No. of Recommendations: 14
OK, I'm gonna give you a mini-seminar on how to use the protection of the Fair Credit Reporting Act to your benefit when credit grantors tattle on you to the credit bureaus. The Federal Trade Commission refers to the credit bureaus as "consumer reporting agencies," (CRA) and so shall we. A little background:

In this country, even common criminals are innocent until proven guilty. No one has the right to accuse you without proof. You, however, don't have to defend yourself because it's the prosecution's burden to prove your guilt.

Your credit report is the prosecution's "indictment," if you will. Sometimes your credit report says you did good and sometimes it says you did bad. We're not alarmed about the good stuff; we're only concerned with the bad stuff because the bad stuff keeps us from getting what we want (good loans).

Actually, I don't think either of these debts were sent to collection agencies. I just called the gas companies directly to resolve the debt since they were the ones listing me in default.

It's a sucky state of affairs that even when the utilities do not extend credit, they still have the right to subscribe to one or all three of the CRAs and claim that you don't pay your bills on time or, in the case of the account going to collection, at all. Even when the account has not yet been sent to an outside collection agency, it still shows up on your credit report as being a collection account. Because of this, it still wields the impact of a collection account--the dreaded Score Factor Code #22. A SFC #22 will always be in first position on your credit report and, as such, weighs in at 35% of your total credit score.

The most effective strategy of "credit correction" is to either (1) deny everything or (2) deny everything. The ONLY reasons you give when you dispute are (1) not my account; please delete, or (2) paid as agreed; never late. That's ALL! Don't say a single word more about the situation because it doesn't matter what your excuse--valid or not--is.

In the case of a collection account, dispute as "not my account; please delete" and make 'em drag out every piece of evidence they have to prove it's your debt.

You actually write in and say "this is not my account"?

Yup. There's a form that the bureaus provide expressly for this purpose. It may be available on their web site--I don't know, you'd have to go check:

Don't they have all the proof they need to say, "of course it's your account; here's your social security # and everything"?

They may, but it's not profitable for them to bother providing said proof in most cases. It's the unprofitable and impractical nature of credit verifying that results in derogatory items being removed, even if they're accurate. HOWEVER, if the account IS verified, you still have the right to request that they disclose who verified it, when they verified it and in what manner they verified it. This is called "Request for Procedure Description." In my seminar, we call it "Round Two." You may not get the result you want by simply disputing the trade ("Round One") and so Round Two is necessary. They're saying, "account verified," to which you reply, "Oh, really? Prove it."

How does this [dispute] letter actually get the mark off your record? Please explain this to me as if I'm six years old if anyone has the time.

The CRAs are in business to make money by assisting their customers in making sound business decisions. They make money by GETTING and GIVING information about you to credit grantors on a subscription basis. The CRAs call their customers (the credit grantors) "subscribers." While the CRAs have an interest in protecting what they perceive to be the integrity of the information they gather, they also handle millions of bits of information every day. They often take the path of least resistance. If a collection account has a zero balance, and you claim it isn't yours, are they going to devote a man-hour or two to verify it? Heck, no. They'll simply hit the delete key. It's more profitable to do so.

As for the assertion that failing to pay these bills was entirely my fault and I am getting my just deserts, all I can say is this: I called to cancel the accounts, asked how much I owed on my forthcoming bill to pay everything off and sent in that amount.

I'm not asserting anything. It's a sucky system, but it's the system we have. And if I've heard, "I called to cancel the accounts ..." once, I've heard it a thousand times. It doesn't matter. The derog is on your account and we have to work to get it off. That's why in my workshop I have a sign with the international symbol (red circle with diagonal slash) and the words "whining" in the background. The minute someone launches into their "story," I point at the sign. We have too much work to do to listen to anyone's story. If we listened to everyone's valid reasons why the derog shouldn't be there, we'd never get anything done. And the CRAs ... and your credit grantors ... and the collection agencies don't care, either. Pay up or take your medicine. Or deny everything.

but I am not the first person to find Fair Isaac's policies overly simplistic. Many argue that they basically have a monopoly on the credit rating universe and, as such, are exempt from trying too hard to improve their internal mechanisms to enable people to repair their credit more efficiently.

Personally, I think that Fair Isaac's days and methodologies are numbered. There are simply too many stories like yours to allow the contents of one's credit report to have such an impact on important life decisions as a home loan. But the problem is not the Fair Isaac scoring system or the CRAs! They merely report the news; they don't make it. Unless and until there are consequences to the reporters of the news (your creditors), the system won't develop the efficiency you seek. If American Express sends erroneous information to the CRAs, there is no consequence to them for doing so. You bear the burden of answering the indictment, mailing your disputes, monitoring the drop dead dates, etc., etc., ETC.!

Anyway, I predict that Fair Isaac will someday soon be the subject of the biggest class action lawsuit we've seen in this country in a long time. Consumer groups are already gathering steam.

Back to now ...

If you can't negotiate a delete, then pay the account and subsequently dispute at the CRAs as "not my account; please delete." In the unlikely event that a paid collection account is actually verified, then drag the CRAs through the mud and make them prove it's yours. The maddening thing about the whole process is the time that it takes. Each "round" takes 30 business days plus 5 for mailing. That's why the smart consumer gets his credit report months ahead of his plans to actually shop for a loan. And, of course, find someone (usually a mortgage broker) who can help you wade through the morass and get the junk off.

You can always wait for the passage of time to remedy your credit derogs. Or you can steel yourself to do battle with the CRAs. You can do the work yourself or you can hire someone to do it for you. It's just clerical work, but there are services out there who will routinely send disputes to the bureaus for months on end until the crud comes off. Go to and see how you can hire someone to do the work for you somewhat inexpensively. I recommend that you do it yourself, however. Many of my seminar attendees, after a few months, remark, "Whew! I'll never be late with my bills again!"

Any questions? :-)

Catherine Coy
Mortgage Broker

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