The 411 on credit reporting system

Learning how to legally remove inaccurate negative and out dated credit information from your credit report is vital to your financial health. Having a low credit score is not a life sentence. You can easy improve your credit score with just a little understanding of how the credit reporting system works. Credit influences just about every facet of our lives in terms of how we manage and use credit. Your credit score/FICO scores determine if lenders will extent you credit and how much credit the lender will recommend for you. The higher your FICO scores the less you have to repay in loan fees. In today’s time your credit report and FICO scores impact your entire financial way of life. The fact that most individuals have no concept of how the credit reporting structure works may cost them hundreds of dollars in unnecessary finance charges.

There are very few business transactions that you can perform that will not require running your credit report. Many industries from auto insurance to cable television companies now request a good credit score. Several utility companies will deny you service if your credit score is too low or you had a prior negative payment history with their company.


Experian, Transunion and Equifax are three major reporting agencies to be concerned with. These bureaus maintain records on millions of consumers and borrowers. Thousands of credit grantors such as credit card companies, banks, retail stores and utility companies inform these credit reporting bureaus of their updates. These updates typically are made on a monthly basis. The information sent to credit agencies includes the customer’s usage of their credit and the payment of their account. Disputing negative items on your credit file is your right as a consumer by law as long as you believe that the information is inaccurate, outdated or unverifiable.

In writing a dispute letter to the credit reporting agencies include the following – Personal information, name, address, Social Security number and date of birth. Send your letters by certified mail return receipt for legal proof that you mailed your letters to the credit agencies. This preserves the 30 day timeline which by law the credit bureaus must respond back to you within the 30 days. You don’t have to be fancy or technical in your dispute letter to the credit bureaus; the most important thing is to be clear about what you are disputing and why you are disputing it.

Include any documentation you have that backs up your dispute, like cancelled checks showing timely payments etc. State in the letter how this wrongful information has caused you harm. Always provide a reason for your dispute and your desired result of the investigation, example “never late, not my account” etc. The credit agencies cannot begin an investigation without it.


Most consumers are unaware that a collection company cannot collect a debt from you without the necessary documentary (signed contract) or evidences. Most times the collection agency does not possess the proof to validate the debt which leads to the deletion of the account from your credit report. For example when you receive that first collection notice, by law you have 30 days to request what is called debt validation demanding the collection company to prove you owe the debt.


While concentrating on removing damaging information from your credit history, it is equally important to add positive credit to your credit report in order to improve your credit score. Adding positive credit to your report will aid in balancing out some of the harmful information within your credit file. Paying off old debts is a great way to enhance your score, but you also need to keep in mind not to raise the balances on other accounts. You need to establish new credit so the adverse accounts start to gradually dissipate away and will be restored with current and positive accounts.

Restoring credit takes at least 30 days to a year to complete with the right approach and the discipline to maintain it. Here are just a few examples of how to add positive information to your credit file once you have removed the negative information from your credit report.

Obtain a Secured Credit Card

For those who cannot get accepted for an unsecured credit card, a secured credit card is an exceptional option. With this type of card, you will be making an initial deposit into an account to secure the credit line on the card. You can get this card even if you still have some poor credit within your credit report. By placing $500 into a savings account, you will be allowed to charge up to $500 on the credit card.

Although you are securing your credit with a deposit, payments must be made on time and the account balance should be kept minimal. Have the credit card company report to all three credit bureaus as this will aid in raising your credit score.

Small installment Loan

You want different types of credit types, which include revolving credit (credit cards) and installment accounts. Your local credit union is a good place to request for a small installment type loan. Credit unions are very forgiving to those who have less than ideal credit and you can get a small period loan (no more than a year or two) to show you can pay on time.

Department Store Credit Card

Several stores offer credit without great concern for the credit standing of the applicant. These stores usually can be found in businesses with small products. Here is a listing of creditors who frequently offer credit to those lacking much credit history:

•Department Stores •Furniture Stores •QVC •Appliance Stores

Brett Mitchell is a leading expert and consultant on issues of consumer credit and home ownership. Mr. Mitchell is also a motivational speaker, author, consumer credit advocate that enjoys sharing and educating his audiences on wealth building information through his not for profit organization JOURNEY TO WEALTH Inc. For further information, comments, queries or clarification you may contact me at 678-318-1703; [email protected].

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