• How to Dispute Negative Items on Your Credit Report

    Having negative items on your credit report will lower your credit score. This can make it harder to get approved for a mortgage loan. It will also prevent you from getting the best interest rate on a loan, if you do get approved.

    In some cases, there's nothing you can do about negative entries on your credit report. If it's a legitimate entry, and it hasn't reached its "expiration" date yet, then you probably won't be able to have it removed. But if it's an erroneous entry, or one that exceeds its allowable time limit, you can dispute the negative item to have it removed.

    It's important that you do this as soon as possible, because it may take several days or several weeks to get the item(s) removed. This is why I tell home buyers to review their credit reports at least 30 days before applying for a mortgage loan. The sooner the better.

    You are entitled to receive one free credit report per year, from all three of the reporting agencies. You can do this by visiting AnnualCreditReport.com. This is the only website that's regulated by the federal government. So it's the only one we recommend.

    Credit Reporting in a Nutshell

    I'll explain how to dispute negative items on your credit report in just a moment. But first, we need to discuss the reporting process itself. It will help you to understand where your credit reports come from, and how they are produced.

    Your credit history usually starts when you open your first credit card account, or when you take out your first loan (personal loan, car loan, etc.). The creditor or lender who creates this account for you will report it to the three credit-reporting agencies. There are three of these reporting companies -- TransUnion, Equifax and Experian.

    The Credit Reporting Process

    You can think of this as the basic level of reporting. It's basically a list of accounts you currently have open, along with those you've had in the last few years. But there's also a performance-based type of reporting, and that's what you should be most concerned with.

    If you pay all of your bills on time, you'll have a "clean" credit report without any negative items. This will result in a higher credit score. But if you have late payments, bankruptcy filings or other negative items, they will drive your score down.

    As you can see in the image above, you have three different credit reports. They are maintained by three different companies that don't cross-share information. So it's possible to have three reports that are all slightly different. Keep this in mind when the time comes to dispute negative items on your credit reports. You have to handle it through the specific company that produced the errors.

    Negative items could show up in only one of your credit reports, or all three of them. Generally, there's a lot of overlap between the three, with only minor variations. But it's still important to check all three files for accuracy.

    Negative Items That Can Show Up

    I've used the phrase "negative items" throughout this article. But what does this mean exactly? Here's a simple definition: When you fail to repay a debt in some way, it can show up on your credit report as a negative entry. These are also referred to as derogatory entries. Here are some examples:

    • Late payments on credit cards, loans, etc.
    • Debt collections
    • Charge-offs / Write-offs
    • Tax liens
    • Bankruptcy filings (Chapter 7 or 13)
    • Foreclosure
    • Lawsuits or judgments

    All of these negative items can damage your credit score, and to varying degrees. There is no way I can tell you how much a certain item will lower your score. The damage will depend on (A) the length of your credit history, (B) the seriousness of the event, and (C) whether it's a pattern or an isolated event.

    For example, a single late payment might lower your score by 50 - 120 points. It depends on how late you were, how many times it has happened, and other factors.

    But the amount of damage is beyond the scope of this article. This article is meant to show you how to dispute a negative item on your credit report. So let's talk about that next.

    How to Dispute Negative Entries

    There are three types of negative items that can show up on your credit report.

    1. Legitimate entries that have not reached their "expiration" date.
    2. Legitimate entries that have exceeded their time limits.
    3. Illegitimate entries (erroneous items that do not belong on your report).

    You can dispute the second two items on this list, and probably have them removed from your credit reports. But there's nothing you can do about the first item on the list.

    Technically, you can dispute anything on your credit report. But you won't have much luck disputing the first item on this list. If you have negative entries on your credit report (late payments, bankruptcies, etc.) that are legitimate and within their allowable time limits, there's no point in disputing them.

    Here's an example:

    Let's say I have a charge-off for a store credit card with an unpaid balance. This negative item can stay on my credit report for a period of seven years. After that, it must be removed. This is all in accordance with the Fair Credit Reporting Act (FCRA).

    Section 605 of the FCRA clearly states that "no consumer reporting agency may make any consumer report containing ... accounts placed for collection or charged to profit and loss which antedate the report by more than seven years." [Translation: The reporting agencies cannot report a charge-off / write-off that's more than seven years old.]

    When it won't work:

    So let's assume that my charged off account is from five years ago. Can I dispute this negative item on my credit report? I can try. Legally, I can challenge any item that appears on my report, and the reporting company is obligated to investigate my claim in a timely manner. But I won't get very far. Why? Because this derogatory entry is (A) legitimate and (B) within its allowable time limit for reporting. So it's probably going to stay on there.

    When it will work:

    Now let's say I'm in the same situation, but this time the account was charged off eight years ago. For some reason, it is still showing up on my credit report -- even though it exceeds the legal time limit for this type of entry. In this scenario, I could dispute the negative entry and have it removed. Refer back to Section 605 of the Fair Credit Reporting Act above. This kind of item cannot be reported after seven years.

    You can successfully dispute outdated entries on your credit report. We talked about that above. But there's another scenario where you can have derogatory entries removed, and that's when they involve errors.

    Let's say I review my reports and find a store credit card that's not mine. This mistake is on my TransUnion report, but it's not on the other two. I've never opened an account with the store that's listed in my file. Heck, I've never even shopped there. This is obviously a mistake of some kind. It's a data mix-up. This is another situation where I can successfully dispute a negative item on my credit report.

    You Can Dispute it Online

    Federal law requires the reporting agencies to have a simple process for disputing errors. After all, they're the ones who compile this data. So they must have a mechanism in place for correcting erroneous data. These days, all three of the companies allow you to file a dispute online through their websites.

    Use the links below to learn more:

    I recommend starting this process online, and following up with a written letter only if necessary. The benefit of using the online approach is that you can log in to check the status of your dispute. This makes it a lot easier to follow up, after you submit your initial complaint.

    You Can Also Write a Letter

    You can also dispute negative information on your credit report by writing a letter. The disadvantage of this method is that it takes longer. But if you have additional documents that support your case, you might want to mail copies of them to the reporting agency. Do not mail your original documents -- make copies.

    Here are the mailing addresses for the reporting companies:

    For Equifax Disputes
    Equifax Information Services, LLC
    P.O. Box 740256
    Atlanta,GA 30374

    TransUnion Disputes
    TransUnion Consumer Solutions
    P.O. Box 2000
    Chester, PA 19022-2000

    Experian Disputes
    They do not provide a mailing address for credit report disputes. You'll probably have to initiate the process online. You may be provided with a mailing address for any follow-up documents you have, after you submit the dispute via the website.

    Note: These were the correct addresses at the time this article was published (April 2011). You can verify the mailing address by visiting the website of the company in question.

    Here's a sample letter for disputing negative items on your credit report.

    Date
    Your Name
    Your Full Address

    Name of Reporting Company
    Address of Reporting Company

    Dear Sir or Madam:

    I am sending this letter dispute the following information found within my [company name] credit report. I have provided a copy of my report with the disputed item(s) circled in red.

    I request that you research the disputed entry and respond to me within 30 days of receiving this letter, in accordance with the Fair Credit Reporting Act.

    [Next, you will need to identify the item you feel is incorrect, and explain why it's incorrect. Refer to your supporting documents as needed. Example: "The credit account I have circled is inaccurate. I have never had an account with this store. It is obviously some kind of mistake. I request that this account and all related information be removed from my report."]

    Please investigate this matter and delete the disputed item as soon as possible.

    Sincerely,

    Your name

    Enclosures: (Any supporting documents you are enclosing, if applicable.)

    Persistence and Follow Up

    When you dispute a negative entry in your credit report, the law is on your side. The reporting agencies are required to investigate the matter in a timely fashion. If they find out that your complaint is legitimate -- or if they cannot make a determination one way or the other -- they must remove the item from your file.

    But you must be persistent. If you started the process online, you'll be able to log back into your account to check the status of your dispute. I recommend doing this once every few days, until the situation is resolved.

    Remember, derogatory information in your credit file can damage your FICO credit score. This can affect your ability to qualify for mortgage loans, auto financing, etc. It can also affect the interest rate you receive from creditors. So you need to follow up until the erroneous information is purged.