Common Mistakes People Make When Disputing Items on a Credit Report

One of the ways to potentially improve your credit score is to clear errors off your credit report. This process starts with filing a dispute for any erroneous item. However, if you don’t take the appropriate steps, you might mess things up and sacrifice some of your consumer rights. Managing a credit report dispute can be tricky, and you don’t want to compromise your chance for success. Today we look at some of the common mistakes people make when disputing errors on their credit report.

The Fair Credit Reporting Act (FCRA) requires that the credit bureau investigates your dispute - and also the creditor. However, the creditor might not conduct a thorough investigation and may erroneously insist that the record is accurate and you are the one that is mistaken. If you can prove the reported item is inaccurate, you can sue, but if you don’t take the right steps when you initially pursue the dispute, you may shortchange yourself when it comes to the right to litigate.

Mistake 1 – Not Opting Out of the Arbitration Clause

The credit bureau might have a binding arbitration clause in the terms and conditions (T&C) of their web page where you purchased the credit report. Equifax has such a clause in their terms of use page on their website. This states that you agree that if you buy your credit report from them online and disagree with how a dispute is handled, you can be forced into binding arbitration, denied a jury in your civil case trial, or be blocked from participating in a class-action lawsuit.

However, you have the option to opt-out of these unfavorable terms, but you must send a letter within 30 days (depending on the bureau’s T&C) requesting you want to opt-out of the arbitration clause. Arbitration is generally not favorable to the consumer and is run by an arbitration firm chosen at the discretion of the credit bureau. In some cases, consumers have been able to argue that the arbitration clause itself wasn’t fair to consumers if it was buried on the website and not obvious.

Mistake 2 – Not Keeping Evidence to Prove Your Case

You should keep everything you need to prove your case. If you wind up suing the credit bureau for bungling your dispute request, you will need to show proof that you provided them the evidence to show the credit item was wrong. The first item of importance is proof of when you filed the dispute. This should be in the form of a certified mail receipt. You also need to show that you were harmed by the dispute not being properly solved.

Showing that you were denied credit is one way to demonstrate that you were harmed. Keep any letters from potential creditors that denied you a loan or credit card, etc. You should also save evidence that proves the error on your credit file. This can include payment receipts, late notices from the creditor that substantiate when the debt went bad. If the negative item is from identity theft, be sure to keep evidence that establishes that as well.

Mistake 3 – Not Filing the Dispute with the Credit Bureau 

You might think it’s easier just to contact the original creditor that recorded the mistake on your report. However, this can shortchange you on the protections afforded by the Fair Credit Reporting Act. You should start the process with the credit bureau, and they will contact the lender or creditor to begin an investigation. If you step outside this process, you won’t be able to use the full extent of the FCRA law to your benefit if the investigation doesn’t result in a correction to your report.

Once you file a dispute through the bureau, if the lender doesn’t correct the item, then you can sue. However, if you go straight to the lender or creditor and skip the bureau, you cannot sue. You also cannot sue simply on the basis of an error. You must be able to prove they didn’t properly investigate to sue. If you know they are in the wrong because you can prove the error, that will help you in court, but you must follow certain steps to be able to get there.

To find out more about understanding and improving your credit score, check out Credit Score Keys. Be sure to check out our free videos and call 919-495-2365 with any questions.