There are millions of people with errors in their credit reports and some don’t even know it and others cannot get the errors fixed. In fact, CBS news estimated that as many as 80% of the public has errors.
The first step, as en educated consumer, is to look at your credit report. Review it carefully. You can get a free copy of your credit report from the three major credit bureaus: Experian, Equifax and Transunion at annualcreditreport.com. You can get this free copy once annually and I recommend you put a date on your calendar to get it each year.
Errors in your credit file can create significant problems for you such as:
a. The failure to qualify to purchase a home, refinance a mortgage or get a car loan
b. A credit score that is lower than it should be resulting in your being charged higher rates for credit
Most people are able to get the credit report errors fixed simply by following the steps outlined by the Fair Credit Reporting Act:
- Write to the credit bureau and tell them of your error and with the documentation (the evidence or proof) that you are correct. This could be something like a cancelled check or statement copies showing that a debt has been paid.
- Send the same item to the creditor (the company that loaned you money).
- Hopefully, within 30 days, you will get a notice that the error has been fixed. But in many cases, you will get no result.
Understand that the credit report bureaus will simply take your request and pass it along to the creditor. If the lender then reports back to the credit bureau stating that the information is accurate, the credit bureau will simply send you a letter stating that they have verified the information in their files. Since you have already also sent the same request to the creditor, if they also state that they believe the information they have (the error) is accurate, you are then stuck. There is little you can do under the law, until you read how I solved this problem.
On two occasions, with two different well-known financial companies. I wasted several months attempting to get my credit report errors fixed through the normal channels first with the credit bureaus and then directly with the creditors. I even employed a firm which advertises prolifically about helping to fix credit errors and they simply sent the same letters I had already sent and they got the same result. I then found the ultimate solution. I sued the creditors in small claims court. Within 60 days my credit reports errors were fixed and I even received $2,500 from one lender as damages.
Using small claims court is tremendously effective for five reasons:
- It is fast. Your total time investment is maybe 4 hours as compared to hours, weeks and months of delay when you do this the old way by sending letters and making calls
- In some states, the creditor cannot deal as they would like. Normally, any formal legal action is handled by their legal department and they have a well-structured process for responding through legal channels (by having a contract attorney in your state fight you). However, in a few states. their lawyers are of no value as lawyers are not permitted in small claims court. This means that the creditor, in order to appear or respond, must do so with their non-legal employees. This is inconvenient and expensive for them as they don’t have a system for this. It’s much easier for the creditor to just fix your credit report.
- In states where the creditor can use their legal department to respond, the problem is that the response must be by appearance at a hearing. In other types of court, issues can be handled by mail and fax. Not so with small claims – only personal appearance will suffice. This is expensive because someone representing the creditor might need to get on a plane and invest a lot of hours and expense in dealing with your complaint. It’s much easier for the creditor to just fix credit report.
- Filing a formal legal action is the only way to get the attention of anyone with intelligence or authority at the creditor (and for these credit report issues, a small claims action is much better than the normal type of suit that people file). Until you have your small claim delivered to your creditor, you’ll be dealing with clerks and automatons who simply repeat the same company policy over and over and you get nowhere. Once your claim arrives at their office, you get the attention of intelligent people; in many cases, it becomes quickly apparent to them that they need to change the reporting on your credit report.
- It is inexpensive to use the small claims system. You get the attention of the right people at the credit bureaus and the lender and make yourself a thorn in their side for under $100, which is the typical cost of filing a claim in small claims court.
- Don’t waste weeks and months of time and have lots of grief and irritation. You can learn how to use a small claims to fix your credit report errors fast.