Photo (cc) by Casey Serin
Here’s a recent reader question about trying to heal a short-sale wound…
I have a question about removing a bad mark I got on my credit as a result of a short sale that occurred almost a year ago. I was in the Air Force but was forced to leave when I sustained a service-connected disability. Coming off active duty, I suffered a significant reduction in pay. We contacted Chase, was promptly denied any relief, and eventually had to complete a short sale.
I want to ask Chase to remove the mark on my credit, since it was the result of my disability and eventual retirement that left me unable to pay my mortgage. I realize that Chase has many programs now for military members, and even a dedicated military section. But neither was available at the time of my short sale.
I read your article on removing bad marks on your credit, but I no longer have an account with Chase to use as leverage. What can you do when you lack leverage such as any active accounts or debt owed? Also, when the creditor says they can’t remove items from your report, is there a regulation or reference that I can cite during this process?
I appreciate any help or information you can provide.
Here’s your answer, Kaz!
I can understand why you think having a negative mark removed from your credit history is possible. After all, I said as much to another member of the military just last week in Ask Stacy: How Can I Clean Up My Credit History? I’ve also written about it in books like my latest, Life or Debt. Here’s an excerpt…
There’s no law that says that creditors have to report delinquencies or other negatives. In fact, they don’t have to report anything. The only delinquency that’s required to be included in your credit history is child support. Nothing else has to be reported, and anything that has been reported can be removed at the whim of whoever reported it in the first place. And that’s the secret to fixing your credit history. As you go through this process, you may have creditors tell you that the law requires that negative items be reported on your credit history. Hogwash. They put it there, they can take it off, and there’s no law against it.
Another friend of mine had a slew of negative stuff in her credit history, all the result of a time in her life when she was a lot less responsible than she is today. She’s been patiently working for a number of years, off and on, to restore her credit history to pristine condition. How? She simply writes a letter to each creditor that reported a negative item and asks them to remove it. This is a particularly effective technique in either of two situations: when you’re still a customer of the creditor or when you have an unpaid balance that you can negotiate with. Following is a letter she wrote to a credit card company that she still deals with:
January 31, 2001
123 Maple Street
Anytown, USA 12345
PO Box 12345
Wilmington, DE 12345
Regarding: MasterCard account #1234-4567-8910
As you know, I have been a loyal customer of your company for more than seven years. Over that time period, I have received many offers from other companies for credit cards with lower interest rates or other terms that could have been more attractive, yet I’ve remained with your company.
I recently obtained a copy of my Equifax credit report and was dismayed to learn that your company has reported that I made two late payments four years ago. I’m writing today to ask you to have this negative information removed from my credit history. Having become conversant with the Fair Credit Reporting Act, I’ve learned that this is easily accomplished.
As you are well aware, my record of paying on time is unblemished with those two exceptions. Since even one negative item in my credit history is one too many, please repay my loyalty and responsibility by helping me have these items removed.
Thank you in advance for your timely response. I look forward to continuing our mutually beneficial relationship for many years to come.
Believe it or not, this simple letter, or a variation thereof, has worked for her in five instances where she’s used it. So the odds of eliminating negative items placed by current creditors are pretty good. But don’t think that a simple letter like this will always do the trick. Sometimes she got a response back like, “I’m sorry, but we are unable to act on your request because company policy precludes alteration of accurate negative information.” That’s not a defeat; it’s a challenge. If you get a response like that, do what she did: take the fight to a higher level. For example, write again, only this time to the president of the company. Maybe you can say something like, “I am enclosing copies of two letters: one that I wrote asking your company for help with my credit history, and their bureaucratic response. They state in their reply that your company policy prohibits their helping me. My assumption is that your company policy also includes making a profit. I’ve paid you more than $2,000 in interest during the seven years I’ve been your loyal customer. Am I to understand that you no longer value my business enough to write one simple letter to Equifax?” Blah, blah, blah…you get the picture. Be a squeaky wheel for as long as it takes to get results. Remember, this is a game of patience and perseverance.
It won’t always work
That snippet from Life or Debt, as well as posts I’ve written, may leave the impression that having negatives removed from your credit history is as simple as asking. This isn’t true.
The whole purpose of having credit histories on file with credit reporting agencies is so potential lenders can accurately gauge your history of repaying loans. If creditors started removing negatives every time a former customer requested it, everybody’s credit history would be flawless – and nobody’s credit history would be accurate. The entire system would become worthless to lenders.
Today, there are literally millions of people walking away from underwater mortgages, short-selling their homes, and failing to meet credit card and other loan obligations. And most have an excuse. They’ve gotten sick, gotten hurt, lost a job, gotten divorced, or otherwise suffered, often through no fault of their own. Unfortunately, bad luck isn’t normally a good enough reason for a creditor to remove negatives from your credit history.
Imagine I borrowed money from you, failed to repay it as agreed, and cost you a ton of money and aggravation. Then one day I come along and ask you to pretend like it didn’t happen by contacting a credit reporting agency and saying the accurate late payments you reported were, if fact, not accurate. What would persuade you to do that? If the situation were isolated and I was still a good customer, you might. If I offered you money you might not otherwise collect, you might. But if I simply said that I’d encountered some bad luck? Not likely.
Kaz asks, “What method should be taken in a situation where you lack leverage such as any active accounts or debt owed?” The answer, Kaz, is that if you don’t have leverage, you’re probably not going to succeed. That doesn’t mean you shouldn’t try, but keep your expectations low.