Every one LOVES when they are successful in getting negative items removed from their credit reports. It is pure nirvana! The Number One question I am always asked is what will happen if it comes back on? Well this will happen; A 106 point drop!
This actually happened to a student who attended one of my Credit is Power Workshops. She was able to get 12 collections removed using the information she received and 3 of them came back. The reason why it caused such a catastrophic drop to her score is because the FICO scoring system viewed them as a brand new collections (explained further here). So, what do you do when bad credit comes back?
The Dispute Process
When we dispute information on our credit reports we are exercising our consumer rights under the Fair Credit Reporting Act (FCRA), Section 611 to be exact. Here, it let's us know that our credit reports should be 100% Accurate, 100% Verifiable, & 100% Timely. If any of these factors are missing, the item must be deleted. The law gives the bureaus and the company reporting the adverse information 30 days to investigate and if they are not able to do so, the item must be deleted. Similarly, if the bureaus do not hear anything from the creditor by day 30, the item must be deleted.
When Deleted Items Are Reinserted
When bad credit comes back, in most cases, a creditor will contact the bureaus and verify the legitimacy of your debt sometime after day 30, which will result in the bureaus reinserting the credit item back on your report. This is perfectly legal. However, specific guidelines outlined by the FCRA must be followed. I'll explain.
Per FCRA Section 611(5)(B) Requirements Relating to Reinsertion of Previously Deleted Materials; the creditor who is reporting the information to the bureaus must certify that the information they are giving them is 100% complete and accurate (Certificate of Accuracy). The credit bureaus must also notify the consumer (you) in writing no later than 5 business days after they have reinserted the item back on their credit report. The written notice must include a statement that the disputed item is being reinserted and provide the contact information (name, address, telephone number) of the business that has verified the item so that you may reach out to them for further dispute/information; they'll also state that you can write a 100 word statement to place in your file.
What I Recommend
1. If an item has been reinserted on your report and the company furnishing the data to the credit bureaus completed a Certificate of Accuracy; ask to see it. Section 607 of the FCRA is pretty clear about the bureaus having to maintain accuracy and if a consumer requests to see documentation proving that the items on their credit report have been verified for accuracy and timeliness, they are required to provide that information to us (Section 609).
2. Dispute with the company reporting. If it is a Collection Agency that has verified the information, send them a validation letter asking for copies of everything that they have proving that you are liable for this debt (sample letter found here). If it is an Original Creditor, send them an Investigative Letter, asking for documentation of your history of the account from the moment it was opened to when it was closed. Per Section 623 of the FCRA, you are able to do this
3. Ask to see the procedures the bureaus use in preventing the reappearance of negative information on our files. Per that same section in the FCRA (611(5)(C)); the bureaus should have procedures in place to prevent this from automatically happening and ruining a consumer's credit rating. Why do you want to see it? To see if they followed it. If they didn't even follow their own procedures AND failed to follow the procedures outlined in the FCRA, you have a nice FCRA violation suit to prepare.
4. If you never got the written statement of reinsertion, re-dispute with the bureaus. Simply tell them they are in violation of FCRA (611)(5), and to permanently delete the item.
5. If you owe it, negotiate a settlement or pay in full in exchange for a deletion of their reporting to the credit bureaus.
TIP: Compare a new credit report to the old credit report to see if all of the information is the same. In the case above, one of the collection agencies reported the exact same debt under a different account number, sneaky right? But remember, their job is to use every method possible to get you to pay that debt and ruining your credit rating is a good motivation for consumers, especially if they're looking to make a purchase soon.
This particular client ended up sending validation letters to 2 of the bureaus and a dispute letter to the bureaus for the 3rd one and all 3 were deleted. Her scores have been restored and more because she's building new positive lines of credit as well.
Hope this helps!
If you'd like to learn how to apply everything I've detailed here, check out my Credit on Fire Academy! My members are doing more than increasing their credit scores; they are TRANSFORMING them!
If you'd like 1-on-1 assistance, visit www.SoarMyScores.com!
