Tag Archives: Credit Disputes

How does a credit reporting agency create my credit file?

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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.

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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 does a credit reporting agency violate the FCRA?

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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?

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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.

The Two Main FCRA Violations Asserted Against Credit Reporting Companies.

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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.

 

Inaccurate Credit Reports Because of Mixed Credit Files and Merged Credit Files

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A mixed credit file or a merged credit file occurs when another consumer’s credit information is placed erroneously on your credit report.  Despite the fact that the responsibility for the debt is that of another consumer, a credit reporting agency will attribute that information to your credit report.  This situation can lead to disastrous consequences because the information can cost you a mortgage, a job, or to pay higher interest rates.

As you would expect, both furnishers and credit reporting agencies can be the source of the incorrect credit account that appears on your credit report.  Mixed credit files and merged credit files occur for consumers because of the manner that credit reporting agencies acquire and organize their data.  Originally, furnishers provide information to credit reporting agencies about consumer accounts.  Furnishers provide this data electronically by including identifying information like name, address, and social security number.  If the information provided by the furnisher to the credit reporting agency is incorrect or missing, then the credit reporting agency can match the information to the wrong consumer’s file.  Incorrect file matching occurs because the credit reporting agencies do not maintain one file for each consumer.  The credit reporting agencies maintain pieces of individual data in their records and then associate and match similar data based upon complicated algorithms that are proprietary secrets.  While these algorithms are closely guarded secrets, we know some information about the process through discovery in litigation of mixed and merged credit file cases.  Typically, a nine for nine social security number match is not required to associate one piece of credit information with a particular credit file,  and other criteria like name and address are factors into the decision as to which file to place a credit account.  A name and address alone may be enough for incorrect data to match to your file and cause a completely different credit file to ultimately merge into your credit file as part of the computerized matching process.  Accordingly, people with common names have a higher chance to be the victim of mixed and merged credit files.  Inappropriately merged credit files typically occur when an existing credit file begins to more closely match your credit file with the credit reporting agency. Identity theft victims also can have the identity theif’s actual bad credit merge into the good credit of the victim.

Common mixed credit file and merged credit file causes include:

  1. Transposition errors in social security numbers.
  2. Incorrect name being attributed to a social security number.
  3. Different versions of your name like nicknames and maiden names.
  4. Mismatching information related to Jr., Sr., and III suffixes

Correcting inaccurate credit information as a result of mixed credit files or merged credit files is accomplished in the same manner as any other credit report inaccuracy.  Please review my previous blog post on how to dispute inaccurate information information on your credit report.

If you would like to contact me with any questions, or potential referral to a lawyer in your area, please contact me at 571-313-0412.

How do I get a free copy of my credit report?

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The fastest way to get a free copy of your credit report is to obtain the report through www.annualcreditreport.com.  You may also obtain a free copy of your credit report by calling 1-877-322-8228, or through the mail by  completing  the Annual Credit Report Request Form and mailing it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.  The Federal Trade Commission also has a short video on free credit reports that you can review as well.

The FCRA requires certain credit reporting agencies to provide you with one free copy of your credit report per year. The important thing to remember is the correct website to visit in order to obtain your free credit report. The website is:

www.annualcreditreport.com

When you visit the website, you will need to know basic details about your financial life in order to answer security questions. Initially, you will enter obvious items like your name, address, and social security number.  As you enter a specific credit reporting agency website, you will answer more difficult questions about your financial history to verify your identity.  Examples include prior street address names and numbers, monthly payment amounts for certain debts, and maybe even the names of prior roommates.

You do not need to purchase anything to obtain a free copy of your credit report.  You may be solicited for optional items like credit scores and credit monitoring, but you need not purchase anything in order to see your free credit report.

Because their are three main credit reporting agencies, I like to review one free report every four months by staggering the individual reports that I obtain for free.  A good reference point is near your birthday with scheduled reminders to get another free report four months later.  By viewing credit reports in this fashion, you are getting periodic snapshots to make sure that no new inaccuracies are on any credit report.

I would print off and maintain in your records the copies of the reports that you obtain.  This creates a baseline snapshot of your credit file if you are ever the victim of inaccurate credit reporting, identity theft, a mixed credit file, merged credit file, or multiple credit files.  Monitoring the contents of your credit file is important in protecting your future.  Do not delay, get a free copy of your credit report today.

 

What happens after you send your credit dispute letter.

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After you have mailed your credit dispute letter and supporting documentation to a credit reporting agency (CRA), the process typically results with your letter being
outsourced to another country like India, Costa Rica, Jamaica, or the Philippines
for processing.  Whether you disputed credit information with Equifax, Experian, Trans Union, or another CRA will ultimately determine the particular country in which your dispute is outsourced.  When the CRA receives the credit dispute letter, it normally has the dispute letter with attachments scanned into its system.  Next, the CRA has the foreign-based processor review the letter and documentation to identify your particular type of dispute and select a code number that best describes your particluar dispute. At this point, the CRA must notify the furnisher of your dispute. The FCRA presently requires that the CRA must notify the furnisher of the dispute within five business days of receiving your credit dispute letter.  The CRA will send notice of your dispute through an electronic system known as E-OSCAR via a form called an Automated Consumer Dispute Verification form or “ACDV”.  The furnisher of the disputed credit information will receive the ACDV and has a duty to conduct a reasonable investigation of the dispute.

I think that it is helpful to imagine your credit dispute letter running on two parallel train tracks, one with the CRA and one with the furnisher of the information.  When the CRA reviews your dispute, if it determines that the disputed information is inaccurate,
incomplete, or cannot be verified, it has to delete the item of information or change the information as appropriate given the results of its reinvestigation.  The time required for a CRA to complete its investigation depends on certain factors and can be extended, but a good rule of thumb is that a CRA has about thirty days to complete the investigation of your credit dispute.  In addition, the furnisher of the disputed credit information also has a responsibility to investigate your dispute.  The furnisher should make a detailed inquiry into its records to assure that the information reported is full, complete, and accurate.  Often times the furnisher will only check its computer records to determine if it has already made a decision regarding the disputed account and will not conduct the thorough analysis required.  After the furnisher completes its investigation, it will send a response to back to the credit reporting agency.

When the investigation of your credit dispute letter is concluded, the CRA must send you notice of the results of the reinvestigation. The results of the reinvestigation will typically be mailed to you unless you have authorized some other method of notice.  The notice of the results of the reinvestigation should also include notice that you may request a description of the procedure used to determine the accuracy of your disputed
information.  It can be a good idea to request this information from a CRA if incorrect information remains on your credit file or if the source of the information is of dubious origin.  You will also receive notice of the right to have previous users of your credit file notified of the disputed account.  Finally, you also have the right to place a statement of dispute in your credit file describing why you believe a certain item of information is incorrect.  As with the credit dispute letter you send, you will want to keep a copy of the results of the reinvestigation of your dispute letter. If you have many disputes with multiple CRAs, you will probably want to purchase a multi-pocket file folder as your records will become numerous. If your disputed credit report information remains on your credit report following the initial credit dispute letter, I would recommend that you contact an attorney that specializes in credit report litigation.

 

How do I dispute inaccurate Equifax, Trans Union, or Experian credit reports?

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Mail a written credit dispute letter along with supporting documentation to the credit reporting agency that reports the inaccurate information.  The letter should include your identifying information (name, date of birth, social security number) , an identification of the inaccurate information, a description why the information is inaccurate, and any documents that support why the information reported is inaccurate.  If you wish to discuss your letter before mailing it to the credit reporting agency, please call me at 703-390-2905. 

The reason you want to send this is information is related to the provisions of the Fair Credit Reporting Act (FCRA).  Under the FCRA, a consumer must initiate the dispute of an inaccurate credit report directly through a credit reporting agency (CRA) in order to trigger the liability provisions of the act. This means that you must send your credit report dispute letter including documents related to your dispute to the credit reporting agency (typically Equifax, Trans Union, and Experian). You may also want to provide a copy of the dispute to the furnisher of the incorrect information, but providing the information directly to the furnisher will not trigger your right to file a lawsuit.  After the CRA receives the dispute, it has a duty to send a notice of the dispute to the furnisher of the information.  Under the FCRA, both a CRA and a furnisher have a duty to conduct a “reasonable investigation” of the information that you have disputed.  Because reasonableness can often be in the eye of the beholder, certain information will increase the chances that an investigation of your credit report dispute will be resolved in your favor.

First, a good dispute letter should clearly identify your name, address, social security number, and date of birth.  By providing this information, you reduce the chance that the CRA can claim that they could not locate your credit information in their data base.

Second, you should clearly identify the account(s) that you are disputing as well as describe the facts supporting your position why the credit reporting is incorrect.  Often times a CRA can claim that they do not want to resolve disputes between you and a third party furrnisher.  To minimize this argument, you can identify the facts that demonstrate why your position is clearly correct and reference as many documents as necessary to demonstrate why the information reported is inaccurate.  You should also include the supporting documentation as part of your dispute package. Letters, invoices, and/or contracts involving the furnisher of disputed information can make for good proof of your argument.  In the event that you are a victim of identity theft, you should also include an identity theft affidavit, police report, and/or identification of the police report number with the investigating officer named.  For information about dealing with the affects of identity theft, please review this post on what to do if you are an identity theft victim.

Third, include a statement that describes how the inaccurate credit reporting is hurting you and request that the CRA take immediate action to solve your problem.  Whether that means correcting an inaccurate account, deleting a judgment that is not yours, or removing a false criminal conviction from an inaccurate employment credit report, you should request that the CRA stop reporting the inaccurate information.  If you have lost a job because of an inaccurate employment credit report or lost a mortgage because of an inaccurate credit report, I would tell the CRA the details in the dispute letter.

Finally, I recommend that you personally sign your letter, make a copy of the signed letter including the attachments for your records, and mail the letter via both first class mail and certified mail return receipt requested.  The Federal Trade Commission also publishes information that you can consult when disputing inaccurate information which is located at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.pdf.  If you ever have any questions, you can also contact me.