Credit Reports - Your Rights

BAD CREDIT are two of the most feared words in our society today. Literally millions of Americans suffer from bad credit caused by a court judgment, tax lien, divorce, or a rapidly fluctuating economy that has left them financially overextended and powerless to respond. Bad credit can mean humiliation, a drastically altered life style, and all to often, divorce and a broken home. But it doesn't have to be this way because each year people labeled “Bad Credit Risks”, with seemingly bleak futures, suddenly regain their favorable credit status. Once again, they can apply for loans and credit cards without fear of rejection. Once again, they can improve their life style with new found purchasing power and can leave the mistakes of the past behind.

The purpose of this section is to show some of the methods and techniques people have used to change their credit rating from bad to good. Some are simple, others more complex.

Since each “Bad Credit” situation is as different as the people involved, no one situation will be exactly like yours. There is no iron-clad guarantee that this booklet holds the perfect solution for your specific problem.

THE CREDIT REPORT

WHAT IS IT, WHO MAKES IT, WHO KEEPS IT, WHO GETS IT?

Before discussing how people have transformed bad credit into good, it would be helpful to examine the different roles that are played in credit reporting.

THE CREDIT REPORT:

Is a compilation of a person's borrowing history, both favorable and unfavorable. It can be detailed or sketchy and can contain a great deal of personal, as well as financial information. A report could contain: customer's name, address, social security number, place of employment, salary, number of years at present employment, date account was first opened, original terms, credit limits, monthly payment amount, current balance, number of times late (30, 60, or 90 days.) charges concerning disputes, records of attest and convictions, liability arrangement (individual or joint), collateral security, and write offs.

Such information is usually given to credit bureaus by major lending institutions and later sold to subscribers upon request.

THE CREDIT BUREAU:

Is a storehouse of personal credit information. There are three major credit bureaus in the nation, each containing millions of reports that are used most often: They are:

1. CBI/Equifax
   P.O. Box 740241
   Atlanta, Georgia 30375
   
2. Experian
   P.O. Box 2106
   Allen, Texas 30375
   
3. Trans Union Corporation
   P.O. Box 7000, Suite 400
   North Olmstead, Oh 44070

MAJOR LENDING INSTITUTIONS:

Are the prime sources of personal credit information for credit bureaus. They gather initial information from consumers and track the consumer's history of borrowing and payment. They trade this information to the bureaus. Major lending institutions, are: major banks, travel and entertainment cards, major savings and loans, major department stores, consumer finance companies, and collection agencies. Bureaus also get information from public courthouses and public records.

SUBSCRIBERS:

Are those who purchase credit information from the credit bureaus. All major lenders are subscribers and they trade their information for lower rates. Limited subscribers are minor lending institutions who do not necessarily share their consumer information with credit bureaus, but they do request reports. They are: small banks, home mortgages, utility companies, oil companies, American Express, insurance companies, small or medium size credit unions, savings or checking account information, etc. In addition, many employers may request credit reports on prospective employees.

CHANGING BAD CREDIT TO GOOD CREDIT

People labeled as “bad credit risks” have successfully changed their status to “good credit” prospects by:

1. exercising their full rights under the Fair Credit Reporting Act,

2. taking advantage of the computerized nature of credit bureau files.

The Credit Reporting Act (Public Law 91508) not only sets the guidelines and creditors and credit bureaus must follow in reporting credit files, but also gives consumers certain rights with regard to the issuing of information about their credit status. Because credit bureaus rely so heavily upon computers to store their information, they leave themselves open to the shortcomings of these systems. Many people have used the shortcomings to turn the system against itself and clear their credit records.

A MODEL PROCEDURE USED FOR CREDIT CORRECTION

This model procedure has been used successfully time and again by “bad credit risk people” to help clear their credit records.

STEP 1:

After learning that you have a negative credit report, you determine which credit bureau has your file. Local lending institutions can usually direct you to the bureaus used most in your area or you can contact the major bureaus nearest you. Often the credit informant will tell you which bureau he used.

STEP 2

Request a copy of the credit report from the bureau.

You should also include a copy of your credit denial. Most bureaus charge between $5 and $15 per credit report. If you have been denied within the last 30 days, the report should be free. Should you have difficulty understanding the bureau's particular formats, (different bureaus use different symbols) the bureau should answer any questions you may have.

STEP 3.

You check the report for absolute accuracy, not overlooking the slightest discrepancy. (A) You begin with your name, address, prior address, birthday, social security number, employment and other personal information. THE INFORMATION MUST BE ONE HUNDRED PERCENT ACCURATE. (B) You then check the number of credit inquiries. No inquiry should have been made without your approval. A large number of inquiries casts a bad light on a person's credit record. (C) You then check payment history for discrepancies or errors, keeping in mind that: (1) all bankruptcies must be removed from credit reports after ten years (chapter 13-after 7 years). (2) other items such as liens, judgments, late payments, write offs, repossessions, and convictions must be removed after seven years.

STEP 4:

You write the bureau a letter listing all items which you disagree with and want to investigate. You state that “these inaccuracies are injuries to my credit rating”. You request an investigation and a copy of an updated report after the investigation has been completed. Keep your letters short and to the point. Avoid explanations and threats and include copies of checks, invoices, or other evidence or proof you may have. Request the name, address, and phone number of the creditor which the bureau is verifying the inaccuracies with. Send all correspondence by certified mail and keep copies of everything.

After the bureau receives its letter, it is allowed a “reasonable amount of time” by law, (usually four to six weeks), to verify the discrepancies with the reporter.

STEP 5:

If you have not received a response from the credit bureau after a few weeks, send another letter inquiring as to why. You need to send a copy of this letter to the Federal Trade Commission.

You then repeat Steps 4 and 5 over and over, challenging the alleged inaccuracy you want investigated each time. You are banking on the probability that eventually, either the bureau or the subscriber will not be able to respond within a “reasonable amount of time”.

This tactic may prove to be very effective, particularly during the extreme busy December holiday period. The result is that either the bureau or the subscriber usually cannot respond to one of the inquiries within the reasonable amount of time required by law, and the Federal Trade Commission has the unfavorable items removed from the credit report. The “bad risks” have “good credit” again.

NEGOTIATE IF NECESSARY

If the five step model procedures just described have been followed, but unfavorable items still remain on the credit record, consumers have found that negotiation have proven to be effective.

The first step is to contact the creditor directly to discuss an agreement. As in any negotiation, diplomacy is all important. You need to schedule an appointment and meet only with the person of authority.

Avoid anger, threats, or alternatives. In cases where the consumer was a good patron and payments have been good since the discrepancy, an objective face to face meeting has often proven to be the most successful. In cases involving delinquent accounts, consumers have offered to pay in full only if the subscriber agrees to the deletion of the unfavorable entry on the credit report. (Also, note that most states have a statute of limitations in which the creditor cannot sue you for an unpaid debt. The general rule in Texas is four years on a written contract. If this statute has expired, the creditor may be more likely to agree to delete the bad credit entry in exchange for payment). Be cautious here as acknowledging the debt may extend the statue of limitations. This method has also proven to be very successful. In either case, the unfavorable entry on the form may be removed if: (1) the subscriber directly asks the bureau to remove it (2) the consumer initiates a new request to the bureau for reinvestigation and the subscriber fails to cooperate with the credit bureau.

ADDING YOUR STATEMENT & FAVORABLE ITEMS TO A CREDIT REPORT

Many consumers, who feel that a credit report does not accurately reflect true or complete circumstances of a given situation, exercise their right to add a statement (up to one hundred words) that tells in their own words, their side of the story.

In addition, if a credit report has resulted in a consumer having been denied credit, the consumer is allowed to supplement the report and add favorable evidence referring to his or her “good” credit history. Remember, credit reports can show only few unfavorable instances while omitting years of faithful payment. Most credit bureaus will make these additions to reports for a small fee.

Moreover, once consumers have made additions to their own report, they have had bureaus send copies of the new reports to any subscriber or employer who has requested a report within the last several months.

BANKRUPTCIES, TAX LIENS, and JUDGEMENTS

As stated earlier, credit bureaus rely upon public records or courthouses for information concerning bankruptcies, tax liens or judgments. In this case, it is the inefficiency on the part of public reporting clerks, that offers the greatest opportunity for credit corrections. Because there are so many details to record, the possibility of inaccurately reported and as we have seen earlier, even the smallest detail can cause a deletion on a credit report. By challenging different inaccuracies over and over, the possibility of the bureau being unable to respond within a “reasonable amount of time”, grows greater and so does the possibility of having a bankruptcy, lien, or judgment removed from a credit record.