The country’s three major credit reporting agencies have announced plans to overhaul how they collect information about consumers and how they interact with consumers seeking to correct reporting errors, according to a press release.
This National Consumer Assistance Plan resulted from an agreement that New York Attorney General Eric Schneiderman made with the agencies — Equifax, Experian and TransUnion.
“The nation’s largest reporting agencies have a responsibility to investigate and correct errors on consumers’ credit reports. This agreement will reform the entire industry and provide vital protections for millions of consumers across the country,” Schneiderman said, according to a report by Reuters.
Stuart Pratt, president and CEO of the Consumer Data Industry Association, said the three agencies comply with federal and state laws. The most recent comprehensive study by the Federal Trade Commission showed that credit reports are “materially accurate 98 percent of the time,” but the plan will further improve industry procedures, he says.
For example, medical debts won’t be reported until after a 180-day waiting period. This will allow insurance payments to be applied. In addition, medical collections that have been or are being paid by insurance will be removed from credit reports, the press release states.
The agencies will no longer report debts like tickets or fines that didn’t result from a contract or agreement by the consumers to pay. Also, they will no longer accept reports that don’t include a consumer’s date of birth. Other revised rules will make it easier for consumers to dispute credit-report errors that might hurt their credit ratings.
Here are the free steps you can take to repair your bad credit:
Step 1: Access free copies of your credit reports
Visit AnnualCreditReport.com for a free copy of your credit report from each of the three credit reporting agencies. Once they’re in hand, thoroughly analyze the information for errors, omissions and fraudulent accounts.
Also, be on the lookout for negative marks that should have dropped off your report because they are more than seven to 10 years old. Most bad items drop off in seven years.
Perhaps you received your three free credit reports through AnnualCreditReport.com earlier this year and do not want to pay for new reports from the credit bureaus. According to the Federal Trade Commission, you are still entitled to a free copy of a credit report if:
- You are denied credit, insurance or employment, or offered unfavorable rates because of the content of your credit profile. You have to ask for the free report within 60 days.
- You are not working, and you plan to begin a job search within 60 days.
- You receive welfare benefits.
- Inaccuracies exist on your report because of fraud, including identity theft.
Step 2: Fix errors
To file a formal dispute of an error in a credit report, notify the credit bureau online or via a letter. Once you have done so, it will contact the other credit bureaus. If you decide to use a letter, it should include:
- Your name and address.
- The items in dispute.
- Your argument and any facts to support your claim.
- A formal request for the resolution of the issue.
The FTC provides a sample letter here.
Among the information you send to the credit bureau should be a copy of your credit report that clearly identifies the item in question. Also send copies of your documentation that support your claim that the information is false. Don’t send the originals. Send the package via certified mail with a return receipt requested to ensure it arrives at its intended destination.
Upon receipt, the credit bureau must investigate and communicate its decision within 30 days. Should it reject your request, you can ask that a note detailing your argument be added to your credit file.
Step 3: Goodwill adjustments
At this point, you may have pulled your credit reports and concluded that the contents are accurate. Even if they’re riddled with negative information, all hope is not lost.
Time makes negative information fade way. However, you can try writing your creditors and request that they remove the negatives from your report right away. If they comply, it is called a “goodwill adjustment.”
Remember to be as pleasant as possible during the process; creditors aren’t required to remove negative information.
Money Talks News founder Stacy Johnson says you are most likely to find success with this approach if you still have a business relationship with the creditor, or if you have an outstanding balance that you can negotiate about.
“In that instance, you’d write a letter to the creditor offering to settle the debt completely by paying part or all of what’s owed, along with getting any and all negatives removed from your credit history,” he wrote.
Make sure you get that agreement in writing from the creditor.
Hiring a professional
Still not convinced that you can do this yourself? If you decide to engage a credit repair company, be very careful. There are lots of bad actors in this business.
Some so-called credit repair companies make inflated promises to consumers desperately seeking relief from their credit blunders. Some promise to give you a fresh start, while others claim they can erase any negative marks that exist and raise your score in a flash.
Both are false promises. The FTC says it’s against the law for credit repair companies “to lie about what they can do for you, and to charge you before they’ve performed their services.” (To further protect yourself, become familiar with the Credit Repair Organizations Act.)
The FTC adds:
No one can legally remove accurate and timely negative information from a credit report. You can ask for an investigation — at no charge to you — of information in your file that you dispute as inaccurate or incomplete. Some people hire a company to investigate for them, but anything a credit repair company can do legally, you can do for yourself at little or no cost.
Gerri Detweiler, director of consumer education for Credit.com, wrote:
If you are contemplating credit repair, ask them, “Exactly what do you do for me?” If they tell you that they will dispute information, then ask them how they will do that. Drill down deep enough and you’ll probably find that they will send letters to the agencies requesting that negative information be verified. You may wind up paying someone hundreds, or thousands, of dollars just to send form letters for you.
Another practice some credit repair companies engage in is called “jamming.” CreditCards.com explains:
In “jamming,” a repair clinic will challenge everything, including records of debts that the consumer failed to pay. If the review isn’t complete because, as commonly happens, a data furnisher doesn’t get back to the credit bureau in time, the agency is obligated to remove the disputed record. On Day 31, the credit report is cleansed of disputed but unverified items, and the bad debt vanishes from the consumer’s report.
The removal of valid items won’t be permanent, though. Generally, lenders report monthly to credit bureaus. So in a few days or weeks, when the lender reports back, the disputed, but now verified item comes right back. The record of the bad debt gets reinserted onto the credit report. In addition to reinserting verified negative marks, credit bureaus may refuse to investigate disputes if they figure out they are frivolous.
Here’s an alternative plan
The Federal Trade Commission suggests that if you lack the discipline to budget and pay your bills on time, you should consider seeking credit counseling. But again, make sure you find a reputable organization. The FTC warns, “In fact, some credit counseling organizations — even some that claim nonprofit status — may charge high fees or hide their fees by pressuring people to make ‘voluntary’ contributions that only cause more debt.”
Who is reputable in this field? A leading source of accreditation in the industry is the Council on Accreditation. The National Foundation for Credit Counseling requires that all of its members have COA accreditation. The Association of Independent Consumer Credit Counseling Agencies also requires its members to be accredited by COA or one of two other organizations.
If you’re still seeking help with credit restoration, you can visit our Solutions Center.
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