Credit Basics
When does the 7-year
period start?
If you have collection or
charged off accounts listed on your credit report, you'll want to read
this section carefully. It may be confusing at first, but because mistakes
are often made, you'll want to make sure you understand it.
For collection or charged-off
accounts, the 7-year clock starts ticking 6 months from the date you first
fell behind leading up to the collection or charge-off. It does not start
when the account was placed for collection or to the date of last
activity.
For example: Let's say your
credit card payment was due on June 1, 1998. You lost your job and couldn't
make your required payments. In November of 1998, the issuer charged off
your account (wrote it off as a bad debt). In January 1999, it was placed
with a collection agency. By law, the collection agency is supposed to tell
the credit bureau when it first reports the collection account that the
original date of delinquency was June 1998 and that should start the 7 year
reporting period.
Warning: Beware of
collection agencies that tell you they have ways of reporting the collection
account "forever" to the credit bureaus if you don't pay. That's simply not
true.
What do I do
now?
Once you have your
credit report and understand how long information can be reported,
you're ready to create a strategy for building better credit.
Step #1: Fix
mistakes.
It's not unusual to find
wrong or outdated accounts. You may want to check for the following
items:
Accounts that don't
belong to you. Keep in mind, though, that if you cosigned for
an account, it will likely be reported on your credit report and treated as
your own. If you were only an authorized user on an account that fell behind,
the creditor may be willing to remove it from your credit report since you
weren't legally responsible for the bills.
Incorrect
balances. While you can expect it to take 30 - 60 days for
information about your loan balances to be updated, you shouldn't see
completely wrong information. For example, an account that was discharged in
bankruptcy or settled through a collection agency should show a zero
balance.
Duplicate
accounts. If an account was turned over to multiple collection
agencies, only the most recent collection agency account should appear.
Otherwise, it can look as if you have more accounts in collections than you
actually do.
Old
accounts. You may find old accounts you don't use anymore
still listed. Even if an account is paid off, it may remain for the legal
time limit. Fair Isaac Company, creator of the popular FICO credit scores,
recommends that you don't close old accounts because doing so may hurt your
score and won't help improve it.
To dispute wrong information,
you can contact the credit reporting agency that is listing the wrong
information, the credit grantor that is reporting it, or both.The advantage
of going to the credit reporting agency is that they are better equipped to
handle disputes. If they cannot promptly confirm the information on your report
with the source, by law it must be removed.The disadvantage is that the major
credit bureaus don't share information with each other, so you'll have to check
all three credit reports and dispute mistakes through each one that has the
wrong information.
The advantage of disputing mistakes
directly with the credit grantor is that the lender must supply any correction to
all the credit bureaus that have the wrong information.The disadvantage is that
creditors aren't always set up to handle disputes and you may find it harder to
get your problem resolved promptly.
Whichever approach you choose, put
your dispute in writing, type it if your handwriting isn't clear, and make it
brief yet describe the problem clearly. If you have any documentation to prove
your side of the story, include it.The credit bureau or credit grantor must
generally get back to you within 30 days to tell you the results of their
investigation. Keep copies of all the letters you send and get back.
| 
