Details of the Credit Dispute Process and Does the Credit Dispute Process Work?
Better Credit…Better Options
The credit dispute process is very complex, so it wouldn’t make sense to try and explain this entire process in a couple of sentences. Most people don’t know much about how the credit reporting agencies operate and how the dispute process works. One thing most people do know is that credit reports and credit scores are becoming more and more important when consumers are trying to obtain a mortgage, car loan, job, apartment, credit card, or many other types of financing. Unfortunately, the number of inaccuracies on American consumers’ credit reports is increasing at a rapid rate. There are hundreds of millions of Americans with credit reports and thousands of creditors, collection companies, lenders, and others contributing to these credit reports. Inaccuracies are almost inevitable.
There are three main credit reporting agencies: Experian, Equifax, and Transunion. Each company is independent from the others, and although they try to follow the Fair Credit Reporting Act, they all have different policies, procedures, and systems for tracking and reporting consumer information. The amount of inaccuracies on credit reports, and the average number of people with inaccuracies on their credit reports, has risen at an alarming rate. Just over a decade ago it was close to 20%-30% of consumers who had mistakes on their credit reports. Currently about 80% of people have inaccuracies on their credit reports. These inaccuracies could be significantly impacting their credit scores and their ability to obtain financing. There is a growing concern about this among consumers, but the credit reporting agencies maintain that tracking all this financial information is a monumental task, and there are bound to be inaccuracies.
The Fair Credit Reporting Act states that consumers have the right to dispute any items on their credit report that they believe are inaccurate. The credit reporting agencies maintain that their job is to report the information they are given from the creditors and collection companies; this makes the entire problem very difficult to fix. Another huge problem with the credit reporting process is that many people believe that Experian, Equifax, and Transunion are agencies that are here to help consumers. In truth they are businesses, NOT government agencies, and they are paid directly from the creditors and collection companies that report on consumers’ credit.
The Consumer Financial Protection Bureau (CFPB) has recently been appointed to oversee the credit reporting agencies and collection companies. Not long ago, representatives from The National Association of Credit Services Organizations (NACSO) and CRE Credit Services met with the CFPB in a consultant capacity to help give them some insight into what goes on inside the bureaus.
CRE Credit Services owner Simon Webster also spent time in Washington D.C. and, along with NACSO’s Government Affairs Advisor Nick Owens, met with members of the House of Representatives, the Senate, and members of the Financial Services Committee to try to promote credit education and credit awareness in our country. He also met with the Federal Trade Commission (FTC) which was formerly charged with the oversight of the credit bureaus.
In spite of efforts to improve the system, there are still a lot of problems with the number of inaccuracies being reported on consumers’ credit reports and the financial impact it is having on them. Consumers are urged to dispute items they believe to be inaccurate, however the question many consumers have is how to go about disputing inaccuracies and how effective is it? It is true that anyone can dispute an item on their credit report. The credit reporting agencies will then start an investigation on that item or items that you dispute. The biggest problem is that many times the dispute process is so complicated that it is difficult for the average consumer to navigate through it. And many times it just doesn’t work.
There are many consumer protection laws that pertain to consumers such as The Fair Debt Collection Practices Act (FDCPA), The Fair Credit Billing Act (FCBA), The Fair and Accurate Credit Transactions Act (FACTA), The Equal Credit Opportunity Act (ECOA), and for medical information, the Health Insurance Portability and Accountability Act. However, many of these laws more often pertain to the creditors and collection companies as opposed to the credit reporting agencies. So while many people think that disputing items on your credit report launches an investigation that requires the creditors or collection companies to validate a disputed item(s) is simply not true.
Experian has launched a program called e-OSCAR which is a metro 2 compliant, web based, automated system that allows the credit reporting agencies and data furnishers to create and respond to disputes about consumer credit histories. The e-OSCAR program is used by not only the credit reporting agencies (Transunion, Experian, Equifax, and Innovis), but by independent credit bureaus or affiliates, and mortgage reporting companies. Automatic Credit Dispute Verifications (ACDV’s), which the e-OSCAR system supports, are initiated by the credit reporting agencies on behalf of the consumer and sent to the corresponding data furnisher to update the information if needed. The problem is that if the account in being inaccurately reported by a data furnisher based on the information they have in their system, why would it change just because someone disputes that item? The answer is many times it will not change, because they are not required to validate the item they are just matching up data between their systems. The data in their system is most likely going to show what is being reported which is why this dispute process has been ineffective for so many people – even if the information truly is inaccurate.
It is always best to initiate the dispute process through the credit reporting agencies or hire a credit repair company to do so on your behalf. However, if the dispute process doesn’t work, the previously mentioned consumer laws can be used to force creditors and/or collection companies to validate the debts on your credit report. The problem is you are dealing with extensive laws and very rich and powerful creditors and collection companies. It can be very difficult for the average person to hold them accountable. It is very important to really understand all of your consumer rights, the laws that protect you, how these laws are enforced, and the internal policies of the creditors and collection companies. If you do hire a lawyer or a credit repair company, it is important to make sure they are well versed in both the dispute process and the laws pertaining to creditors. You do not need a lawyer to do credit repair and many times they may be more inexperienced than a competent credit repair company.
Gauging the experience and reputation of a credit repair company is very important. Many credit repair companies are just equipped to perform simple credit repair activities: they will send out a basic form letter on your behalf. However, considering how complicated the process can be and the importance of your credit rating, it would be wise to hire a more experienced credit repair company that can achieve the most satisfactory results. If you are looking for the most experienced credit repair company to help you achieve an accurate credit report, then you should contact CRE Credit Services.