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You May Not Even Realize You Agreed to Mandatory Arbitration: What Every Consumer Needs to Know

June 20th, 2017 · Consumer Info

You May Not Even Realize You Agreed to Mandatory Arbitration: What Every Consumer Needs to KnowLet’s say you order a credit report from Equifax. You find a mistake on it. You dispute the mistake – an essential step in the credit repair process – but it’s not corrected. You know the information being reported by Equifax is wrong so you decide to take them to court. Only you can’t because you signed that right away when you agreed to the terms required to see your credit report through their website. If you have a dispute with them, you are limited by the mandatory arbitration clause that negates your right to a day in court (or the participation in a class action lawsuit).

It’s not just credit bureaus that include mandatory arbitration clauses. It’s companies providing all sorts of financial products and services that you probably use. Here’s what you need to know about them.

What is mandatory arbitration?

Mandatory arbitration is a form of alternative dispute resolution (ADR). You may also see it referred to as forced arbitration, binding arbitration, or mandatory binding arbitration.

Under normal circumstances, if a company violates the terms of an agreement, you have the right to sue them for it or join a class action lawsuit if there are others whose rights have been similarly violated. A mandatory arbitration clause included in an agreement – be it a signed physical contract or terms of service you click agreement to on a website – can prevent this from happening.

As explained by the Consumer Financial Protection Bureau:

“These clauses typically state that either the company or the consumer can require that disputes between them be resolved by privately appointed individuals (arbitrators) except for cases brought in small claims court. Where these clauses exist, either side can generally block lawsuits from proceeding in court. These clauses also typically bar consumers from bringing group claims through the arbitration process. As a result, no matter how many consumers are injured by the same conduct, consumers must proceed to resolve their claims individually against the company.”

So instead of a judge or jury deciding the outcome of your dispute, the decision is left to an arbitrator.

What types of companies use mandatory arbitration clauses?

Many types of companies in the financial space use these clauses. You may be subject to mandatory arbitration for any of the following consumer products or services, including:

  • Credit cards
  • Prepaid cards
  • Checking accounts
  • Investing accounts
  • Insurance policies
  • Cell phone accounts
  • Auto loans and leases
  • Private student loans
  • Payday loans
  • Credit reports
  • Credit monitoring

You may also find mandatory arbitration clauses in employment contracts and doctor’s agreements.

(Per the Dodd-Frank Act, mandatory arbitration clauses are prohibited in mortgage agreements.)

Can you opt out of a mandatory arbitration clause?

It depends on the company. Some allow you to opt out; others don’t. But if you have the option, The Consumerist says you should.

When you’re asked to sign or agree to anything, look for the inclusion of a mandatory arbitration clause. If you don’t see language explaining how to opt out, search for it (e.g., “how to opt out of [name of credit card company, lender, service provider] mandatory arbitration”). If nothing turns up, you can always contact the company and ask.

What is an example of a mandatory arbitration clause?

Equifax – one of the big three national credit bureaus – includes a mandatory arbitration clause in its Product Agreement and Terms of Use. There is an entire section devoted to it, broken down into sub-sections, quotes from which are excerpted and included below.

On binding arbitration…

“Any Claim (as defined below) raised by either You or Equifax against the other shall be subject to mandatory, binding arbitration. As used in this arbitration provision, the term ‘Claim’ or ‘Claims’ means any claim, dispute, or controversy between You and Us relating in any way to Your relationship with Equifax, including but not limited to any Claim arising from or relating to this Agreement, the Products or this Site, or any information You receive from Us, whether based on contract, statute, common law, regulation, ordinance, tort, or any other legal or equitable theory, regardless of what remedy is sought. This arbitration obligation extends to claims You may assert against Equifax’s parents, subsidiaries, affiliates, successors, assigns, employees, and agents.”

However, Equifax also makes clear that mandatory arbitration does not apply if you believe they are in violation of the Fair Credit Reporting Act:

“The term ‘Claim’ shall have the broadest possible construction, except that it does not include any claim, dispute or controversy in which You contend that EIS violated the FCRA. Any claim, dispute, or controversy in which You contend that EIS violated the FCRA is not subject to this provision and shall not be resolved by arbitration.”

On class action lawsuits…

“By consenting to submit Your Claims to arbitration, You will be forfeiting Your right to bring or participate in any class action (whether as a named plaintiff or a class member) or to share in any class action awards, including class claims where a class has not yet been certified, even if the facts and circumstances upon which the Claims are based already occurred or existed.”

On opting out of mandatory arbitration…

“IF YOU DO NOT WISH TO BE BOUND BY THE ARBITRATION PROVISION, YOU HAVE THE RIGHT TO EXCLUDE YOURSELF…. In order to exclude Yourself from the arbitration provision, You must notify Equifax in writing within 30 days of the date that You first accept this Agreement on the Site (for Products purchased from Equifax on the Site).

“If You purchased Your Product other than on the Site, and thus this Agreement was mailed, emailed or otherwise delivered to You, then You must notify Equifax in writing within 30 days of the date that You receive this Agreement. To be effective, timely written notice of opt out must be delivered to Equifax Consumer Services LLC, Attn.: Arbitration Opt-Out, P.O. Box 105496, Atlanta, GA 30348, and must include Your name, address, and Equifax User ID, as well as a clear statement that You do not wish to resolve disputes with Equifax through arbitration.”

On the initiation of arbitration…

“Arbitration shall be administered by the American Arbitration Association (“AAA”) under its Consumer Arbitration Rules in effect at the time the arbitration is filed unless any portion of those rules is inconsistent with any specific terms of this arbitration provision or this Agreement, in which case the terms of this arbitration provision and this Agreement will govern. The AAA’s rules may be obtained at www.adr.org, or by calling the AAA at 1-888-778-7879.

“To commence an arbitration, you must file a copy of your written arbitration demand with the AAA…. The arbitration shall be before a single arbitrator. The arbitrator will have the power to award a party any relief or remedy that the party could have received in court in accordance with the law or laws that apply to the dispute, subject to any limitations of liability or damages that exist under this Agreement.”

On payment of arbitration fees and costs…

“In the event You file a Claim in arbitration in accordance with these provisions, We will advance all arbitration filing fees if You ask that We do so, in writing, prior to the commencement of the arbitration. The payment of any such fees will be made directly by Us to the AAA. Such requests should be mailed to Equifax Consumer Services LLC…. We will also pay all arbitrator fees.

“If Equifax prevails in the arbitration, then the arbitrator shall have the authority to require that You reimburse Equifax for the filing fees advanced, but only to the extent such fees would be recoverable by Us in a judicial action. You are responsible for all other fees and costs You incur in the arbitration, including attorney’s fees and expert witness fees, except that the arbitrator shall have the authority to award attorney’s fees and costs to the prevailing party.”

On small claims court…

Notwithstanding anything in this Section, either You or Equifax may bring an individual action in small claims court as long as (i) the claim is not aggregated with the claim of any other person, and (ii) the small claims court is located in the same county and state as Your address that You most recently provided to Equifax according to Equifax’s records in connection with this Agreement.”

What are the pros and cons of mandatory arbitration?

Pros

Mandatory arbitration:

  • Shortens the dispute process, as the two parties are not bogged down in the court system
  • Reduces cost, as the two parties aren’t dealing with expensive legal fees for a lengthy court case
  • Cuts down on costs for companies, savings that (theoretically) can be passed on to consumers in the form of lower prices

Cons

Mandatory arbitration can:

  • Allow companies to select the arbitration association, raising doubts about impartiality
  • Strip consumers of the right to sue companies for contract and terms of use violations
  • Strip consumers of the right to join class-action lawsuits, a big con, as a 2015 study by the Consumer Financial Protection Bureau (CFPB) found that “arbitration agreements restrict consumers’ relief for disputes with financial service providers by limiting class actions”
  • Strip consumers of the right to appeal the results of arbitration, with exceptions: 1) it was previously agreed that the decision could be repealed or 2) it is suspected the arbitrator is guilty of fraud or collusion with the company
  • Surprise consumers, as they did not know they had agreed to mandatory arbitration or that it stripped them of their right to sue; the CFPB study revealed that 3 out of 4 of consumers didn’t know whether any contracts they’d signed included mandatory arbitration clauses and 93 percent of credit card holders didn’t realize such a clause would mean they couldn’t sue their credit card issuer
  • It’s possible that the language of the clause would allow the company to sue the consumer even though the consumer cannot sue the company

The cons also include a point that negates the argument of one of the pros. The CFPB study found no proof that money saved by companies as a result of mandatory arbitration (versus expensive court costs) results in lower prices passed on to consumers.

What happens during the arbitration process?

NOLO provides a good breakdown of the arbitration process. Here’s the gist of it:

  • You initiate arbitration. Likely, the arbitration clause specifies an arbitration association that must be used for this process. (Keep in mind that this works both ways. If you are in violation of the agreement, the company can initiate arbitration against you.)
  • The arbitration association in charge of the process assigns the arbitrator (who is usually a retired judge or attorney). The rules followed by the arbitrator are dictated by the rules of the arbitration association.
  • The arbitrator holds pre-hearing conferences.
  • The arbitrator holds the arbitration hearing, during which each party presents their evidence.
  • The arbitrator makes a decision, which could take anywhere from 10 days to 6 months.

Once the decision is made, it stands as is; the appeals process does not apply (with limited exceptions).

How is mandatory arbitration enforced?

The Federal Arbitration Act of 1925 and state arbitration laws provide the framework for enforcing mandatory arbitration decisions.

What is the Arbitration Fairness Act?

The Arbitration Fairness Act is legislation proposed by Minnesota Senator Al Franken. If passed, this legislation “invalidates agreements that require the arbitration of employment, consumer, antitrust, or civil rights disputes made before the dispute arises” and “restores the rights of workers and consumers to seek justice in our courts.”

Is the CFPB really going to ban mandatory arbitration clauses that prohibit class action lawsuits?

Maybe. This is a possibility that’s been in the works for a number of years:

July 2010

Dodd-Frank is enacted, 1) mandating that the CFPB conduct a study of the use of pre-dispute arbitration clauses in the consumer finance space and 2) giving the CFPB the power to issue new arbitration regulations

April 2012

The CFPB launches a public inquiry into arbitration.

December 2013

The CFPB releases preliminary results of its research on arbitration clauses.

March 2015

The CFPB releases a detailed report on the impact of arbitration clauses on consumers.

October 2015

The CFPB announces its consideration of proposed regulations that would prohibit the use of clauses that prevent consumers from joining class action lawsuits.

May 2016

The CFPB seeks public comment on its proposed regulations to ban arbitration clauses that prohibit class action lawsuits.

April 2017

The L.A. Times reports that the CFPB could impose the new regulations anytime, but with much expected push-back: “The financial services industry has been screaming bloody murder about the CFPB’s plan. You can expect the Republican majorities in Congress, and President Trump, to see things their way and block the proposed rule. You can also expect consumer advocates not to roll over quietly.”

How is mandatory arbitration different from non-binding arbitration?

In general, the decision reached in mandatory arbitration must stand; there is no appeals process (with limited exceptions). In contrast, the decision in a non-binding arbitration decision is little more than advice that both parties can agree to follow, or not.

How is arbitration different from mediation?

Mediation is another form of alternative dispute resolution. But while an arbitrator decides the outcome of a dispute, a mediator serves only as a facilitator of the process, helping the two parties decide together how the dispute should be resolved.

What should you do if you have a dispute?

Your best bet is to exhaust every possibility for resolving the issue with the company before it reaches the arbitration stage.

For instance, the 2015 CFPB study found that 40 percent of the arbitration filings it looked at involved disputes over the amount of debt owed by a consumer to a creditor.

If you have a similar issue – meaning the amount the creditor says you owe is incorrect – submit a credit dispute to the credit bureaus. If that doesn’t resolved the issue, dispute directly with the data furnisher. If neither of them resolve the problem, submit a complaint to the CFPB and the FTC. Note, the same process should be followed for any type of inaccuracy you discover in a listing on your credit report. (Have you looked for these errors?)

Should none of this resolve the issue, then it’s time to take more drastic measures. If a mandatory arbitration clause applies, submit a demand for arbitration to the appropriate association (if applicable). If you are not bound by arbitration, consult an attorney and consider a lawsuit.

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Charge Off on Credit Reports? What It Means (and How to Fix It)

June 13th, 2017 · Credit Repair

Charge Off on Credit Reports? What It Means (and How to Fix It)Whether it’s a new listing or something that’s been on your credit reports for years, a charge off is cause for concern. It not only does major damage to your credit score, but likely means dealing with aggressive debt collection efforts, including the possibility of a lawsuit. Your best line of defense? Learning all you can about what a charge off actually means and what you can do to fix it during the credit repair process.

What is a charge off?

A credit account in good standing is considered an asset. When that account goes delinquent for a long enough period of time, it is considered a liability. When that happens, the creditor “charges off” the debt, meaning they write it off as a loss, as it is considered unlikely that the debt will be paid.

When do creditors charge off accounts?

A debt has to be delinquent for a certain number of months before a creditor will charge it off. The exact length of time depends on the debt type.

Creditors charge off:

  • Revolving accounts after 180 days of non-payment
  • Installment loans after 120 days of non-payment

But before you take that to mean making any amount of payment will keep an account from charging off, consider this from Credit.com: “Debts can be charged off even if payments have been made, providing that all of the payments were below the account’s monthly minimum.”

Is it up to the creditor whether they charge off an account?

No, creditors cannot pick and choose whether they charge off accounts. It is a federal law that requires banks to charge off unpaid debts after 120 to 180 days of non-payment, depending on debt type. As stated under the Uniform Retail Credit Classification and Account Management Policy at FDIC.gov:

“Closed-end retail loans that become past due 120 cumulative days and open-end retail loans that become past due 180 cumulative days from the contractual due date should be classified Loss and charged off. In lieu of charging off the entire loan balance, loans with non-real estate collateral may be written down to the value of the collateral, less cost to sell, if repossession of collateral is assured and in process.”

What happens when a debt is charged off?

When a debt is charged off, you should expect the creditor to:

  • Cancel the account.
  • Report the charge off to the credit bureaus, meaning it will show up on your credit reports. That said, creditors are not required to report charge offs (or anything else) to the credit bureaus. And if they do report, they may not report to all of them. It’s likely, though, so you should be prepared for the hit your credit is going to take, as a charge off is one of the worst of possible negative listings.
  • Continue collection efforts on the debt, either through their own in-house collection department or a collection agency. They could also sell the debt to a debt buyer who will then try and collect the debt from you. Or the creditor (or debt buyer) may decide to sue you for it.

Do you still owe the debt after it is charged-off?

Yes. In no way does a charge off relieve you of the responsibility to pay a debt. On the contrary, collection efforts will be stepped up, and you could be sued and forced to pay the debt by a court of law.

That said, you cannot be sued for a debt once the statute of limitations has been reached, which varies by state and debt type. When this happens, debt collectors no longer have any legal means to make you pay a debt. Technically, you still owe it – and the collector may still try to collect on it – but no court can require you to pay it.

Just keep in mind that the statute of limitations has nothing to do with how long a charge off stays on your credit reports. Even if you are no longer legally required to pay a debt, it can still do plenty of damage to your credit scores, which means resolving charge offs is an essential part of the credit repair process.

Can you be sued after a debt is charged off?

Yes. Again, charging off a debt in no way relieves you of your legal responsibility for it. You can be sued for the debt until the statute of limitations runs out, which ranges anywhere from 3 to 10 years depending on the type of debt and where you live. Find out the statute of limitations in your state.

Are you being sued by a collector? Don’t ignore it. Learn how to answer a summons and complaint.

How long will a charge off stay on your credit reports?

Like most negative listings, charge offs can stay on your credit reports for up to 7 years. Add to that the months of late payments that led to the charge off, and this one account can end up negatively affecting your credit for 7 ½ years.

Who do you pay for the debt once it is charged-off?

The older the unpaid debt, the more times the collection responsibility will likely change hands. This can make it hard to know who you should be paying to make good on the debt. The original creditor may do one of three things: 1) hand the debt over to their in-house collections department, 2) hire a third-party collection agency, or 3) sell it to a debt buyer.

If you’re not sure who is handling the debt, contact the original creditor. They should be able to tell you whether they are stilling handling the debt in house, are using an outside collection agency, or if they have sold off the debt entirely.

If the original creditor does, in fact, still own the debt, you should try making payment arrangements directly with them. Otherwise, you will need to negotiate payment with the new owner of the debt. That said, the debt buyer the original creditor sold your account to may have since sold it themselves.

By the way, be mindful of scammers that try and collect debts they have no right to collect on. It might be for a debt you recognize, or it might not. Either way, never assume it belongs to you. The more debts you’ve had in collections over the years, the harder it is to keep track. You get used to the debt changing hands and may not question the validity. By all means, question it.

As soon as you receive the first notice from a collection agency, request debt validation. This will require them to provide proof that 1) the debt exists, 2) that it belongs to you, and 3) they have the right to collect on it. Until they provide such validation, they must cease all collection activity. Pay them nothing until you receive this validation. If they fail to validate, their collection activity must cease entirely and any negative listing they have reported to the credit bureaus must be removed from your credit reports.

How will a charge off affect your credit?

You should expect a charge off to drop your credit scores considerably. Plus, when potential creditors see the charge off on your credit reports, they may decide you are too big of a risk for them to trust you with a loan. This should be of paramount concern if you are in the market for a home or auto loan – now or any time soon – as some lenders may not extend credit to you as long as you have these unpaid balances hanging over your head.

How can you have a charge off removed from your credit reports?

Try to arrange a pay-for-delete. This means that in exchange for you paying the debt, the creditor will remove the charged off status from the account on your credit reports. There is no guarantee that a creditor will agree to this, but you’ll have the best chance if are able to pay the debt in full, and in one payment. That said, you should never agree to pay more than you know you can afford. So before you send a letter requesting a pay-for-delete, make sure you know what your budget will allow.

If the creditor has already sold the debt, all is not lost. You can still try for a pay-for-delete through the new debt collector.

Either way, be sure to get the agreement in writing before you make the payment. (Refer to this sample agreement, which you should send via certified mail with return receipt requested.) Only send your payment in after they have signed and sent the agreement back to you. After they have received and processed the payment, follow up by checking your credit reports to be sure they have held up their end of the deal.

Just keep in mind that charge offs fall of your credit reports after 7 years. If you’re getting close to that point – and you don’t need to apply for credit in the meantime – you can always wait it out. Of course, it’s possible that the statute of limitations in your state is longer than 7 years. In that case, it’s probably a good idea to pay it (if you can) to avoid the possibility of a lawsuit.

Learn more about the pay-for-delete technique.

Note, you can also discharge charge offs in bankruptcy, but that should only be a last resort.

How can you prevent a charge off?

Pay your bills on time.

As long as you stay current on your payments, your account cannot be charged off. If it’s an installment agreement, this means paying the same amount every month. If it’s a credit card, this means making at least your minimum payment, but it’s always best for your credit (and your bank account) to pay the full balance owed.

That said, circumstances beyond your control may prevent you from making timely payments, like a loss of income or an emergency medical situation. Whatever the reason you are falling behind, contact your creditors about it. Together you can talk about the situation and hopefully work out a doable payment arrangement.

Beyond that, look at your budget. What can you cut from your expenses to help you get back on track?

How do you repair your credit after a charge off?

As much damage as a charge off can do to your credit score, there are plenty of actions you can take bounce back:

1) If the original creditor still owns the debt, contact them directly to try and work out a pay-for-delete. Paying them in exchange for removing the charge off will reverse the damage.

2) If the original creditor has sold the debt to a debt buyer:

  • Request debt validation from the new collector. If they don’t validate, the listing must be removed from your credit reports. This won’t remove the original creditor’s charge off status from your credit reports, but it will at least minimize the number of listings related to this one account.
  • Look for reasons you may be able to dispute the debt, an invaluable part of the credit repair process. Inaccuracies could include the name of the original creditor, balance owed, date of first delinquency, or date of last activity. So check your records carefully. If you see a discrepancy, submit a credit dispute to the credit bureaus and/or the debt collector, including supporting documentation.
  • If the debt is verified and accurate, try for a pay-for-delete. If you can get the debt collector to agree to this, they remove the charge off from your credit reports.
  • Look for other inaccuracies on your credit reports that may need disputing. Though they are separate from the charge off in question, getting other errors cleaned up will help improve your credit overall.

3) Build positive credit:

  • Pay all your bills on time, every time
  • Don’t use more than 30 percent of revolving credit
  • Pay off your credit card balances every month
  • If you don’t have a credit card — and your credit is too bad to qualify for one — consider applying for a secured credit card
  • Pay attention to your credit mix
  • Keep new applications for credit to a minimum

If you can get the charge off removed from your credit reports, great. But at the very least, building positive credit will help minimize the impact of a charge off, or any other type of negative listing. It may not be by much, and it may not be evident right away, but over time it will make a big difference.

Learn more about DIY credit repair.

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Have You Looked for These Errors on Your Credit Reports?

June 6th, 2017 · Credit Reports

Have You Looked for These Errors On Your Credit Reports?We think of credit bureaus as the ultimate authorities on creditworthiness. But the truth is, credit bureaus – and the data furnishers reporting to them – make mistakes. The good news is, correcting them can prove invaluable during the credit repair process, and beyond. You’re the only person who you can count on to set the record straight, so check for credit report errors regularly and dispute every mistake you find.

Incorrect personal information

A misspelled name or wrong address on your credit reports may seem like no big deal. But while inaccuracies like these won’t directly impact your credit score, they could signal a bigger problem, like a merged credit report or identity theft. So if you see credit report errors in your personal information – be it your name, date of birth, social security number, address, or employer – let the credit bureaus know of these inaccuracies.

Incorrect account details

Account number

Every account on your credit reports should have an account number associated with it. Take the time to compare these numbers with what you have in your own records. Because if an account number is wrong on your credit reports, it could be an account that belongs to someone else.

Original creditor

If you have a debt that gets turned over to a collection agency, you will see the name of the original creditor noted in the listing on your credit reports. If that original creditor is incorrect, then the collector may be trying to collect a debt that does not belong to you.

Late payment listing you know you paid on time

Just one late payment can knock 100 points off your credit score. So it’s not only important to make payments on time, but also to make sure your timely payments are being reflected as such.

Open/closed status

Open accounts listed as closed

If you have an open credit card that shows up as closed on your credit reports, your overall credit limit will be lower than it should be. If you don’t have balances on any of your credit cards, it won’t make much of a difference. But if the card that’s showing up as closed had a zero balance and you’re carrying balances on your other credit cards, then your credit utilization ratio could increase considerably.

Beyond the immediate impact on your credit score, an open account listed as closed could do damage down the road. Keep in mind, as long as a credit card is open, it will remain on your credit reports indefinitely, doing good things for the length of your credit history (another key factor in determining your credit score). Closed accounts, however, drop off of your credit reports after a certain length of time – 10 years for accounts that were closed in good standing and 7 years for closed cards that show a history of delinquency.

Note, a credit card issuer may close a credit card for inactivity or delinquencies, so be sure to use yours regularly and responsibly.

As for installment loans, it is normal for the account to be listed as closed once you have paid the balance or refinanced it (in which case the original loan will be closed and a new one opened).

Closed accounts listed as open

If a closed account is listed as open, any unpaid balance that is being reported will negatively impact your credit score. Whether it’s a credit card you paid off and closed yourself, or an installment account you paid off, which automatically closed it for you, make sure it’s being reflected accurately on your credit reports.

Note, it’s never a great idea to close a credit card. Your best bet is using it regularly and returning the balance to zero every month. In this way, your credit score benefits from the available credit, the contribution to your mix of credit, and the demonstration of responsible payment behavior. That said, if you have a history of maxing out credit cards – and you don’t believe you can restrain yourself going forward – consider closing the card. Carrying debt like that will do far more harm to your financial situation in the long run.

Account that doesn’t belong to you

If an identity thief gets their hands on your personal information, they may be able to open a fraudulent credit card account in your name. They can then max it out and leave you holding the bill, not to mention a tanked credit score.

If you see an account on your credit reports that does not belong to you, alert the credit bureaus immediately that you are likely a victim of identity theft. (Be sure to alert the creditor, too.) The sooner you can spot fraudulent accounts the better, so if you haven’t already, sign up for one of numerous free and paid credit monitoring services. And consider a credit freeze.

Wrong accounts – as well as incorrect inquiries, collections, and public records – can also be a sign of merged credit reports. Again, let the credit bureaus know of the inaccuracies as soon as possible so you can start the process of getting things sorted out.

Listings that should have fallen off by now

As much damage as some negative listings may do to your credit, it’s not permanent:

  • Credit inquiries fall off your credit reports after 2 years (though hard inquiries stop affecting your score after 12 months and soft inquiries never affect it at all)
  • Late payments, charge-offs, collections, foreclosures, judgments, and paid tax liens fall off your credit reports after 7 years
  • Bankruptcies fall off your credit reports after 10 years

If any of these types of listings remain (or reappear) on your credit reports longer than they should, it is going to unnecessarily hurt your credit score.

Missing accounts

If an account is missing from your credit reports, its absence could hurt your credit score in all sorts of ways. You could be missing out on the benefit of the credit limit, positive payment history, credit mix, and the length of your credit history (the older the account, the bigger the impact).

If it’s a closed account that’s missing from your credit reports, keep in mind that only open accounts will stay on your credit reports indefinitely. A closed account will only stay on your credit reports up to 10 years from the date of last activity.

Finally, remember that creditors are not obligated to report to all three credit bureaus. So if you see a listing on two of your credit reports, but it’s not on the third, that doesn’t necessarily mean it’s “missing” from that third report. It probably just means that the creditor doesn’t report to that third bureau. (To find out which credit bureaus a creditor reports to, just ask.)

Authorized user status

A good way to rebuild bad credit is to become an authorized user on someone else’s credit card account. As long as you and the credit card holder both practice good habits with the credit card, your score will benefit. So if you are, indeed, an authorized user but it’s not showing up on your credit reports, then you’re not reaping the benefits of the arrangement.

That said, there may come a time when you no longer want to be an authorized user on a credit account. If you’ve requested to be removed as an authorized user, but it’s still showing up on your credit reports, then your credit could take a hit from any negative credit behavior (on that account) by the actual credit card holder. In this case, make sure you have taken the necessary steps to remove yourself as an authorized user before disputing the listing with the credit bureaus.

Finally, it’s possible you could be the authorized user on an account – a status you want to keep – but that you are being reported as the as the owner of the account. You don’t want that either. Because it is the owner of the account who is legally responsible for the debt (not the authorized user). If the actual owner of the account charges up a balance that they don’t pay, you could be held liable for it.

Incorrect amounts

Credit limit

How much you charge to your credit cards compared to how much you could charge (i.e., your credit limit) is called your credit utilization ratio. The lower the ratio, the better it is for your credit score – a ratio that most credit experts recommended should range from 10 to 30 percent.

If a credit limit is reported as lower than it really is, then your credit utilization ratio is going to be wrong and your score is going to suffer for it.

Balance owed

How much you owe on your accounts counts for 30 percent of your FICO credit score. This category of credit scoring takes into account:

  • How much is owed on all accounts
  • How much is owed on different types of accounts
  • Credit utilization ratio on revolving accounts (e.g., credit cards, home equity lines of credit)
  • How many accounts have balances
  • How much is still owed on installment accounts

Total balances/debt is also “moderately influential” on your VangtageScore.

So if a balance is reported as higher than it really is, then it is going to negatively affect everything in this category of credit scoring.

Incorrect dates

Date opened

Again, the longer your credit history, the better it is for your credit. So if one of your accounts is showing an open date later than the actual open date, then you’re not getting full credit for the length of time you’ve had the account.

Date of first delinquency

Late payments can only stay on your credit reports for 7 years. It’s the date of first delinquency that determines when the 7 years starts.

As Experian explains:

“The original delinquency date applies to the first late payment in a series. So, if a payment is late today but next month the account is brought current, seven years from today that late payment would be deleted, but the account would continue to be reported with the more current payment history.

“However, if an account were to become late today, the payments were never brought current, it was charged off as bad debt, closed and sent to collection, then the original delinquency date would be today’s date. Even if the bad debt was eventually paid, seven years from today’s date, the closed account and the subsequent collection account would be deleted.”

So if there is an incorrect date of first delinquency on one of your credit accounts, it could mean the negative listing stays on your credit reports longer than it should.

Date of last activity

The statute of limitations is the length of time for which you are legally obligated to pay a delinquent debt. This time period starts ticking from the date of your last activity on the account. So if the date of last activity listed on an account is later than it actually was, then the statute of limitations is going to last longer for you than it should. See what the statute of limitations is in your state.

Multiple listings of the same debt

When you have an unpaid debt, you should expect it to appear on your credit reports. What’s not right is when a creditor and collection agency (or multiple collection agencies) show a balance owed for the same debt. If you have multiple listings like this – for the same debt – dispute it with the credit bureaus. Only one company at a time is legally allowed to collect on a debt from you. It is only that company that should show a balanced owed, and only that company with whom you should make payment arrangements.

Previously removed listings reinserted

It’s possible that the reinsertion of a previously removed listing is in error. However, as pointed out in Common Credit Reporting Complaints (and What to Do About Them), there could be another explanation if you submitted a dispute about the listing in question:

“Maybe the credit bureau didn’t complete its investigation of a disputed item within 30 to 45 days. In that case, the item had to be removed, but could be reinserted if the data furnisher subsequently provides verification of the listing. You can still dispute the listing if you believe it to be inaccurate, but the reinsertion wasn’t illegal.”

Settled accounts not reflected as such

When you negotiate a settlement with a debt collector, and pay it as agreed, you want to see it reflected in your credit reports. Ideally, you want to negotiate a pay for delete, meaning you make the payment and they delete the negative listing from your credit reports. If the collector won’t agree to that then, at the very least, you want the account to show that there is no longer an outstanding balance. If the debt is still showing as unpaid on your reports, it’s going to hurt your credit.

What to Do About Credit Report Errors

If you see any of these errors on your credit reports, dispute them with the credit bureaus. (Refer to this sample credit dispute letter.) Just be sure to check all three of your reports first. Because if the error is only on your Experian credit report, for example, then you should not send a dispute to Equifax or TransUnion.

You can also dispute errors directly with the data furnishers (i.e., the original creditors and collectors reporting the incorrect information about you).

Should the credit bureaus and data furnishers fail to correct the mistake, you can submit a complaint to the Consumer Financial Protection Bureau (CFPB) and the FTC.

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