Over
the past several months we’ve covered what happens when you file a
dispute with the credit reporting companies (CRCs) because of a
fraudulent entry in your file, a confused or “mixed” credit file,
identity theft or if you’ve filed a dispute via a credit repair
organization. And although it’s certainly important to understand your
rights and the chronology of events that take place under each of these
aforementioned dispute scenarios, they are not the most common type of
dispute received by the credit reporting companies.
The most
common type of dispute is instead one that involves a non-complex
credit report error, such as an incorrect balance on an account, a
misreported late payment, or some other simple, straightforward
inaccuracy. No fraud is alleged, and no credit-repair organizations are
involved: It is just a basic error correction.
To provide you
with some perspective on the reasons why these disputes occur: Each
year, the CRCs receive billions of pieces of credit-related information
from well over 10,000 data furnishers—which is credit speak
for lenders, card issuers and other companies that supply the CRCs with
credit data. The CRCs do an excellent job of maintaining credit file
accuracy but, given the volumes involved, mistakes can still happen.
The Fair Credit Reporting Act (FCRA) gives everyone the right to challenge the information in their credit files.
Initiating a garden-variety credit dispute, such as challenging an incorrect balance, triggers a series of events:
First,
the CRC opens an investigation and contacts the credit furnisher that
provided the contested information. An erroneous balance in a credit
file entry is one of several errors typically attributable to
inaccurate reporting by financial institutions or collections agencies.
The
CRC informs the furnishing party of the nature of your dispute and
asks it to confirm the information in question. This is done by means
of a standardized electronic form called an Automated Consumer/Credit
Dispute Verification form “ACDV.”
Upon receipt of the ACDV, the
furnisher performs its part of the investigation, typically by checking
internal records to determine whether the contested figure is correct.
If the furnisher concludes, for instance, that a disputed balance was
reported correctly, it will “confirm” the accuracy of the account
information it provided the CRC, using the same ACDV form it received
from the CRC. Conversely, if the furnisher concludes that the balance
was reported incorrectly, it will use the ACDV to provide a corrected
balance amount.
Once the CRC receives the ACDV back from the
furnisher, it either changes the balance (in the case of a correction)
or leaves it unchanged (per a confirmation). The CRC then closes its
investigation and notifies you, the consumer, of its outcome. Under the
FCRA, this entire process is free to the consumer and must be
completed in no longer than 30 to 45 days.