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Improving Your Credit Report

by: Sahil | last updated: November 13, 2009
Tags: Improving credit report, credit, credit report improvements, credit scores, better credit. FICO

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Improving Your Credit Report

The credit report may contain inaccuracies and discrepancies and these have to be corrected in order to present a fair view of the financial situation and history of the consumer. The Fair Credit Reporting Act (FCRA) is responsible for protecting the consumer rights in case there are discrepancies in the report. The FCRA is a federal law that was passed in order to regulate the collection and use of consumer information which also includes credit information.

The consumer reporting agencies or credit bureaus have various obligations under the Fair Credit Reporting Act. These obligations include providing the consumer with information in their database and correcting any inaccuracies that are being disputed by the consumer. Furthermore, the Credit Bureaus have to provide one free credit report to the consumer every year, if requested. This law came into force in the year 2003 when an amendment was added to the FCRA called The Fair and Accurate Credit Transaction Act.

If any negative information is found and removed by the bureau then the information cannot be reinserted without intimating the consumer about the same and that too within five days time and in writing. The only pre-requisite being, the discrepancy or the negative information should be disputed by the consumer.

The bureau does not remove negative information if the consumer does not dispute it. The FCRA also lays out the timeframe for the negative information to be retained in the report. Negative data such as late payments, bankruptcies, tax liens and judgments may stay on the consumer report for seven years and no more. The only exceptions in this case are bankruptcy (10 years) and tax liens (seven years).

The providers of information about the consumers transactions have a pivotal role to play in the accuracy of the credit report. These providers may include lenders such as banks, financial institutions, credit card companies, and auto finance companies. However there are other secondary providers such as municipalities, government agencies, courts, past and present employers, and third party collectors. These lenders must provide accurate and correct information to the credit bureaus, the onus of investigating any disputed transactions lies on these lenders (creditors), and they must also intimate the consumer about any information (usually negative) that may appear in the future on the consumers credit report arising out of any previous transactions.

Companies that are regulated by the FCRA are not only the lenders and the banks but may also be entities that collect information of the finances of the consumer using the public domain. According to Section 603(f) of FCRA, a consumer reporting agency can be defined as - any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information ... for the purpose of furnishing consumer reports to third parties. This has enabled the expansion of the power of the FCRA which can now control smaller reporting agencies and control the errors and discrepancies in the reports.

The actual process of disputing and correcting the report is not very difficult and all it needs is a letter in writing and copies of the statements in which the inaccuracies can be seen. The letter can be a simple one stating exactly what is wrong or inaccurate, explaining in detail why you think the information is wrong so that the consumer reporting company can easily come to a conclusion and immediately take the required steps to correct the anomalies. Make sure to send the letter with a return receipt requested so that you have proof that you have mailed them a letter.

If the information provider finds that there are discrepancies in the report then it is duty bound to inform all the three major Credit Bureaus about the same. After completion of the investigation, the consumer reporting companies must provide you with the written results and a free copy of the report if there are changes due to the dispute.

At the request of the consumer, the consumer reporting company must send notices to people or entities who have received your report in the past six months. In case the dispute remains unsolved then the consumer can request the reporting company to include the statement of dispute in the consumers file and in future reports as well.