Under the FCRA, a furnisher must include a notation that your account is disputed as part of its response to a credit reporting agency if you have previously disputed the accuracy of the account. The furnisher must include this notation even if it believes that you are responsible for the debt associated with the account. Furnishers that fail to include this notation as part of a response to a dispute reinvestigation may have violated the FCRA and caused significant damage to your credit score.
The reason that a furnisher must include the notation that a consumer disputed the credit reporting for the account is found in 15 U.S.C. 1681s-2b(b)(1)(C) of the Fair Credit Reporting Act. This provision requires a furnisher to report the results of its dispute reinvestigation to the credit reporting agency. Because furnishers must report accurate information that is not misleading, a furnisher must indicate that the consumer previously disputed the credit account to provide a complete representation of the account status. When a furnisher fails to note that the consumer disputed the credit reporting of the account, it provides misleading information that the account is simply a refusal to pay and not a genuine material dispute as to whether the consumer is liable for the debt reported on the credit report.
For identity theft victims, the failure to report a debt as disputed can undermine the victim’s ability to have inaccurate accounts removed from their credit report. When debt collectors, furnishers, and credit reporting agencies see past due accounts that are not marked disputed, those entities may be inclined to believe that the consumer is not being truthful about the time period related to the identity theft or the scope of the identity theft. Any doubt that the victim is not being truthful about the circumstances of the identity theft can undermine the ability of the identity theft victim to restore their good credit history.
Finally, a consumer wants the disputed accounts reported as disputed because the notation can alter how the account is scored in credit scoring models. Some credit score models do not include disputed accounts when determining the consumer’s credit score. Accordingly, if a derogatory account is not scored, you will have a higher credit score than if the derogatory account was included. As with all items in a consumer credit file, you should review the file so that it includes information that accurately reflects how you manage your credit history.