Dispute Your Credit Score

Reasons for Dispute

If you notice that you have a particularly low credit score, you will want to take a look at your credit report to determine why. Your credit report contains the data that is used to calculate your score. Two types of credit scoring systems are used by the three major credit reporting agencies, the VantageScore and the FICO score. The FICO score ranges from 300-850 and groups data into five categories ? payment history, amounts owed, new credit, types of credit, and the length of your credit history. The VantageScore groups data into six categories ? payment history, utilization, balances, depth of credit, recent credit, and available credit. It ranges from 501-990, with higher scores representing a lower likelihood of risk.

While there are no set ranges as to what is considered a good or bad credit score, each credit reporting agency may have their own set ranges to determine good or bad credit. For example, Equifax, which uses the FICO score, applies the following credit score ranges to determine the condition of one’s credit: 280-259, low; 560-659, below average; 660-724, average; 725-759, above average; 760-850, high. If you have a low credit score, or one that is below average or on the lower end of average, you may want to take a closer look at your credit report. While you have to pay a fee to see your credit score rating, the Fair Credit Reporting Act makes it so that people are entitled to one free report each calendar year giving everyone the opportunity to examine their credit report and identify discrepancies at no cost. So, next time you taking a deeper look into your credit, be sure to check your credit report for the following:

Late Payments

Sometimes a late payment is not a result of someone not wanting to pay their bill, but simply forgetting to. But when it comes to credit, forgetfulness can be a costly mistake. Payment history accounts for 35% of your FICO score, more than any other category, and 28% of your VantageScore. In other words, not paying your bills on time can negatively affect your score more than most factors. In general, this means not making the minimum monthly payment on accounts for credit cards, retail charge accounts, installment loans, mortgage, finance company accounts, and more.

How long a payment is past due and the amount that is owed also plays a role, as does the length of time since an account was past due, the number of past due items, and the number of accounts paid as agreed. A missed payment, or a delinquency on an account, can stay on your record for seven years. This is a long time to wait for a higher credit score, so you want to make sure that one isn’t on your record if it doesn’t have to be. If you find a missed payment on your record that you believe to have been a mistake, contact your creditor to figure out what went wrong and rectify the situation. If you missed a payment by accident or because of special circumstances, you might be able to ask the creditor to “forgive” the late payment by writing an explanation letter.

Incorrect Balances

Just because you have paid a credit card bill, doesn’t mean that the credit reporting agency got the message. It’s possible that a credit report could still show that you own money on a bill that you have paid in full. If an account that has been closed, either by you or a creditor, still shows a balance as if you haven’t paid it down then it can affect your score. You want to make sure all balances and accounts are up-to-date, whether installment or revolving, open or closed, so that you can have the most accurate score possible.

As far as credit cards are concerned, amounts owed accounts for 30% of your FICO credit score, with balances accounting for 15% of your VantageScore. Therefore, the larger your total balance as a percent of your total credit limit across your credit cards the lower your credit scores. This is why it’s so important to make sure that you get credit for payments made to lower your debt. Sometimes it can take weeks to a couple of months for creditors to report your most recent payments. But any longer can end up being too long when you’re applying for a loan or some other line of credit. In the event that you do discover an incorrect balance, contact the crediting agency to see if and when the most recent payments can be reflected as soon as possible.

Items That Can Be Taken Off

While positive information regarding your credit can last a lifetime, negative information has an expiration date. Negative information must be removed from your file once a certain length of time has passed since the date of last activity, usually from seven to 11 years. According to Equifax, delinquent accounts, ones that go unpaid for 30 to 180 days, remain on your record for seven years beginning on the date of the first missed payment that caused the account to not be current. The same amount of time is applied for collection accounts and paid off or closed accounts with negative payment history.

Your credit score after bankruptcy can take a nosedive and stay that way. Bankruptcy is kept on your report for seven to 10 years, depending on what type is filed. Chapter 13 bankruptcy, that which requires a least a partial payment of your debt, is deleted off our your report after seven years, while Chapter 7 bankruptcy takes 10 years to be removed because no debt is repaid. Closed accounts with no negative history will be taken off your report 10 years from the date that you closed it. Contrary to popular belief, these types of accounts do not have a negative effect on your credit score and actually help it. Still, if you find old negative information still on your report after the allowed time, you can dispute it directly with the credit agency to have it removed.

Fraudulent Accounts

You also may want to check accounts that are recorded on your credit report to make sure that they are all ones that you actually opened. Fraudulently opened accounts can occur when you have been a victim of identity theft. Often identity thieves will try to open a credit card in your name which can leave you with delinquent accounts because of missed payments or even accounts that get sent to collections incidents. Many identity theft victims do not even realize that their identity has been stolen until it’s too late. Keeping a careful eye on your credit report can help you to catch these mistakes before significant damage has been done. If you spot any inaccuracies on your report, inform your creditor about it immediately so you can begin the credit score dispute process.

How To Dispute Your Credit Report

Your credit report is one of the determining factors for several things, including loan approval, insurance rates, and employment. Therefore, it’s vitally important that the information on your credit report is accurate. Errors on your report can have some severe negative effects, such as having to pay higher insurance rates than you should, being denied for a loan that in actuality you qualify for, and not being hired for a job.

Credit report errors are a relatively common occurrence since they contain a lot of information, such as your bill payment history, whether you have a filed for bankruptcy, any lawsuits that have been brought against you, and your arrest record. Also, they are prepared by agencies dealing with a large amount of information daily, so mistakes do happen. To review your information and make sure it’s accurate, you may want to consider requesting a copy of your credit report at least once a year.

According to the Federal Trade Commission, each of the three nationwide consumer reporting companies ó TransUnion, Equifax, and Experian ó are required to provide you with a free credit report every 12 months at your request. Once you receive your report, review it and look for errors. Some of the most common errors include incorrect dates, inaccurate account balances, old information that has not been removed, and information that doesn’t belong to you, such as information about someone with the same name as you. If you find any inaccurate information in your credit report, you need to report it.

“The type of information being disputed determines who you should contact first,” said Clifton O’Neal, the senior director of corporate communications at TransUnion. “For example, if you find an error on your credit card payments, it’s best to contact your credit card company and work with them to resolve the issue since they are the source of the information. On the other hand, if you have an issue such as an incorrect address or information that does not belong to you, you should contact TransUnion directly.”

Whether you contact the consumer reporting company directly or go through the company responsible for the inaccuracy, ó such as your credit card company ó the issue must be addressed at no cost to you. According to Section 611 of the Fair Credit Reporting Act, consumer reporting companies are required to investigate the accuracy of the information you are disputing, free of charge. The dispute must be resolved and inaccurate information must be deleted or corrected within 30 days, though a company may file for a 15-day extension if needed.

“While federal law allows 30 days to complete a dispute, the process is typically completed today within 10 business days, and often within only two or three days,” says Rod Griffin, the public education director at Experian. “A consumer can contact Experian several ways to dispute an item on their credit report. We believe it is very important that a consumer start the dispute process with a current copy of their credit report directly from Experian. This will ensure that we can clearly identify what they are disputing and we can provide notices that are required and may vary depending on the state in which they reside.”

All three nationwide consumer reporting companies allow you to file a dispute online, through TransUnion.com, Experian.com, and Equifax.com. Whichever company you receive your report from, it should include a report number that will allow the company easily locate your information and access your credit report. If you would rather not file your dispute online, each report will include a toll-free number that will allow you to speak with a representative and begin the dispute process.

If the investigation conducted by the consumer reporting company shows the information to be inaccurate, according to the Federal Trade Commission, the company will correct the error by either deleting or changing the information. They will then send you a new copy of your credit report free of charge, as well as the name, address, and phone number of the information provider responsible for the inaccurate information. Also, you may request that notices of the changes be sent to anyone who has received your report within the last six months, and that copies of your corrected credit report be sent to any potential employers that have received it within the last two years, according to the Federal Trade Commission.

If your dispute is denied, and the information is found to be accurate, you may submit a short message regarding the dispute to be included in your credit report. “If a consumer disagrees with the results of a dispute,” says Griffin, “we encourage them to add a ‘statement of dispute,’ explaining why they disagree with the way the lender is reporting the account information.”

Equifax, TransUnion, and Experian have worked to make the dispute process as quick and easy as possible for consumers who find inaccurate information on their credit reports. Given the importance of your credit report, and how many things in your life are affected by it, you should remain aware of information included in it and ensure its accuracy. And if you find any errors, no matter how minor they may seem, they shouldn’t be overlooked. Contact the consumer reporting company, have them investigate the information, and get the problem fixed.