Stop the Smear Campaign in Your Credit File

Being turned down for a new car loan is demoralizing enough. Being rejected for financing because credit bureaus say you're dead to them? Dude, that's harsh.

But that's exactly what happened to a very much alive 30-year-old Detroit man who made national news after learning of his allegedly deceased status from, of all people, the loan officer at a car dealership.

Although most of you reading this are in no danger of being written off with such finality (save for those in witness-protection programs), that doesn't mean no one's telling tall tales and spreading devastating lies that are affecting your credit history.

Oops, My Bad. Or Is It?

Various surveys over the years have found that a high percentage of credit reports -- perhaps 80% or more -- contain inaccuracies, with the severity of the slipups ranging from a rather innocent misspelling of a name to the extreme of, well, being reported dead.

Most inaccuracies are more likely to be one or more of the following:

• Erroneous reports of late payments. You'll find the payments being described as 30, 60, or 90 days past due. (If you really did have a tardy payment, over time the negative notation will carry less weight on your score, until eventually it'll drop entirely from your report.)
• Someone else's loan obligations on your account. These can appear as a result of an entirely innocent clerical error, such as transposing numbers when inputting someone's Social Security number. (Even if the stranger on your report is paying his or her bills on time, you still want to get the information off your report.)
• Expired bad news that's sticking around. Perhaps one of your financial-service providers is still reporting a delinquency you've already remedied or an old collection action past the seven-year expiration cycle.
• Sins of omission. If your good bill-payment behavior hasn't been reported, you can be robbed of critical points that could work in your favor.

No matter what is called into question, there's only one thing to do: Clear your good name. With a little diligence on your part, you can update your records and remove inaccuracies relatively quickly. Here's how to fix the flat-out wrong errors in your credit file.

Six Steps to Disputing a Credit Report Error

The best way to approach the cleanup process is to start with the source. In most instances, it's listed right there on your credit report.

1. Start a record. Under the Fair Credit Reporting Act (FCRA), credit bureaus are required to investigate your claim within 30 days. If a bureau determines that an error has been made, it must correct the boo-boo and notify the other credit bureaus and you -- with a free report.

Keep good records of your phone conversations and copies of each letter/email/carrier-pigeon missive you send every step of the way, and send all letters via certified mail, with return receipt requested.

To verify your claim of inaccurate information, you need proof, which can be anything from canceled payment checks to past billing statements. (Never mail the originals; always send copies.)

If your statement-filing system isn't up to snuff, you'll need to work at rounding up your past account statements to support your claim. Lucky for you, the Fair Credit Billing Act requires creditors to keep your past statements on file, so that you can access them. Unfortunately, you'll probably have to pay for the privilege. Call the billing or records department of your creditor and ask for what you need.

2. Inform the credit-reporting agency -- Equifax, Experian, or TransUnion -- and tell it which information you believe is inaccurate. The Federal Consumer Information Center (FCIC) suggests that you enclose a copy of your report, with the items in question circled. (Again, make copies.) Check out the FCIC sample dispute letter.

The credit-reporting agency will reinvestigate the items in question within 30 days and will forward all relevant data about the dispute to the "information provider" -- a lender, creditor, or other business that reported the inaccurate information. By law, the creditor is required to investigate your complaint and report its findings.

If the disputed information turns out to be inaccurate, the creditor must notify all nationwide credit-reporting agencies, so they all can correct the information in your file.

Your journey may end here. If so, count yourself as lucky. The error is corrected on your credit reports at all three bureaus, never to appear again. You will, however, have to regularly check to make sure it doesn't get put back into your file. And don't be surprised if you have to go deeper into battle than this step. Your next stop is to face your accuser.

3. Inform the business that sent the erroneous information of your dispute. If the credit-reporting agency is unable to verify that the information is incorrect, your best bet for successful resolution is to face the source of the problem.

With your newly honed letter-writing skills, it's time to let the creditor or other information provider know in writing that you are disputing an item it put on your report. (Include copies of your communications with the credit bureau to show you mean business.) Be sure to tell the creditor exactly what you want it to do -- whether you're requesting that it delete a false item completely or update an old entry.

If your creditor disagrees with your claim, it will probably explain why it believes the information is accurate. And -- get this -- the creditor may be right. The explanation you get may jog your memory that, oh yeah, you were three months late paying a bill when you forgot to get your mail forwarded to the sweat lodge in New Mexico where you were "finding your true self." The other possibility is that the creditor misunderstands your dispute. In that case, yet another letter-writing campaign may be necessary. (Retreat to your happy place to get calm.)

4. Celebrate victory! If your dispute results in a change to your credit report, the credit bureau will give you the written results and a free copy of your report. (This is in addition to the free credit report you can get from all three reporting bureaus once a year at annualcreditreport.com.) This is where most disputes end. However, as we've mentioned already, the information may show up again if the creditor later verifies the disputed item's accuracy. If that happens, you'll receive notice from the credit bureau, and you can take it from there. Again.

5. Accept defeat -- but make sure you get in the last word. If you are unsuccessful in removing information from your credit file and reach an impasse, you do have the option of taking legal action. Your state's attorney general's office can help you locate a lawyer who will advise you on taking a creditor to court. If you don't want to go that far, your next option is to attach a letter of explanation to your credit file. Be sure to cover all three of the major credit bureaus, as well as the offending business. The business is obligated to include your letter in any future input to the credit bureaus. Verify that it does.

This notation won't make a difference unless an actual human being processes your credit report the next time you apply for a loan. Still, including it shows that the truth is out there, as long as someone bothers to look.

6. Get the good stuff put into your file. Sometimes, the best salve for bad credit is to inject more good news into your file. If you've been told you were denied credit because of an "insufficient credit file" or "no credit file," take your pulse. If you're alive, and you have accounts with creditors that don't appear in your credit file, you can ask them to kindly report your stellar behavior for future reports. They are not required to do so, but if you ask nicely and they can verify the accounts, most will add them to your report for a fee.

Finally, remind yourself that it could be worse. At least your lender knows (and reports) that you're alive.

Dayana Yochim employs the strongly worded missive approach to correct any injustices she feels she's suffered. That's mostly because she has no upper body strength.