Fixing credit reports and deleting wrong information should not be this hard
I have kept above average credit scores most of my adult life. I now have a key derogatory on my credit report that is not even true bringing my score down. I have tried to deal with the institution reporting it to get it corrected to no avail.
How to fix or get something deleted off my credit report?
—Credit reporting errors
We cover credit reports throughout the CRN education and on our web site, but mostly as it applies to people who need some form of debt relief due to a financial hardship. While that is an important topic and a concern for more and more people as a result of our tough economy, what about the furnishing of bad data against people who are managing their debts well? What affect does bad information supplied to the credit reporting agencies have on them? How can you fix or remove your wrong credit report?
Your credit score and loan product modeling is calculated not just by your timely payment history, but is also based on your credit utilization, debt to income ratio and a few other key points.
Due to how information in your credit report is factored, mistakes made by those furnishing information about you to the reporting agencies can have a major impact on how much credit will cost you and whether you are approved for a credit product at all.
I read a good example of the type of damage that can be inflicted by a simple loan classification error:
Issue: Most scoring systems take data at face value with little or no interpretation. If you track the erroneous “Installment Loan” designation downstream, the credit scoring systems would see the following:
- An installment loan for an extremely large sum (i.e. $200,000).
- Duration of payments for these loans was reported as 30, however, the number reported for an installment loan is seen by Metro 2® as 30 months, whereas, the number reported for a mortgage is seen by Metro 2® as 30 years.
Result: Most credit scores would be calculated based on the facts reported — “Installment” loan of $200,000 with what looks like payment term of 30 months. In effect, a 30 month payback period would require each payment be approximately $6600, whereas a 30 year payback period would yield a monthly payment in the vicinity of $1000. The perceived debt of $6600 per month could potentially negatively impact multiple factors of consumer lending such as approval scores, debt ratios, bankruptcy scores, pre-screen scores, etc.
And those types of errors are just the tip of the credit reporting iceberg. From a potential litigation standpoint, data furnishers that do not invest the time and resources required to evaluate the accuracy and integrity of their credit reporting on an ongoing basis are making a potential titanic mistake.
To read the full article click here: troubling times ahead for credit bureau data furnishers
This type of loan classification error would seem easy for the furnisher to fix. Indeed, common sense dictates that it should be fixed. It will cost money to do it though.
My experience with reporting agencies and furnishers is that they do not always think with “sense”, but think more in terms of dollars and “cents”.
The key to “common-cents” and violations of the Fair Credit Reporting Act (FCRA) is that it is more profitable to do the wrong thing than the right.
Some credit report information furnishers get it absolutely bass-ackwards.
They seem to be saying “We know we have a problem and that it screws people over, but we will continue to do so until it is more cost effective to fix the problem than to continue to get sued”.
The linked article above speaks to a specific case in the 9th circuit that allows a class action to proceed against one company that may end up costing them between 29 and 290 million. My guess is that their legal defense bill alone would have covered the costs of auditing and correcting their reporting systems on a regular basis which would prevent actions like this from occurring.
It is a small wonder more legal action is not brought against furnishers who fail to fix and delete wrong credit report information.
Similar to the economy of furnishers and reporting agencies making changes only when it makes “cents” to do so, suing them for their transgressions and missteps has long been about the costs for bringing the action and what can be gained from doing so.
Perhaps this attitude will change with the potential for more class action lawsuits that can lead to tens of millions in costs.
Perhaps there is a class out there forming to bring the particularly egregious practice of reporting a balance still due after a settlement on a past due debt is reached, accepted and funded, and where both parties agree that the debt is settled, there is no balance due, but the amount of debt forgiven remains on the trade line and shows that portion of the balance as outstanding when it no longer is! I wrote about this practice recently. Read more about it here: Why Does Capital One Screw People Who Settle Their Debt.
It is as important now as ever before for people to take responsibility for policing the accuracy of their credit profile. No one else is going to do it for you. If you find inaccurate, erroneous or out of date information – You can fix your credit report!
You have the ability to dispute bad information with the reporting agencies and you can also send direct disputes to the furnisher of the information. If they do not correct the discrepancies after sending your dispute certified mail return receipt it may be the best use of your time to next consult with a skilled consumer law attorney.
There are not that many attorneys experienced with FCRA violations around the country, but a case they may bring can be filed in federal court, which may make speaking with one you find with an office outside of your state worth the effort.
Anyone with questions or concerns about getting information removed from your credit reports is welcome to post in the comments below for feedback.