How does a credit reporting agency create my credit file?

Credit reporting agencies create a consumer credit file when banks, credit card companies, collection agencies, etc. (“furnishers” as defined by the Fair Credit Reporting Act) provide credit information about their experiences with a consumer.  These experiences can be credit inquiries, on-time payments, late payments, or charge-offs.  Furnishers typically provide this information to the credit reporting agencies in the industry standard Metro 2 Format.

The Metro 2 Format is an electronic mechanism so that credit reporting agencies have a standardized system to receive and report credit data in electronic form.  As part of the format, credit information such as account type, account status, account balance, and account history is converted into Metro 2 codes that can be associated and reported with the identifying information for an individual consumer.  The organization and maintenance of this information results in what the consumer refers to as their respective “credit file.”  Conceptually the credit data information maintained on a consumer is more like data in a cloud that can result in a different credit file for a consumer depending upon the information input in the inquiry process as part of a credit application.  Most consumers are surprised to learn that credit reporting agencies do not keep copies of the credit reports that are issued when a consumer applies for credit.  The credit reporting agencies use matching algorithms that are programmed to place certain information in specific places and provide a credit report.  These reports are organic in the sense that the information reported can change depending on the time and circumstances.  When a credit reporting agency receives Metro 2 data from a new furnisher regarding a consumer, the credit reporting agency attempts to match that new information with the best possible match of credit data already in possession of the credit reporting agency.

Credit report errors of mismatched or mixed credit information occur when the data received by the credit reporting agency is associated with the file of a different consumer.  Mixed credit information can be the result of the incomplete or inaccurate information being associated with the wrong consumer.  For example, a furnisher could transpose the social security number digits on an account that would result in the information being associated with the wrong consumer.  Similar names or similar social security numbers for individuals that live at the same addresses can cause data to be mixed inaccurately and lead to a credit report error.  The end result can be catastrophic if the inaccurate credit information is placed on a consumer’s credit report just as the consumer needs to use their credit to obtain a mortgage or buy a car.

When a credit report error happens, the consumer should dispute the inaccurate information immediately with the credit reporting agency.  Please see my previous post with helpful information on how a consumer can dispute inaccurate information on their credit report.  If you would like to speak to me about inaccurate information in your credit report or a credit report error about an employment related credit report, please contact my office at (703) 390-2905.

How a settled charged off debt should report on your credit report.

When a consumer pays in full a charged off account the balance should credit report as zero with the appropriate status code, “Paid/closed-was a charge-off.”  If the consumer does not pay the full balance after a charge-off as part of a settlement, the account status code credit reported is “Paid in full for less than the full balance.” 

The credit reporting errors that our office sees most frequently related to paid charge-offs happens when the furnisher continues to report a balance after the consumer has made the settlement payment on the account.  The furnisher will continue to report an amount in the balance status even though it has accepted a settlement payment.  Credit report errors of this nature are particularly  frustrating because the credit report continues to report the past due balance as owed when the consumer has paid and settled the debt.  Consumers are contacting our offices looking for a Northern Virginia credit report lawyer who can assist them in having a settled charged off debt report correctly on their consumer credit report. If you have a credit report error, you should contact me at my office in Reston, Virginia at 571-313-0412.

Consumers often encounter a financial set back, which results in credit cards and loans being charged-off by the original creditor or a bankruptcy.  After an account is charged-off with a past due balance owed, consumers may wish to settle the debt for less than full balance owed as a means of beginning to rebuild their credit and credit file. If you are going to settle a past debt with a creditor or debt collector, I would recommend getting the terms of the settlement in writing prior to making any payments, so the obligations of the parties are clear.  Many creditors will not agree to delete derogatory items from your credit file as part of a settlement, but  they do have an obligation to report the debt accurately on your credit file after you make the settlement payment.  Based upon generally accepted credit reporting guidelines authored by the Consumer Data Industry Association, when an account is paid in full for less than the total amount owed, the creditor should report the current and past due balance as zero with a special notation that the account was paid in full for less than full balance.

Paid charge-off accounts credit reporting inaccurately are similar in nature to inaccuracies related to bankrupt accounts previously discussed.  While previous charge off accounts and bankruptcies are bad credit events in the past, the passage of time allows the consumer to rebuild their credit profile.  When credit report errors persist,  the consumer can never receive the fresh start to their credit that they have earned and should hire an attorney to assist them to recover damages for an inaccurate credit file.


How should my accounts credit report after filing bankruptcy?

The type of bankruptcy filed, the status of the bankruptcy proceeding, and whether the debt has been discharged determines how credit reporting agencies report accounts after bankruptcy filing.

Furnishers of information credit report the bankruptcy status of an account to the credit reporting agencies as part of the consumer information indicator field in the Metro 2 data sent to the credit reporting agencies.  As for a Chapter 7 bankruptcy, for the month that the Chapter 7 bankruptcy is filed, the furnisher should report in the consumer information indicator field that a Petition for Chapter 7 bankruptcy has been filed.  For the time period between the filing of the Chapter 7 bankruptcy and the discharge, the furnisher should continue to report the same consumer information indicator to report that the account was included as part of the bankruptcy.  After the debt is discharged in the Chapter 7 bankruptcy, the furnisher should update the consumer information indicator field to indicate that the debt has been discharged which will assist the credit reporting agencies so that they do not report an inaccurate past due balance or derogatory status after a bankruptcy.

Equifax, Experian, and TransUnion have also agreed to implement procedures to make sure that debts discharged in bankruptcy do not continue to report derogatory balances or a past due status.  Experian notes that accounts included in bankruptcy will not be deleted from a credit report but that does not mean that a credit reporting agency can report inaccurate information with incorrect past due balances about an account that was discharged in bankruptcy.  While the filing of a bankruptcy is obviously an extremely negative event for a credit report, the purpose of the bankruptcy is to provide a new start so that a consumer can reestablish a credit profile.  Reporting inaccurate credit information about accounts included in bankruptcy can cause significant hardship to a consumer trying to reestablish their credit after bankruptcy.  If you need to obtain a copy of your credit report after bankruptcy to review how the credit reporting agencies note the accounts after bankruptcy, please see my previous post on how to obtain a copy of your credit file.  If you know that you have inaccurate information on your credit report after a bankruptcy discharge, you can dispute the inaccurate information with the credit reporting agency as described here.  If you need any additional information or have any questions, please contact my office at 703-390-9205 to discuss the inaccurate information on your credit report.

How do consumers have mixed credit files?

If you are a mixed credit file victim in Herndon, Virginia, a credit report lawyer can help you sort out the mess of an inaccurate credit file or a mixed up credit file.

A mixed inaccurate credit file occurs when a credit account belonging to another individual becomes associated with your credit file. This can happen in any number of ways, for example:  incorrect spelling of names, transposition of social security numbers, similar names, two people with nearly identical social security numbers, or the mixing of generational differences like Jr. and Sr.

Our law firm in Reston, Virginia has conducted jury trials involving inaccurate credit reports containing mixed credit files.  From deposition and trial testimony, we have learned that the matching process for associating credit accounts does not require a nine for nine social security number match, does not require a date of birth match, and does not require a name match.  The computer systems simply associate data with other data that may be an appropriate match or may be the credit of a completely different person.  In identity theft cases, we have also seem the identity thief’s actual bad credit become associated with the victim’s good credit.

Consumers do not have a credit file like you would associate with a file in a traditional filing cabinet.  Credit reporting agencies simply maintain data in a cloud like environment.  When a credit reporting agency receives  data from someone requesting a consumers credit file, the credit reporting agency uses the provided information to match the data it maintains, with a credit reporting agency then providing a credit report containing information that best matches the associated data at that particular time.  When credit information contained in the agencies records is incomplete or inaccurate such that it becomes associated with the wrong person, the credit report provided will contain mixed and inaccurate information.  This can be a real problem in dealing with abusive debt collectors because they will collect on an account that is actually the debt of another person with a similar name.

Solving an inaccurate credit report or mixed credit file usually requires the services of an experienced credit report lawyer.  Having dealt with the problems on other occasions, we know how to best solve your particular problem.  If you would like to speak to me about your mixed credit file, I can be reached at 703-390-9205.  Our office also accepts inaccurate credit report cases for mixed credit file victims in Pittsburgh, Pennsylvania.

Five Key Rights For Identity Theft Victims

If you are the victim of identity theft in Herndon, Virginia, you have five important rights afforded to you by the Fair Credit Reporting Act.  15 U.S.C. 1681g(d) states that identity theft victims have the following rights:

1.  The right to  place a fraud alert on their credit file.

As of the time of this post, the credit reporting agency fraud alert phone numbers were:

Experian fraud alert phone number (888) 397-3742

Equifax fraud alert phone number   (800) 525-6285

TransUnion fraud alert phone number (800) 680-7289

Remember an initial fraud alert stays on your credit file for 90 days and that you may request an extended fraud alert if you provide a valid identity theft report.

 2.    The right to receive free copies of their credit file.

The initial fraud alert  affords the consumer the chance to obtain a free copy of their credit file.  Consumers should review these copies to determine if the file has any items indicating identity theft including unauthorized accounts, unknown credit inquiries, or inaccurate address information.

3. The right to copies of documents relating to fraudulent transactions.

If a thief has used your personal information to open accounts, a creditor or other business must give you copies of applications and business records involving transactions related to the theft, provided that you ask them in writing.

4. The right to obtain information from a debt collector.

You can stop debt collectors when they improperly collect debts relating to inaccurate credit reporting or identity theft by requesting that the debt collector provide you with information related to the name of the original creditor and the debt.

5. The right to request that a credit reporting agency block identity theft information.

In order to invoke the identity theft blocking provisions under the Fair Credit Reporting Act, you should identify the information to be blocked, state that you did not incur or authorize the charges, provide proof of your identity, and provide a copy of an identity theft police report.

Please review my previous post for more information about remedying identity  theft in Herndon as well as the FTC’s website.  If you need to speak to a credit report lawyer about an identity theft or inaccurate credit reports, please contact me at my Reston office, 703-390-9205.


Initial Fraud Alerts For Identity Theft Victims

If you have a credit report error  or potential identity theft problem in Herndon, Virginia, I would be happy to discuss your situation via the telephone at 703-390-9205.  My law office has handled numerous cases involving credit report mistakes and identity theft, and we are willing to discuss your particular problem.

Sometimes consumers need assistance outside of regular office hours when identity theft is suspected.  In fact, CNN has reported that another American is victimized by identity theft every two seconds, which is shocking. If you feel that you may have been a victim of identity theft, a good first step is to place an initial fraud alert on your credit file because an initial fraud alert should slow down an identity thief’s actions in establishing more credit in your name.

15 U.S.C. 1681 c-1(a)(1) of the Fair Credit Reporting Act was established to help consumers stop the identity thief.  This provision provides that a consumer may request an initial fraud alert provided a good faith suspicion exists that the consumer may have been an identity theft victim.  The initial fraud alert is designed to be a “one-call” alert with all three major credit reporting agencies placing the initial fraud alert on a consumer’s credit file as long as any one of the three credit reporting agencies are notified by a consumer. Once the consumer notes the initial fraud alert, 15 U.S.C. 1681 c-1(h)(1)(B)(i), provides that a user extending credit should “utilize reasonable policies and procedures to form a reasonable belief that the user knows the identity of the person making the request.”

If you need the fraud alert phone numbers for Experian, TransUnion, and Experian, please see my previous post on what you can do if you may have been a victim of identity theft , or simply call me at my office in Reston, Virginia to discuss your credit report error or identity theft.




How does a credit reporting agency violate the FCRA?

Two core provisions of the Fair Credit Reporting Act require credit reporting agencies (Experian, Equifax, and TransUnion) to adopt reasonable procedures to assure maximum possible accuracy and to investigate consumer disputes of credit information.   Violations can occur if the credit reporting agency creates an inaccurate mixed credit file by placing another person’s information on your credit file, notes a judgment on a consumer’s credit file that a court vacated, or provided any other inaccurate or misleading information on a credit report. 

One of the most common  FCRA violations for a credit reporting agency is based upon the failure to conduct a reasonable investigation of inaccurate information in a credit file after receiving a credit dispute letter from a consumer, which violates 15 U.S.C. 1681i.  After receiving notice of a consumer dispute, the credit reporting agency has a legal duty to review information provided with the dispute and conduct a detailed systematic investigation into the information that is reporting.  Experian was found liable for a negligent investigation of a consumer credit dispute, and the court stated, “When conducting a reinvestigation pursuant to 15 U.S.C. 1681i, a credit reporting agency must exercise reasonable diligence in examining a court file to determine whether an adverse judgment has, in fact, been entered against a consumer.  A reinvestigation that overlooks documents in the court file expressly stating that no adverse judgment was entered falls far short of this standard.” Dennis v. BEH-1, LLC 520 F.3d 1066 (9th Cir. 2008).  There are many other instances when a credit reporting agency can be held liable for violating the FCRA, and a consumer with inaccurate information on a credit report should not hesitate to contact a consumer credit report law specialist. Our office in Reston, Virginia has handled numerous cases involving inaccurate credit reports, and we have litigated inaccurate credit report cases in the Alexandria, Richmond, and Pittsburgh federal district courts.

As for maintaining reasonable procedures for maximum possible accuracy, 15 U.S.C. 1681e(b), requires a credit reporting agency not to just establish reasonable procedures, but to follow reasonable procedures for credit report accuracy.  The remedial purpose of the FCRA to protect consumers would not be achieved if the credit reporting agency simply maintained pro forma procedures without any meaningful effort to follow those procedures to assure accurate credit information.  Credit reporting agencies violate the FCRA when inaccurate information appears on a consumer credit report and the consumer presents evidence that the credit reporting agency failed to follow a procedure maintained to assure that type of inaccuracy does not occur on a credit file.  Because these procedures are confidential in nature, a highly specialized consumer lawyer that has reviewed credit reporting agency procedures for several years will typically be a consumer’s best resource to have inaccurate information removed from their credit report.

As with any credit report problem, I would be happy to speak with you at (571) 313-0412 regarding your inaccurate credit report for potential representation or referral to a specialist in your particular area.

How do you fix an inaccurate credit report?

Using the provisions of the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681, is the best way for a consumer  to solve problems associated with inaccurate information on their credit report.  Passed by Congress in 1971, the FCRA is part of the federal Consumer Credit Protection Act and regulates various entities involved in credit reporting.  The stated purpose of the statute at 15 U.S.C. 1681(b) is “to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a  manner, which is fair and equitable to the consumer regarding the proper use of credit information, as well as assuring confidentiality, accuracy, and relevancy.”

The banking system depends on accurate credit reports and inaccurate credit reports in Virginia, Pennsylvania, and throughout the United States hurt  consumers as well as lenders because inaccurate judgments, tax liens, and other trade lines undermine the integrity of the entire lending process.  Credit evaluation is a vital part of the life of consumers everywhere and can greatly impact the life of its victims.  Through the mechanisms and rights afforded by the FCRA,  incorrect items on credit reports for consumers in Virginia, Pennsylvania, and elsewhere can be removed and damages recovered for the entities responsible.   Please review this previous post for information on how to dispute inaccurate items in your credit report.

3 Notices From The IRS Indicating An Identity Theft Problem

Identity theft involving IRS tax returns has become an ever increasing problem over the last four years. According to Treasury Department reports, more than five billion dollars in improper refund checks may have been issued to identity thieves in 2011 alone.  If you have an IRS identity theft problem, the agency has established a procedure to assist victims on the identity theft page of the IRS website. As identified on the IRS website, three types of IRS notices can indicate that you may have an identity theft problem with the IRS. The three notices or letters indicating a problem are:

  1. You filed more than one return.
  2. You have a balance due, refund offset, or collection action for a year that you did not file a return.
  3. You received wages from an employer that you do not recognize.

If you receive any of these notices and think that you may be a victim of identity theft, the IRS requests that you take immediate action via an IRS identity theft affidavit.  The details regarding how to complete the affidavit and more information about the process can be found on the IRS website.

If I believed that I had an IRS identity theft problem, after notifying the IRS,  I would also immediately obtain a copy of all three of my credit reports from the credit reporting agencies and look for the signs indicating an identity theft problem on my credit file. If you think that you have been the victim of identity theft, you can review my previous post on the actions that you can take to combat your identity theft problem including links to assist you with identity theft reporting in Virginia.  if you have any questions about how to review your file, I have also discussed how to review your credit file disclosure . For additional questions about identity theft or inaccurate credit reports, you can always contact me at 703-390-9205.


The Two Main FCRA Violations Asserted Against Credit Reporting Companies.

Consumer lawsuits against Credit Reporting Agencies (CRAs) under the FCRA most commonly occur under two different statutory provisions. A consumer will allege that a CRA published inaccurate information on a credit report in violation of 15 U.S.C. 1681e(b), or allege that a CRA failed to conduct a reasonable investigation after receiving a consumer credit dispute notice in violation 15 U.S.C. 1681i(a). Other FCRA violations against credit reporting agencies can and do happen, but the bulk of the credit report lawsuits occur under either one and often times both of these statutory provisions.

1681e(b) claims center upon allegations that the credit reporting agency has published inaccurate credit reports without following reasonable procedures to assure the accuracy of the information reported. For some credit report inaccuracies, the CRA has published inaccurate judgment, bankruptcy, tax lien, or other derogatory public record information.  In some instances, information from another consumer will appear on your credit report. This scenario is referred to as a mixed credit file or merged credit file.  Mixed credit files can cause lots of problems for a consumer like a failed home loan purchase, denial of a home refinance, or even a job loss in some instances.  CRAs have a duty to assure the accuracy of the information reported and by reporting another person’s derogatory information on your credit report, the credit reporting agency may be in violation of the law.  You should consult a lawyer that accepts FCRA cases if you believe that you have a mixed or merged credit file.

1681i(a) of the FCRA is another major source of lawsuits between consumers and Equifax, Experian, and Trans Union. Under this FCRA provision, a credit reporting agency must conduct a reasonable investigation of disputed credit accounts and must notify the furnisher of the consumer’s dispute so that the furnisher may conduct their own independent investigation.  CRAs typically rely on an automated process that simply notifies the furnisher of the type of dispute by category.  After receiving the response from the furnisher, some lawsuits have shown that credit reporting agencies simply repeat the furnisher response without conducting their own independent investigation.  This is referred to as “parroting” and there have been instances in which punitive damages have been awarded against credit reporting agencies for parroting information and disregarding statutory duties to conduct independent credit report investigations.

For information on how you can dispute inaccurate information in your credit report or what happens to your credit dispute after you mail a dispute letter, please see my previous posts. If you would like to contact me about your particular sitiauation in Virginia or for a referral to a lawyer in your area, please contact me at (703) 390-9205.