect how and when payments were made on them. The credit bureaus break-down the account if there are late payments to show how many payments are 30, 60, 90 and 120 days past due (and some indicate later past dues of 150 days). Thus (3)(30), (2)(60), (1)(90) means you have paid three times past 30 days, two times past 60 days and once 90 days past the due date. If an account is fairly old, it may state that it is a "charge off", if you paid it after it was charged off it may state that it is a "paid charge off."
   

• Collection Accounts: These accounts are being collected, usually by a collection agency, but sometimes also by companies that buy huge portfolios of charged off debt as well as some law firms.
   
• Public Records: These records are usually obtained by a contractor for the credit bureaus. The contractor goes through the public records maintained by various courts and county records offices. Bankruptcies, judgment, satisfaction of judgment, tax liens, releases of tax liens and foreclosures are just some of the records that can go from the public record into your consumer report.
   
• Inquiry Section: This is a listing of businesses that have either pulled your full credit report, pulled certain information on your report or have "prescreening" your report. The credit card company you applied to, the car dealership that illegally pulled your credit report, the credit bureau pulling your report at your request and others will show as inquiries. Generally if your full credit report was procured, an abbreviated name of the business will appear without initials in front of it.

   

  Generally, if a company with which you already have an account pulls your credit report or if a company's name appears that you have no affiliation with, there is a chance that your name and address were provided to the company as part of a "prescreening" program. "Prescreening" means that a creditor has gone to the credit bureau and asked for a list of addresses of people who meet certain criteria (e.g. mortgage over $300,000 etc.).

Step 3: Locating the Cause Of Credit Mistakes

Errors In Credit Reports Occur Often: Fraud, data entry mistakes, improper merging of information by the CRA are all examples of common errors. The errors can be caused by the creditor, the CRA, a thief, or a collection agency or public record. 

Creditor Error. The creditor or "furnisher" of information to the CRA provides the information in a database format that allows the CRA to bring the information right into its database without entering everything again. The individual pieces of data are known as "fields." The current format is "METRO 2." METRO 2 was created in order to comply with the 1996 amendments to the Fair Credit Reporting Act. However, some very large creditors, including some large national credit card companies have not moved to METRO 2 and are still using METRO 1. This can create many problems in providing correct consumer information, especially regarding bankruptcy.

Incorrect Names. An incorrect name or social security number inputting by the creditor can go to the wrong consumer's file (e.g. incomplete consumer's name such as "J.M. Jones" could either be "John Michael Jones" or "Jay Milhous Jones" or any other combination, "Sam" could be "Samuel," "Samson," or a female "Samantha."). This frequently happens with common names or where there is a junior/senior relationship.

Collection Agency Error. Some companies intentionally (and illegally) place collection accounts on credit reports to get the victim to pay. Collection agencies know some people will pay amounts, even if they don't owe, if they are attempting to get credit. Under recent amendments to the Fair Credit Reporting Act (FCRA), you can proceed against the collection agency that improperly reports the information. The source of the problem sometimes arises because creditors and credit bureaus sometimes don't provide enough identification details when inputting new information into a file.

CRA Error. Most credit reporting agencies use name, address, social security number and date of birth to identify who you are. The CRA can cause an error by mis-merging information where identifying information is similar. This happens most frequently where there is a junior/senior relationship. It also can happen when social security digits are similar within two digits. If the adult child with the same name as the parent moves home, big problems can result. There can also be problems where a recently married spouse has the same first name as a step child or the ex-spouse.

Public Records Error. The Big Three pay companies to go through court files and official records to obtain information. Judgments, bankruptcies and tax liens are the most frequently reported public records. If the reporting agency does not have the company check often enough, the fact that a judgment or bankruptcy was later vacated or satisfied may not get reported.

Step 4: Always Document

Documents Are Important. Many credit card companies, banks and even credit reporting agencies provide toll free numbers and websites you can use to dispute credit errors. It's better to document your credit error dispute on paper. However, if you decide to use the phone, follow-up in writing. Acknowledge the conversation (e.g. "this letter is a follow-up to my conversation by phone with your representative named Joe Smith in which we discussed …"). Send everything in writing by certified mail, return receipt requested. There are many reasons to write the dispute in addition to, or instead of, over the phone. Some of these are as follows: 

Show Concern. Just the fact that you bothered to collect your thoughts and write formally shows you truly are concerned with the credit errors on your report. If you need the help of an attorney or regulatory agency later, they are more likely to take note of the seriousness with which you regard the matter.

Allow you to accurately track case. There may be many people involved in your dispute before it is resolved. First, many of the employees of credit institutions turn over regularly and you may be sent to a different person for each investigation. Also, you may need to show your paperwork to attorneys, law enforcement (in fraud cases), regulatory agencies and perhaps to a court. Having documents helps others "get up to speed." Many credit companies use software to have a chronology of their contacts with you, but it is recorded in a very self-serving manner to make the company look reasonable at your expense. Don't rely on a creditor keeping track of your matter in anything but a self serving manner.

Legal Effect. The obligations of some credit companies under some laws are not triggered unless you provide a written dispute.

Step 5: Send Dispute Letters

Send Disputes to Credit Reporting Agencies. It is imperative you send dispute letters directly to the credit reporting agency. First it’s imperative to send the dispute letter to the CRA because you must put the give the credit reporting bureaus on notice. Secondly, it’s important because under the Fair Credit Reporting Act liability of the entity that furnishes the incorrect information depends on the furnisher’s response to the credit reporting bureau. 

Send Credit Disputes By Certified Mail Return Receipt Requested. Many attorneys who deal with credit reporting issues think it is imperative you send the disputes by certified mail return receipt requested instead of by phone and over the internet. With certified mail, you can track the letter all the way to the credit reporting bureau and document its receipt. Where to Send Credit Disputes. It is not absolutely necessary to send disputes to the company furnishing incorrect credit information to the credit reporting agency, but it is the only way you can be certain that the furnisher of the disputed information is fully aware of your complaint.

Believe it or not, the credit reporting agencies do not send your dispute documents to the furnisher of information – they typically just summarize the dispute into a code. Your affidavit, police report or copies of other relevant documents will not be sent on. The bureaus are not truly concerned with the "maximum possible accuracy" as required by the FCRA. Like your disputes with the credit reporting bureaus, you will want to send it all by certified mail return receipt requested.

Styles of Credit Disputes. With disputes you want to provide the information necessary to have your dispute investigated and convey what is happening to you as a result of the false credit reporting. Basics of Contesting Credit Errors. The minimum information is as follows:

(1) Name of the company reporting the inaccurate entry
(2) credit account number
(3) a statement that the account was in error
(4) why you believe the credit report is in error
(5) what you want done (i.e. whether you want the entire account deleted or corrected in a certain way)
(6) that you want a statement from the CRA of the manner in which it investigated the claim including the name and phone number of anyone contacted in connection with the reinvestigation
(7) your name, social security number, address and date of birth
(8) attach relevant documents to your dispute. Further, you may want to attach a copy of your credit report from that company or a copy of your driver’s license or utility bill that shows your current address if you moved recently. You might also add requests for verification if you are dealing with a collection agency, statement of billing error if you are dealing with a credit card company; and a demand to send corrected information directly to a company that pulled your report if you were denied credit based on an error in a report.

I hope you found this article helpful and if you have any questions give me a call.