The credit bureaus make ginormous profits by selling credit reports. "To the big three, credit reports are like flakes of gold. Each credit report issued brings in revenue ranging from 50 cents (when delivered in bulk to large banks) to $15 (as when a report is sold to an individual consumer). Experian reported revenues of $3.1 billion in the year 2006, Equifax reported $1.6 billion, and Hoover's Company Reports estimated private Trans Union's revenue at $1.2 billion."" Bryan Achoido and Jon Swartz, Zero Day Threat, The Shocking Truth of How Banks and Credit Bureaus Help Cyber Crooks Steal Your Money and Identity, Sterling Publishing Co. (2008).

In stark contrast, handling consumer disputes and correcting errors in credit reports are purely added expenses, a drag on profits. "Thus, credit reporting agencies generally prefer to handle disputes as cheaply as possible." Evan Hendricks, Credit Scores and Credit Reports, How the System Really Works, What You Can Do, Privacy Times, Inc. (2004). In a nutshell, not only is there a peculiar absence of any market incentive to correct errors in credit reports. It's the polar opposite: the cost of handling consumer disputes reduces the profits of the credit bureaus. This explains, to a large degree, why trying to correct errors in your credit report often can be a nightmarish, time consuming, Alice in Wonderland experience.

Step # 1 - Obtain Your Equifax, Experian and Trans Union Credit Reports

You should pull your credit reports from each of the Big Three credit bureaus– Equifax, Experian, and Trans Union– once every 12 months. Most consumers, including those in Colorado, are entitled to one free credit report per year from each of the Big Three. Georgia residents, however, have a legal right to obtain two free credit reports per year from each of the Big Three. You can either contact the credit bureaus directly via the contact information listed below. Alternatively, go to www.annualcreditreport.com, or call 1-877-322-8228 to simultaneously pull your credit reports from all three credit bureaus.

Although there are a few smaller regional credit reporting agencies scattered around the country, the Big Three dominate the credit reporting marketplace. Therefore, all efforts to correct errors in your credit reports should be focused exclusively on Equifax, Experian and Trans Union.

Credit reporting agencies:

Equifax
Equifax has its corporate headquarters in a diabolical office building on Peachtree Street in the fancy, high-flutin, high rent Buckhead district of Atlanta. But don't mail anything to the Buckhead address. Use the addresses below instead:
P.O. Box 740241
Atlanta, GA 30374
To report fraud: Call 800-525-6285 and write to address above
To order credit report: 800-685-1111
(free copies only obtained by mail)

Experian (formerly TRW)
701 Experian Parkway Allen TX 75013
To report fraud: Call 888-397-3742 and write to address above.
Fax: 800-301-7196
To order credit report: 866-200-6020
(free copies only obtained by mail)

Transunion
P.O. Box 6790
Fullerton, CA 92834
or
1561 E. Orangethorpe Avenue Fullerton, CA 92831
or
P.O. Box 390, Springfield PA 19064-0390
To report fraud: 800-680-7289 and write to address above.
To order credit report: 800-888-4213 or 1-800-916-8800
(free copies only obtained by mail)

Click here to see a video produced by the U.S. Department of Treasury explaining how to pull your free credit reports. The video is short and does contain some helpful information. Credit Report Video

You are also entitled to a free credit report if:

Credit Scores - You may request a credit score from consumer reporting agencies that create scores or distribute scores used in residential real property loans, but you will have to pay for it. Credit scores are numerical summaries of your credit-worthiness, at a given point in time, based on information in your credit reports. In some mortgage transactions, you will receive credit score information for free from the mortgage lender. Because your credit scores are calculated by analyzing the information in your credit reports, it is important to make sure that your credit reports contain only accurate information.

Step # 2 - Carefully Review the Information in Your Credit Reports

A credit report contains three sections:

Be sure all of the identifying information (i.e. the Credit Header data) is accurate. Any inaccurate Credit Header data should be corrected through the reinvestigation/dispute procedure. Even seemingly innocuous errors, like an incorrect former address, could indicate that your credit file is in danger of being mixed or merged with another consumer's credit file. Click here for an explanation of Mixed Files. In the payment history section, determine whether the information reporting is accurate or not. Usually, the worst information appears first. This includes public records (such as bankruptcies, judgements, liens and foreclosures), collections, charge-offs, and late payments (30, 60, 90, 120 days). Most derogatory information may remain in your credit file for up to 7 years. Bankruptcies may remain for 10 years, tax liens forever until paid; then 7 years.

Then the good information appears. Accounts with notations like "pays as agreed" or "never late."

The inquiry section is important because it discloses what companies have pulled your credit report and why. A credit report can be used only for "permissible purposes" as outlined in the Fair Credit Reporting Act. A credit report can not be accessed merely to snoop on an adversary or by a company where you may, at some point, complete an application for credit. Car dealerships have been particularly notorious for pulling the credit reports of customers who are merely browsing. Of course, the salesman wants to quickly determine whether a particular customer is credit worthy and, thus, whether to invest any time trying to sell him a car. So the car salesman will pull the window shopper's credit report. But this illegal.

You should be able to recognize most of the companies listed in the inquiries section because you will have authorized the inquiry by, for example, applying for credit at that company. However, there is a legitimate inquiry known as a "soft inquiry" that you may not recognize. The most common soft inquiries are made by banks and credit card companies seeking to pre-qualify consumers for credit. In addition, existing creditors may legitimately pull your credit report regularly to determine whether to increase, decrease or cancel a line of credit or adjust the interest rate.

Step # 3 Try to Determine the Cause of the Errors in Your Credit Reports

There are numerous potential causes of errors in credit reports. Some of the more common causes of errors are as follows:

Furnisher Errors – A company, such as a bank, department store, cell phone company or collection agency, that provides information to a credit reporting agency that will be included in your credit report is called a "furnisher." Furnishers sometimes simply provide the credit bureaus with inaccurate or incomplete information or submit correct information in bulk using an outdated magnetic format known as Metro-1. Metro-1 does not sync well with the data bases of the credit bureaus. Metro-1 was updated to a newer version called Metro-2. Nevertheless, many furnishers continue to use Metro-1.

Public Records Errors – The credit bureaus hire sub-contractors to cull through public records for information like judgements, tax liens and bankruptcies. The credit bureaus are quite proficient at finding this derogatory information and inserting it into consumer credit reports. But after a tax lien or judgment has been has been paid-in-full and satisfied or debts discharged in bankruptcy, this updated information should be reported. Unless the public records are re-checked, the updated, correct information will not be included in your credit report. If there is a public records error in your credit report, then the credit bureau usually is at fault.

Identity Theft – Please review section on identity theft.

Incomplete Files – A credit report may be incomplete because it does not paint a complete picture of the consumer's credit record and other history. This may occur when information concerning preliminary actions that reflects negatively on the consumer is included without any follow up as to an eventual outcome that is more favorable to the consumer. For example, a credit report may record that a lawsuit was filed but not that it was dismissed or may record a debt without showing that it was ultimately paid-in-full.

 Mixed Files – A mixed file occurs when information from one consumer's report is mixed or merged with another consumer's report. This can happen when two people have similar nuggets of personal identifying information. The credit bureaus do not actually maintain a separate and distinct credit file for each consumer. A credit report is not assembled until a company like a lender (called a "subscriber" in Fair Credit Reporting Act parlance) requests a report. To pull a credit report, the subscriber must provide the credit bureau with a portion of the consumer's personal identifying information such as name, address, date of birth and, from time to time, a social security number. Applying this identifying data, an algorithm decides which information in the credit bureau's data base relates to or matches that consumer. This is the magic moment that the credit report is assembled. Problems arise when two consumers share a few bits of personal identifying information because their credit reports will merge. If this happens, then information from one consumer's report will be included in the other consumer's report and vice versa.

Step # 4 - Open a File, Document your Disputes in Writing, and Send First Class Certified Mailings to the Credit Reporting Agencies and to the Furnisher(s).

Dispute in Writing – A consumer may lodge a dispute online at the credit reporting agencies web sites or by placing a telephone call to the credit bureau. But unless you must meet a time sensitive deadline to delete the inaccurate information, it is best to do your disputes in writing. Although credit reporting agencies do sometimes comply with the Fair Credit Reporting Act by permanently deleting inaccurate information from a credit file within 30 days from the date that it is disputed if it can not be verified; you may not be so lucky.

Disputed inaccurate items in your credit report may not be deleted by the credit bureau. And even if deleted, these items may re-appear, without notice, in your credit report sometime in the future. So you should get yourself a file folder and place copies of all relevant documents--such as letters, dispute forms, affidavits, receipts, ect.--in the folder. Keep the folder indefinitely.

Although more convenient, there are four down sides to disputing by telephone or online: 1) it may be difficult to prove months or years hence (say in a court of law) that the dispute was, in fact, ever made; 2) the precise date that the dispute was received by the credit reporting agency will be difficult to prove; 3) supporting documents can not be submitted in an online or telephone dispute; and 4) due to the latter three problems, an experienced Fair Credit Reporting Act attorney may be less likely to file a lawsuit on your behalf should that become necessary.

Nevertheless, if you choose to dispute using the internet or telephone because it is more convenient, then at least get a notebook and create a dispute log. The log should include the date of your disputes, and describe exactly what you communicated to the credit bureau.

Written Dispute Package Content – You can either draft a short, concise letter explaining the precise nature of the dispute, such as the sample letter located here, or fill out the dispute form included along with the credit report you received from the credit reporting agency. The letter or dispute form must include your name, home address, date of birth, social security number, the name of the company reporting the inaccurate entry, the account number for the disputed item, a clear statement that the reporting is an error (e.g. "This account does not belong to me."), and a demand that it either be deleted from your credit file or changed to reflect accurate information. In addition, request that the credit reporting agency provide you with a statement of the manner in which the dispute was investigated including identifying all persons and companies it contacted during its reinvestigation. Be as specific as possible about what information you want deleted or changed.

The credit reporting agencies are required to consider all pertinent supporting documents provided by the consumer– Copies of supporting documents--such as a cancelled check, police report, fraud affidavit, bankruptcy discharge, or anything else that tends to prove that the disputed information is inaccurate--should be included in your "Dispute Package." Keep the receipt from the post office proving the date of the mailing and staple it, along with the return receipt when received, to a copy of the letter or dispute form. Again, put copies of everything in your file folder for use in future disputes and/or potential litigation.

First Class Certified Mailings– All disputes should be sent via certified mail, return receipt requested. This way, you can track online at www.usps.com the delivery status of the certified mailing, and confirm when your dispute package was received. If you have never before sent a certified mailing, then ask a post office employee for assistance. Once the dispute is received, the credit reporting agency has certain fixed deadlines to meet under the Fair Credit Reporting Act in handling your dispute. Frequently, these deadlines are not met.

Thus explains why it is important to send certified mailings: you will be able to prove, in a court of law if necessary, when your dispute(s) were sent and received.

The address used to request copies of your credit reports from the Big Three are not the same addresses where disputes must be mailed. Recent addresses for the dispute departments of the Big Three are listed below. But you really need to research and confirm on your own at the time of mailing where to mail the disputes because the dispute department addresses frequently change. Recent addresses for the Big Three dispute departments are (were) as follows:

 

At the risk of redundancy, check and confirm the addresses as best you can before mailing a dispute because the addresses and phone numbers for the Big Three frequently change.

Mail Certified a Copy of the Dispute Package to the Furnisher(s)

Although a consumer is not legally required under the Fair Credit Reporting Act to send a copy of the dispute package to the furnisher(s); it is strongly advised that you do it any way. The furnisher is the company–such as a credit card company, department store, collection agency or cell phone company--that furnished to the credit reporting agency the information that you want deleted or changed. In this regard, think of the credit bureaus as merely repositories of information provided to them by furnishers. Typically, after receiving your dispute, the credit reporting agency will contact the furnisher, such as a lender, via the automated CDV system explained above. Click here for an explanation CDV system. The credit reporting agency will reduce the dispute to a two- digit code, and then transmit the code to the furnisher. In response, the furnisher will check and see if the information it furnished before has changed. If it has not, the odds are that the furnisher will "verify" the accuracy of the disputed item.

In practice, many furnishers respond to CDVs by simply re-checking the document that contains the error; that is, the same document that caused the original erroneous reporting. If the furnisher verifies the accuracy of the information, then it probably will not be changed or deleted from your credit report even if the information is, in fact, erroneous. Furthermore, even if the disputed item is deleted, it may be reinserted into your credit report by the furnisher in the future unless the furnisher corrects the error in its own records. Thus explains why you should send a copy of your dispute package certified first class mail to the credit bureaus and the furnishers.

It is quite interesting indeed that a provision in the Fair Credit Reporting Act unequivocally places the burden on the credit reporting agencies to send copies of all supporting dispute documents that they receive from consumers to the applicable furnishers. 15 U.S.C. 1681i(a)(2)(b).

Yet after this law went into effect, the credit bureaus simply chose not to follow it. Why? Because it is more profitable for the Big Three to ignore this law rather than comply with it. Consequently, like Bill the Lizard in Alice in Wonderland--who does all of the work for the White Rabbit-- consumers must do the work that Congress delegated to the credit reporting agencies; namely, sending copies of their dispute packages to the furnishers.