Correcting Your Credit Report


By: Gary Foreman

Dear Gary

My student loan went into default. I called the collection agency in January 2000 to make payment arrangements, which I have been making religiously. I was told that after 12 months of payments I could be considered for financial aid programs. I called about two months ago and asked them about my account and they said that it was being rehabilitated and that the credit bureaus will be notified so it wouldn't show that the loan is still in default.

We decided to buy a car and finance it. We couldn't because the student loan still showed in default. I called the collection agency for an explanation. They said a payment back in July 2000 was two days early so the loan was reported late a second time. I didn't receive any letters from them about this. Any suggestions? What should I do?

Thank you,
Connie

Connie has found out just how important your credit report is. It's used when you apply for a mortgage, car loan, credit card, or want to rent an apartment.

Credit reports are kept by Credit Reporting Agencies (CRA's). They collect information from lenders like the people who hold Connie's student loan. The CRA's organize the information so that when you want to borrow money, a potential lender (like Connie's car dealer) can request your history from the CRA. A federal law called the Fair Credit Reporting Act (FCRA) controls how your information is collected, used and corrected.

The three major credit reporting agencies are:

Independent studies indicate that about 70% of all credit reports contain errors. And about one in four reports have an error big enough to cause credit to be denied. In fact, the Federal Trade Commission advises checking your credit report before making any major purchase. That will allow you to correct any errors before a potential lender asks for your report.

So what should Connie do? First, she'll need to gather some information. Is her report showing her late once and still in default? Late once and now current? Or is it showing her late twice?

Since Connie was denied credit because of her report, the company that denied her the credit must tell her which CRA they used to obtain her information. And because she was denied credit, Connie has a legal right to a free copy of the report as long as she asks for it within 60 days.

Unfortunately, the credit reporting agency is not required to seek out errors in her report. Their only responsibility is to list what's reported to them by creditors, include any statements about errors from borrowers and correct any errors found. So Connie is going to have to take the lead to get things straightened out.

Once Connie receives the credit report she'll need to determine whether the entries are correct or not. Accurate information will stay on her report for years. Most items will remain on file for 7 years although bankruptcies show for 10 years.

If Connie's payment was received early, then it cannot be reported as late. But she'll need to be able to prove it. She'll want to contact the credit reporting agency by phone and by registered or certified mail. Her correspondence should state specifically what the error is and provide proof to support her claim. The agency is required to investigate the claim within 30 days. They must also forward any relevant info to the lender involved.

Connie will also want to notify the lender by phone and by mail. The lender must also investigate the claim. Both the company providing the inaccurate information and the CRA are responsible for correcting any errors. And, if an item is incomplete, the CRA must include additional relevant information in Connie's file. For instance, if she was late but is now current the report can't just show her account as delinquent.

Once the investigation is complete the credit reporting agency must send Connie a copy of the report. If there was an error and Connie asks, they must also send revised copies to anyone who has received Connie's report in the last six months. Like the car dealer.

If Connie feels either the lender or credit reporting agency isn't responding she can report them to the Federal Trade Commission. To register a complaint with the FTC call 1-877-FTC-HELP. Connie shouldn't get their hopes up. The FTC will only look at complaints if they find a pattern of abuse. They will not arbitrate individual complaints.

Hopefully Connie will be able to get any errors cleared up with a minimum of difficulty. Unfortunately if she disagrees with either the CRA or the lender there isn't much that she can do that's not expensive and time consuming.

Gary Foreman is a former Certified Financial Planner who currently edits The Dollar Stretcher website www.stretcher.com/save.htm You'll find hundreds of free articles to stretch your day and your budget.

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