Your credit report provides potential lenders with a means to evaluate the risk involved in approving you for loans. Negative entries on your credit report act like warning bells for lenders. They translate to poor credit which not only reduces your rate of approval for credit but also influences higher interest rates from lenders who decide to work with you.
What Counts as Negative Items on Your Credit Report?
Negative items on your credit report can originate from two main sources:
- Accurate negative entries, including delinquencies, foreclosures, charge-offs, judgments, and collections.
- Common credit errors such as payments wrongly indicated as unpaid or late, inaccurate entries belonging to people with similar personal details, entries of closed accounts indicated as open, duplicated accounts, incorrect balances/ credit limits, and outdated negative information.
That said, the Fair Credit Reporting Act dictates that all information provided to the credit bureaus should be accurate and complete. Accurate negative entries, therefore, stay put until they have aged out, which takes around 7 years. The same Act also gives you the right to dispute errors and obligates the credit bureaus to remove them from your report.
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Having negative information removed from your credit report will put you on the road to better credit which means improved credit approval rates and better interest rates.
Here are a few strategies that can help you:
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Check for Errors in Your Credit Report
Checking your credit report from time to time helps you to catch any errors sooner. The 3 three major reporting bureaus, Experian, Equifax, and TransUnion are obligated by Federal law to provide you with a free yearly credit report upon request. Due to the Covid 19 pandemic, you can now get free weekly Credit reports up to April 2022 from all three.
Once you get the reports, scrutinize them for any irregularities, keeping in mind the common errors mentioned earlier. Also, note that it is not uncommon for the bureaus to receive varying information from different lenders.
Note down the mistakes and how they should be corrected. If possible, circle or highlight these errors on a copy of your credit report which you can then send along with your dispute.
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Dispute the Errors with the Credit Bureaus
You can do this online, via email, or by sending a letter. In any instance, ensure that you precisely detail your complaints and attach or enclose documents that verify your claim. These could be identification, bank statements, documents from lenders or collection agencies, pay stubs, and utility bills among others.
Once you file a dispute, the bureau can now investigate the claim which typically takes about 30 days and follow this up with a notification of their findings.
If the findings concur with your claims, they should update your report and if not, you can review their findings, make the necessary changes and file again.
Pay to Delete
This is an instance where a debt collection agency agrees to strike off a collection account from your credit report once you have paid the debt. Notably, the impact that a pay-to-delete move has on your credit report can vary based on your overall credit profile.
For example, if there’s only one collection account and it is removed, this can help increase your credit score. On the other hand, if there are multiple collection accounts, paying to delete one of them might not have much of an impact.
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Pay-to-delete is not considered illegal. However, collection agencies are not under any legal obligation to remove the collection accounts after you have paid. That said, if you have made such a deal, it is important to have a written agreement before making the payment.
Also, credit reporting agencies do not exactly encourage removing any accurate entries from credit reports due to the Fair Credit Reporting Act.
Work with Credit Repair Experts
If you would rather not do the leg work yourself, you can hire a credit repair agency to handle creditor negotiations and disputes on your behalf. Under the Credit Repair Organizations Act, the agencies operate under consumer protection laws. On your part, be sure that what they promise is achievable lawfully before signing up.
The Final Take
Negative entries on your credit report significantly impact your creditworthiness. Unfortunately, not all these items can be removed. Credit bureaus are obligated to remove erroneous entries and you should take advantage of this.
When it comes to accurate negative details, however, even a pay-to-delete strategy does not always guarantee results. All is not lost though; with patience and the adoption of better credit habits, you can gradually repair your credit.