What happens when the credit bureau receives your dispute? What items on your credit report should you dispute? Your knowledge going into the credit dispute process can be the difference between success and failure.
In this article, you will get a behind-the-scenes look at how credit bureaus investigate credit disputes. You will also learn a few credit secrets that can help you boost your score and avoid lawsuits from debt collectors.
What Is a Credit Dispute?
A credit dispute is a process for challenging inaccurate, untimely, misleading, incomplete, or unverifiable (“questionable”) information on your credit report. You have the right to challenge and dispute this information because of the rights afforded to all Americans through the Fair Credit Reporting Act (FCRA).
Even if you believe some or all of the negative items on your credit report may be true, the FCRA allows you to challenge them based on the fact that the FCRA expects all data on your credit report to be backed up by verifiable information and data proving the account is yours. Because if we consumers did not have the ability to dispute or challenge this information, ANYONE or ANY BANK could place inaccurate information on our credit reports.
How Credit Bureaus Process Disputes
One way to dispute something on your credit report is to file a dispute with the credit bureaus. This method is called an indirect dispute because rather than taking your dispute directly to the furnisher itself, you are asking the credit bureau to investigate the claim on your behalf.
The credit bureau is then obligated to conduct a “reasonable investigation” into your dispute, which typically includes contacting the furnishing party and asking them if there is any validity to your credit dispute.
But unfortunately “reasonable investigation” in this case is a myth. And it’s disturbing how much of a myth it is.
Credit bureaus must operate efficiently and effectively to return an annual profit. To do this, all three of the major credit reporting bureaus – Experian, Equifax, and TransUnion initially use an automated process to investigate disputes.
The e-OSCAR System
The system they use is called e-OSCAR. The e-OSCAR system is a web-based, third-party automated system that converts your dispute letter to an Automated Consumer Dispute Verification form (ACDV). When you initiate a dispute with a credit bureau, the credit bureau generates an ACDV that contains the information about your dispute. e-OSCAR is universal, meaning it is the only communication method used in the dispute process and therefore it is used by all three credit bureaus.
The credit bureau then sends the completed ACDV form to the data furnisher using the e-OSCAR system. Keep in mind that data furnishers are the creditors, debt collectors, and other entities that report information about your credit activity to the credit reporting agencies.
At this point, the furnisher investigates the claim, updates the ACDV, and sends the form back to the credit bureau. For investigative purposes, e-OSCAR is highly inefficient for both the credit bureaus and the furnishers. It emerged as the best solution for the credit reporting agencies to respond to credit disputes within their required 30-day window.
But it is anything but the best solution for the consumer.
Problems With e-Oscar
An ACDV simply consists of a few items: identifying information about the consumer in the credit bureau’s file; one or two codes summarizing the consumer’s dispute; and, in some cases, a one-or-two-line free-form narrative field that supplements the dispute codes. The credit bureau employee selects a specific dispute code from among 29 offered by the e-OSCAR system, such as “Not his/hers” and “Claims account closed.” These codes are often contained in a dropdown “pick list.”
This automated system is heavily dependent upon these standardized dispute codes. Yet these codes are entirely inadequate in many instances to properly convey information about a dispute. These disputes often consist of a detailed letter with supporting documentation, painstakingly written by concerned consumers. All of these documents, including a consumer’s careful description of a specific dispute, fashioned to make detection and correction easy, are reduced to a two or three-digit code that the bureau employee who glances at the material believes best describes the dispute.
The code is sent to the furnisher without supporting documentation provided by the consumer – documents such as account applications, billing statements, letters, and payoff statements that can show overwhelming and even conclusive proof. These critical documents are left out of the investigation process, which itself may violate the FCRA.
Most shockingly, of these 29 codes, the credit bureaus use the same four or five codes for the vast majority of all disputes.
Your Rights As a Consumer
Under the Fair Credit Reporting Act(FCRA), you can file a dispute directly with the credit bureau that issued your credit report. And nothing is stopping you from sending a letter of dispute to the furnisher in question as well.
A letter to the furnisher will allow you to see the same information that the credit bureau is receiving, and allow you to highlight differences in their responses.
This tactic has been used to win lawsuits against furnishers and credit bureaus alike, especially if the furnisher is telling the bureau to verify inaccurately reported information.
Patience and persistence are your allies. You have the right to see the information the credit bureau used to obtain verification of reporting accuracy, as well as the details of the verification itself.
You will want to reply to unsatisfactory disputes with a written request for verification. And do everything in writing.
Secrets to the Credit Dispute Game
The following are expert tricks that could greatly influence your dispute investigation and significantly boost your credit score in as little as two weeks.
1. Be Persistent
Because of the universal use of e-Oscar credit bureaus and furnished, you now know both DIY credit repair and credit repair agencies are up against an uneven and unfair playing field. This is where persistence and drive are required in order to continue to write dispute letters even in the face of rejection.
It’s not about wearing the credit bureaus and furnishers down. It’s a matter of being persistent until your logic and persistence are rewarding. It’s doggedness. And a certain ferocity.
2. Use Both Direct and Indirect Disputes
We suggest you send your letters to both the credit reporting agencies and the furnishers. This way, you know all the documentation is getting to both parties. Plus, furnishers tend to pay more attention to your highly detailed, information-rich dispute letter.
3. Use the Two-Year Rule
Dispute negative items that are less than two years old.
FICO provides the most widely used credit scores and the go-to authority on credit reporting services. It has confirmed that negative items less than two years old on your credit report, beginning from the current date and dating backward two years, have the largest impact on your credit score.
The strategy is simple. Attack any and all of the negative items on your credit report that fall within the two years. You can fight the negative items from five years ago after correcting the more recent items.
And there’s even a chance your creditor will waive late fee charges in exchange for a promise of payment. Make sure to get the promise in writing before closing the call with the customer service agent. This strategy adheres to Pareto’s principle: 80% of the results come from 20% of the effort.
4. Pay Down All Credit Card Balances and Dispute Account Balances Online
At the center of this strategy is your ability to pay off your rolling credit card account balances. Recall credit utilization from the 5 Factors That Affect Your Credit Score. In this case, you need to pay your rolling account balances down to zero, or at most a 30% utilization rate.
As soon as you can do this, you will want to file an online dispute with the credit bureaus for your credit balances. This will prompt the credit bureau to investigate your account balances. When they see your balances are paid down, the credit bureau will immediately update its system, increasing your credit score in the process.
A written dispute is not necessary for this strategy for a couple of reasons. The first reason is that a written dispute via mail is a time-consuming process, requiring a minimum of 30 days to go into effect.
The second reason is that you are not disputing important negative items such as inaccuracies, deliquencies or late payments. You are simply paying down balances you would have paid down anyway. You are filing the dispute online to have the credit bureau quickly check for updated information in your creditors’ databases.
You could benefit from this strategy if you are looking to purchase a house and your credit score is not getting you the interest rate you need. You may also benefit from this strategy if you are in the market for a new vehicle or hoping to sign a new lease with a landlord.
This is the one exception to the rule to file all parts of your credit dispute in writing. You could see a quick increase your credit score, by 30 – 50 points, within two weeks. You will find it difficult to find another strategy with such impressive gains.
5. Stop Debt Collectors from Suing You… and Stop Their Annoying Phone Calls
If you’re receiving calls from creditors or collectors, they have probably threatened legal action. To take you to court. To sue you. Here might be one way to think about the risk.
About $2,000 worth of debt per account is a good threshold to consider whether or not you are at risk of being taken to court.
If you have over $2,000 in debt to an individual creditor or debt collector, the chances of legal action by them against you increase markedly. If you have below $2,000 of debt to an individual creditor or collector, you may be rewarded by taking your chances.
A cease and desist to the furnisher would legally prevent them from contacting you by any method. Their only option, should you write such a letter, would be to take you to court.
A more beneficial option for you is to write a letter telling them to stop calling your phone. They will still be able to contact you via mail. This is a powerful strategy to take back control from harassing collectors and set boundaries to optimize your health and well-being.
6. Use Reliable Dispute Letter Templates
CreditInfoCenter.com has built a reputation on offering free credit repair letters over the past two decades. Here is a complete list of Free Credit Dispute Letters To Fix Your Credit. These letters are extremely reliable and proven to work. Once you figure out the items you want to dispute, select the letter that matches what type of item you are disputing.
It’s important that you personalize these letters with information like your name, address, and a few other items.
Final Thoughts
Credit bureaus use an automated system to process your initial dispute letters. The system is called e-OSCAR and it quickly verifies your information across different data repositories.
Unfortunately, it mostly checks your information against the very databases that hold the inaccuracies. Credit bureaus use this system to fulfill their legal obligation to respond to your dispute letter within 30 days.
Do not be discouraged when you receive the initial dispute response from the credit bureau. That means the fight has just begun! Always remember that you have rights as a consumer that your credit organizations are legally obligated to uphold.
Being cognizant of your rights, persistent in your communication, and patient with the process will do great things for you in your credit dispute. There are secrets to the credit dispute game, such as the two-year rule, that can help you greatly along the way.
You want to apply these expert tips to boost your credit score and give yourself the best chance of having a successful and quick dispute process.
