- Regularly review your credit report to ensure all your credit information is accurate and up-to-date.
- If you find an error on your credit report, first contact your creditor to clear up the issue. If that doesn’t work, file a dispute with the credit reporting agency via certified mail.
- To remove legitimate negative items on your credit report, write a goodwill letter to your creditor and be prepared to negotiate a payment plan.
Late payments and other negative information on your credit report can have a dramatic impact on your credit score and can remain on your credit report for seven years.
Your credit score is what lenders use to determine your reliability as a borrower. As such, if you’re looking to buy a house or a car in the near future it’s in your best interest to make sure that score is as high as possible. After all, a lower credit score could mean higher interest rates on mortgage loans, as well as auto loans — which could cost you thousands of extra dollars in interest payments.
As such, if you do see inaccurate information on your credit report, it’s well worth your time to try to get it removed. Here, we’ll review the tactics you can employ for successful credit repair — whether the negative items you find are legitimate or not.
Regularly Review Your Credit Report
A great credit score can be a valuable personal asset. To protect this asset, review your credit score and credit report regularly, and especially prior to applying for a loan. Keeping an eye on your credit is crucial because if you find inaccurate information, you can address it quickly and minimize the damage to your credit score. Look for include accounts that don’t belong to you, personal information errors, a paid account that’s still listed as unpaid, and any negative items that have expired but are still on your report.
There are a number of ways to regularly check your credit with the three credit reporting agencies: Experian, TransUnion, and Equifax. First, you can order a free copy of your credit report from each of the credit bureaus at AnnualCreditReport.com that will be delivered to you once a year. However, because you only receive the report annually, you might not be able to address issues in a timely manner. If you want more timely information that includes your credit score (the free reports do not), consider paying for your online credit report.
Luckily, there are a variety of credit monitoring services that provide a free credit report update on a monthly basis. In fact, some banks and credit card companies offer this service for free just for having an account with them.
Now, let’s say you find a negative item on your latest credit report. What should you do?
Well, first you need to verify that the information is incorrect by checking your bank statements. Depending on the legitimacy of the report, you can take several courses of action.
If You’re Not at Fault
If you find a late payment or other negative item on your credit report that is illegitimate, the first items to note are the lender, account number, date, and payment amount. Once you have this information securely recorded, your first option is to dispute the error directly with the lender.
Contact Your Lender
If an incorrect late payment was recorded for your credit card, the simplest route is to call the number for the credit card company on the back of your card. Often they will find the error and remove it without any further action on your part.
However, if it can’t be resolved so easily, you may have to provide proof that you did, indeed, pay your bill on time. In this case, you need to write a dispute letter, enclosing a copy of your bank statement that shows proof of your on-time payment. Luckily, the Federal Trade Commission makes the process fairly easy by providing a sample letter, which you can fill in with the details of your situation.
Once you file your dispute, the creditor must investigate your claim within 30 days. If the investigation reveals that an error was made, they’ll notify all three credit bureaus who will then update your report. Generally, it may take anywhere from a month to a few months for the updates to be reflected, so be patient, but continue to review your credit report to make sure your it’s updated with the new information.
Once the lender agrees that there was an error, be sure to get confirmation of the mistake in writing. This will come in handy should there be any disagreement about the legitimacy of the late payment claim in the future. The lender should also agree to refund you any late fees that may have been charged as a result of the error.
On the other hand, if the lender does not acknowledge that your credit report shows an error — or your credit report continues to show an error despite an update — you can ask for the lender to notify the credit bureaus of the dispute so they can record it on future credit reports. You can also contact the credit bureaus directly to dispute the issue.
Contact the Credit Bureaus
If you choose to go directly to the credit bureaus, you have several options. First, you can dispute your credit report online — Experian provides a simple interface to file a dispute — but you’ll have to choose from a menu of pre-populated reasons for the issue. Due to these limitations, an online dispute doesn’t allow you to fully tell your side of the story, which can limit the chances that the credit bureau will decide in your favor.
While it might be more convenient to file an online dispute over a negative item on your credit report, using good old-fashioned certified mail is usually best. It allows you to explain yourself thoroughly, provide ample evidence to document your case, and prove beyond a doubt that there was a mistake.
In order to submit your dispute via mail, send a dispute letter similar to the one you originally sent to your creditor. The letter should include your full name, date of birth, and Social Security number. List each item on your report that you think is inaccurate, as well as the associated account numbers, and the specific reasons you feel the information is incorrect.
In addition to the letter itself, enclose:
- A copy of a pay stub or tax document that includes your Social Security number
- A copy of a government-issued ID card (such as a driver’s license)
- A copy of a utility bill, bank statement, or insurance bill
To further strengthen your case, you can also include supporting documentation, like a notice from the creditor that the late payment was inaccurate, or a bank statement that shows you paid your bill on time. You may also choose to include a recent copy of your credit report, circling the incorrect items. Again, once your credit report dispute is filed, the credit bureaus must investigate within 30 days, according to the Fair Credit Reporting Act.
If the dispute process is not successful — even though you did nothing wrong — or you feel that you’ve been treated unfairly, contact the Consumer Financial Protection Bureau to register a complaint.
If You Are at Fault
While it’s always a good idea to ensure your credit report is accurate and free of any errors that could adversely impact your credit score, there may also be legitimate negative items on your report. While the first course of action is to ensure you have good financial habits — e.g. you always pay your bills on time and in full — you may still be able to get negative items removed from your credit report.
Send a Goodwill Letter
In the case of a late payment, you can send a goodwill letter to your creditor to ask for what is known as a “goodwill adjustment.” Usually if you have a good history with the creditor, they’re willing to forgive a late payment and update your credit report. To be effective, such a letter should include:
- A short history of your interactions with the creditor
- An explanation of why your payment was late
- A request to remove the late payment from your credit report
Be Prepared to Negotiate
If, on the other hand, your history with the creditor is less than stellar, a goodwill letter may not be enough. In that case, your best option is to call your creditor directly and negotiate a payment plan. For instance, you might offer to do one of the following to avoid late payments in the future:
- Set up autopay so your creditor knows they can expect timely payments
- Create a payment plan in which you agree to pay off a certain amount of the existing balance each month
- Pay a large amount upfront, and agree to pay off the rest over a specified period of time
- Pay off the balance in full with a one time, lump-sum payment
Keep in mind that if a negative item on your credit report is legitimate, there is no guarantee that you will be able to get it removed. But it never hurts to try.
Foster Healthy Financial Habits
According to a Federal Trade Commission report, one in five American consumers have an error on their credit report. And even more troubling, 5% of Americans will endure an error so serious that it can result in them being overcharged for auto loans, mortgage loans, insurance policies, and other important financial obligations.
So keeping an eye on your credit report is a healthy financial habit. Whether you discover an error — or have actually done something that negatively impacts your credit score — it’s crucial to keep your credit report as spick-and-span as possible.