Ask Stacy: Can I Protest Bad Marks to Improve My Credit Score?

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If you’ve ever had a bad mark you’d like removed from your credit history, you’ll find this question interesting…

Hi Stacy,

I’ve done a ton of online and book research on building your credit back with your postings, and on the Fair Debt Collection Practices Act (FDCPA). I’m really wanting to purchase my first house. However, an old judgment (from 2007) still appears, $5,000 of which I’m working to dispute.

Question: I thought under the FDCPA, collection efforts had to cease during the investigation process – therefore allowing me to move forward while the dispute is looked into. Your thoughts? Thanks!

– Von

This reader is actually asking two questions: One is about having a disputed item removed from his credit history while it’s investigated, which would improve his credit and help him get a lower-cost mortgage. The second question involves stopping collections on a disputed debt.

These are good questions, because there are laws that require collection efforts to stop while a debt is disputed, and for disputed credit report entries to be removed while being investigated – something that could lead to a better credit history and higher score, at least temporarily.

Let’s see what the law has to say…

Disputing negatives to improve your credit history

The law that deals with disputed negative marks on your credit history is the Fair Credit Reporting Act, or FCRA. The pertinent section is 611: “Procedure in case of disputed accuracy.” Here’s part of what it says…

If the completeness or accuracy of any item of information contained in a consumer’s file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file…

Credit reporting agencies like Equifax, TransUnion, and Experian generally have 30 days to complete a reinvestigation, and they typically remove disputed items during the reinvestigation period. If they can determine the negative information is accurate, it’s then reinstated. The way they determine whether the negative item is accurate is by requesting verification from the company that put it there in the first place.

Sometimes the company that originally reported the negative doesn’t respond to the verification request from the credit reporting agency. They may have gone out of business or lost the information necessary to confirm the negative report. In those cases, the information in dispute must be permanently removed by the credit-reporting agency because it can’t be verified.

Disputing negative information – even when they know it’s accurate – is a technique used by some in the credit repair business. They simply dispute the worst negative marks, then have the consumer apply for credit during the 30-day period when they’re not being reported.

This gaming of the system is not only dishonest, it’s short-term and fraudulent. (How would you like it if you pulled someone’s credit, saw a great score, gave them money, then saw their score plunge 30 days later?)

Most negatives will be confirmed and reappear within a month. In addition, if the credit-reporting agency determines the dispute is frivolous, they don’t have to take action. From the law…

A consumer reporting agency may terminate a reinvestigation of information disputed by a consumer…if the agency reasonably determines that the dispute by the consumer is frivolous or irrelevant, including by reason of a failure by a consumer to provide sufficient information to investigate the disputed information.

So while disputing anything inaccurate in your credit report is smart, disputing accurate negatives isn’t, unless you have strong reason to believe the company reporting the information won’t respond. In that case, it’s like pleading innocent to a speeding ticket when you know you’re guilty. If the cop doesn’t show up in court to testify, you automatically win.

To learn more about disputing items on your credit report, including sample letters, check out this page of the FTC website.

Stopping collections while debts are investigated

The law our reader refers to above – the Fair Debt Collection Practices Act (FDCPA) – spells out what debt collectors can and can’t do to collect a debt. From Section 809 of the law…

If the consumer notifies the debt collector in writing within a thirty-day period (after being contacted about the debt) that the debt, or any portion thereof, is disputed…the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment.

Our reader says he’s got an old judgment, part of which he’s “working to dispute.” Because this is complicated, he should talk to a consumer lawyer. But here’s my take…

Disputing a debt isn’t the same as disputing a judgment. A debt is money you owe because of a creditor. A judgment is money you owe because of a court. If he files a dispute with the collection agency, they’ll simply confirm the judgment with the court. If the court confirms the judgment amount, they have the right to continue to collect it.

In short, once you have a judgment, disputing it will require more than a simple dispute letter with a credit reporting or collection agency. You’ll likely have to initiate a legal proceeding, because a legal proceeding is what created the judgment.

If I were Von, other than talk to a lawyer, I’d try to settle the debt with the collection agency, and make a condition of the settlement that any negative information pertaining to the debt be removed from his credit history.

A simpler option is to wait: His judgment is already 5 years old, and according to the FCRA, all negatives pertaining to judgments must be removed after 7 years or the expiration of the statute of limitations, whichever is longer.

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