Credit Infocenter

How to Write a Credit Dispute Letter

November 22nd, 2019 · Credit Repair

Errors are common on credit reports.  In 2013, an FTC report found that one in four consumers had errors on their credit reports. How do errors occur on your credit report?  There are a number of ways;  the credit history of someone with a similar name can find its way on to your report, in other cases, the creditors make an error when reporting information to the credit bureaus.  With over 200 million active credit files managed by 3 credit bureaus, there are bound to be mistakes in data entry. 

Errors on your credit report can lower your credit score and adversely affect your ability to secure credit, obtain a mortgage, get an optimal insurance rate or get an unsecured credit card.  The law gives you the right, free of charge, to contest anything on your credit report that you contend is inaccurate. 

You have three options when disputing errors on your credit report:  online, in writing and over the phone.  It is always better to dispute an error in writing, as this gives you a paper record of your dispute.  This article will help you craft such a letter. 

First Pull Your Credit Report 

You can get a copy of your credit report FREE from annualcreditreport.com.  There are three credit bureaus that you will be pulling your report from: Equifax, TransUnion and Experian.  While it is common to find advice on the internet which says to only pull one of your reports every 4 months in order to spread out the monitoring of your reports, I say it is better to get all three at once.  Information is not shared among credit bureaus and often you can have glaring errors with one bureau while the other 2 show no problems.  Also, you never know from which credit bureau a creditor will pull your credit (or if they pull all three), so it is better to get a complete picture right away.  After you pull your reports from annualcreditreport.com, print out a copy of each. 

Review Your Credit Report History

Most credit reports will divide up your credit report into sections:  Adverse History, Accounts in Good Standing, Collections and Public Records.  The areas of your credit report you want to focus on are the Adverse History, Collections and Public Records. Anything listed in these sections is an item of concern.  Take a close look and take a highlighting pen and make note of ANY information that is inaccurate.  Information that is inaccurate INCLUDES dates and amounts – not just payment history.  I’ve often seen success in deleting an entire listing when the date the account was opened was incorrect or the original amount of the loan was wrong.  When you have highlighted all of the information, it is time to start crafting your letter. 

How Many Letters Should I Write?

You should write a letter to each of the credit bureaus that have reported any inaccurate information, a maximum of three letters. 

What Information Should I Include?

Begin your letter by writing your full name, your address and your social security number at the top of the letter, along with the date.  You can address the letter “To Whom It May Concern”. 

In the first paragraph of your letter, you can simply state that you pulled your credit report and noticed some inaccurate information and you wish to dispute it and have the bureau conduct an investigation.  There is no need to cite the Fair Credit Reporting Act or make threats.  Just be clear. 

The next paragraph(s) should list your disputes. 

Should I dispute Multiple Items in One Letter?

The answer to this question is a resounding YES.  Under the Fair Credit Reporting Act (FCRA), the credit bureaus must investigate each item that you dispute.  However, you must be clear:  you can’t just say my report is inaccurate, you must be explicit.  The person reading your letter has a limited amount of time to decipher it – is it obvious at a cursory glance what is being disputed?

To help with the readability, in your letter, use a whole new paragraph when describing each of your dispute.  In each dispute paragraph, list:

  • The account number of the item (the account number will often be incomplete to protect your privacy, just write down whatever account number is written on your report).
  • The information that is inaccurate. 
  • Why you believe it is inaccurate. 
  • List any proof that you may be including with your letter. 

Close your letter

Sign your name and list any attachments (documentation) that you are including with the letter. 

What Documentation to Include with Your Letter

ALWAYS include a copy of your photo ID that clearly lists your name and your address.  If your address has changed, then include a copy of a utility bill to prove you have moved.  Even if you don’t include any documentation proving your dispute, your letter should have at least one attachment – your ID.  Your credit information is highly sensitive information and the credit bureaus will absolutely not just take your word for it that you are the person disputing the information on your report, you must prove who you are and that the address you are listing is correct.  Why the address?  The credit bureau will reply to your letter via the mail, so they want to be certain they are mailing the sensitive information to the right address.   

If you have other documentation that proves you were not late, the account is not yours, the amount of the loan is incorrect, the date the account was opened is incorrect, by all means include it with your letter and include the document in your list of attachments.

If you do not have documentation that the information is inaccurate, you may still dispute the information, and I recommend you do.  The real burden of proof is on the creditor reporting the information.  Documentation just helps along the process. 

Make a Copy of Your Letter and the Documentation

For your records, you need a copy of what you are sending.  Therefore, when the bureau writes back, you can verify what you disputed and that the investigation actually took place.  If the item was not investigated, the credit bureau could be in violation of the FCRA, which could lead to an easy deletion.

Always Send the Letter Registered Mail, Receipt Requested. 

Under the FCRA, the bureaus have 30 days to investigate your claim.  If they do not complete their investigation within 30 days, they must delete the entire listing.  Sending the letter registered, receipt requested means that someone must sign for the letter and a copy of the receipt along with the date the letter was signed will be mailed back to you.  Having this receipt is real power in your hands. 

Example Letter

Date

Name
Address

Social Security Number

Credit Bureau
Bureau Address

To Whom it May Concern,

This letter is a formal complaint that you are reporting inaccurate credit information.

The following information needs to be verified and deleted from my credit report as soon as possible:

CREDITOR AGENCY –  Account #123-34567-ABC.  This account shows that I was late in July of 2019.  This information is incorrect, I was not late on this account. 

CREDITOR AGENCY – Account XXXX-123-0980.  This account is not mine. 

Please delete the above information as quickly as possible.

Sincerely,

Your Signature

Attachments: 

My driver’s license, utility bill and proof that I was not late on Account #123-34567-ABC in the form of a canceled check. 

Finally

Writing a dispute letter is really pretty easy and will take you less than an hour to complete.  Not sure your letter looks correct?  Here are some other example letters.

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4 Ways to Fix Bad Credit on Your Own

November 15th, 2019 · Credit Repair

Having a bad credit score can impact other areas of your life besides getting a mortgage or a credit card.  It can affect your insurance rates and your chances for employment.  If your credit could use a boost, here are some ways to do it.

Before You Start

Before we get started, there are a few pieces of information you should have in front of you.  First, you should understand what constitutes good credit, which is having a good credit score, leading to the question, how is a credit score calculated? A credit score is calculated based on 5 factors:

  • Your payment history – 35% of your score
  • Your credit utilization (amount you owe vs. your credit limit) – 30% of your score
  • Length of credit history – 15%
  • New Credit – 10%
  • Types of credit used – 10%

Second, we need to have current, accurate information on the current status of your credit.  To get your credit picture, you need your credit report and your credit score.  To get your credit report, go to annualcreditreport.com.  To get your credit score, there are a number of different ways to get them, free and paid.  Here is a complete list of the free ways to get your score.

A good credit score is anything above 720 (credit score ranges are from 350 to 850, with 850 being the best score).  However, once you get to 680, many credit products will become available to you, so if your credit score is low, aiming for 680 is a good short-term credit goal. 

Bad Credit Fixing Strategies

1. Dispute inaccurate information on your credit reports.  Since your payment history is the biggest chunk of your score, the first thing to do is to make sure that bad credit history is accurate.  Review your credit report by looking at the Adverse History, Collections, and Public Records sections.  These sections will list any negative credit history entries.  Make sure that all the credit information, including the date, the amounts and the payment history, is correct.

If you find errors, even slight ones, write a dispute letter to correct the listings.  Do not dispute over the phone or online.  Most people find success with this method, as usually 10% of listings in a credit dispute letter get removed on the first try.  Once you get the results of the dispute back, check your credit score again to see what kind of progress you have made.  If you feel you need to redispute the information, make sure the disputed information in the listing is different, or supply information why the initial dispute was correct.

Sometimes even disputing the minor bits of information about an account can result in having the listing removed from your credit report, which can really boost your score.  Also, when correcting information on your credit report, make sure that your name, address, social security number and employment history is correct, as this can prevent credit merging.  Credit merging occurs when information from someone who has a similar name or address winds up on your credit report.

2. Pay down credit card balances.  Since this is the second biggest factor in determining your credit score, this is a highly effective way of getting a credit score boost.  First of all, figure out your credit utilization rate for each credit card.  It’s not that difficult:  look at your credit report and divide your balance by the total credit line.  If you are over 30% on any one or all of your cards, work on paying down those balances to no more than 30%.  This will have an immediate effect on your credit score and this method will work the fastest to improve your credit.  For the biggest improvement in score, try and get your credit utilization rate to 10%, which is the optimal amount. 

3. Open a secured credit card account.  This method hits both the payment history scoring bucket of your credit score along with the new credit credit scoring bucket:  you will open a new account and you will promise to keep the payment history on this new card as perfect as possible (don’t bother getting the card if you can’t do this).  There are a number of credit card products on the market that cater to the less-than-stellar credit population.  Some of them have competitive interest rates and low to no annual fees. 

A secured card is obtained by placing a deposit with a bank into a savings account or just having the bank hold it as a security deposit.  A credit card is issued with a total credit limit equal to the security deposit or savings account.  If the credit card holder defaults on the card, the security deposit or money in the savings account is forfeited.  This greatly decreases the risk to the bank and therefore a person with bad credit can qualify for one of these cards. 

When getting a secured card, pay attention to the fees, the amount of security deposit and the credit card interest rate.  Also, try to get one that will allow you to migrate to over to an unsecured credit card program once you prove your credit worthiness. 

4. Get added as an authorized user or open a new account jointly with someone who has good credit.   Doing this obviously requires a lot trust from your proposed credit card partner.  If you get added to an account or sign up for a joint one, the other person on the account will have responsibility for any charges that you make on the cards.  However, the results of a successful partnership will be an improved credit rating for you, and potentially the co-signor.

If you get added as an authorized user, make sure it is to an account with a low balance (you don’t want a high credit utilization rate) and a good payment history.  Being added to an established account will add age to your accounts (10% of your score) and a positive payment history (35% of your score).

If you open a new account with someone, you are hitting the new credit credit scoring bucket, and also the credit utilization rate, as most new cards start with a credit limit of $2500 or more.  Keep that balance low and you will see your overall credit utilization rates lower to improve your score.  Obviously, you will also want to make sure to pay this new account on time, so as to not hurt your co-signor’s credit rating and your own.  By establishing this new account, your perfect payment history will start to positively affect your credit in about 6 months to one year. 

Finally

There is really no quick fix to fixing your credit, this is a long-term project, taking 6 months to a year.  Time heals all credit wounds, even the most severe, as long as you make the commitment to keeping your payment history clean and your credit card balances low. 

For the complete guide to fixing your credit, review our credit repair guide

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5 Things You Should Know Before Getting a Student Loan

November 8th, 2019 · Credit Repair

Making it through college is hard enough without having to deal with student loans and debt. Luckily, we live in a world where student loans are easy to apply for and easy to get. In part, this is a beautiful thing, because it enables people who otherwise wouldn’t be able to afford a higher educational degree the chance to earn one. 

On the other hand, taking out student loans can be dangerous. There are a lot of loopholes and complicated financial strings that are usually attached to loans. So take a minute and keep reading to learn more about 5 important things you should know before getting a student loan. Armed with more knowledge, you’ll be better able to make smart financial decisions as you navigate the world of student loans. 

1. Know What You Need

First off, don’t borrow more than you need to. Student loans are meant to help you live within your means while you’re busy with school and aren’t making much at work. You can actually calculate what the right amount is for you. Try to borrow an amount that will keep your payments low–around 10%–of your monthly income, after taxes. 

This will help you avoid overreaching and paying more than you need to on your monthly payments. 

2. Choose Federal Loans Over Private Loans

Before exploring any other avenues, try for a federal loan first and fill out your FAFSA. There are two types of federal loans: subsidized and unsubsidized. Subsidized federal loans don’t build up interest while you’re in school, while unsubsidized do. 

Federal loans are easier to get because they don’t require good credit history, and the repayment plan is based on your income. We recommend taking out a private loan only after you’ve taken out as many federal loans as you can. 

3. Your School Will Help

Talk to your financial aid office. They’re familiar with the ins and outs of loans and can help you with any questions or concerns you may have. After you’ve applied and been approved for a loan, your school takes care of the rest.

The money comes to the financial aid office and is applied to your student account. You’ll be refunded any excess money after all the initial fees are met. 

4. Loans Come with Fees and Interest

This is a fundamental thing to understand about student loans: you will pay and owe more than whatever amount you received. This is due to fees and interest rates that always come with loans, no matter what. Federal loans have a fixed rate on fees, whereas private loans will determine the interest rates and fees for each individual. 

5. Student Loans Are Limited to Certain Things

While a student loan can seem like a big relief for your finances, keep in mind that student loans can only be used for educational expenses, meaning anything that is needed for you to pursue your education. This could be clothes, books, rent for housing, or a laptop.

Now that you understand these important facts about student loans, you will be ready and equipped to find one that is right for you and your unique situation.

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