7 Secrets the Credit Bureaus Don't Want You to Know

When you apply for credit, such as a mortgage or car loan, your lender will want to know something about your credit history. To get that information, he'll contact a "credit bureau."

A "credit bureau" is an agency that keeps records of consumers' credit information, including past payment history, debts, employment, and public records (bankruptcies, judgments, tax liens, etc.).

In the United States there are 3 major credit bureaus...Experian, Equifax, and Trans Union. They make billions of dollars a year selling copies of consumer credit reports to creditors and mailing lists.

It's important to understand that the bureaus are only record keepers. They're not government agencies, and they wield no legal power. But that's not to say they have no influence over your life.

In fact, they wield tremendous power in that your credit report can mean the difference in getting a loan, or not getting one. And if you ARE able to get a loan, a bad credit history can cost you many tens of thousands of dollars in higher interest payments.

Your credit history can also impact your chances of getting a job, and can even have an adverse effect on your personal relationships.

But don't think for a moment that you're powerless to do anything about it. Always remember...knowledge is power! Most people just aren't very knowledgeable when it comes to credit bureaus, and the credit bureaus would like to keep it that way! Knowing a few facts the bureaus would rather keep from you will empower you to fight back.

1. Credit reports are filled with errors

The credit bureaus keep literally millions of records. Given those numbers, it's not hard to understand that mistakes are going to occur. But the NUMBER of mistakes is shocking. Here are some estimates of the percentage of credit reports that contain errors.

Attorney General of NY 1/3
Consumers Union 48%
US Congress 1/2
Charles Givens Organization 90%

So regardless of which figures you believe, it's clear that the credit bureaus are keeping (and selling) literally millions of inaccurate credit reports. And even one of those inaccuracies can shatter your financial life.

To curb such abuses Congress passed the federal Fair Credit Reporting Act in 1972. The FCRA gives consumers the right to challenge any information in their credit report. The onus in on the credit bureau to verify any disputed information.

2. Credit bureaus make money selling negative information

If you have a bad credit history, the credit bureaus have a vested interest in keeping it bad. Remember...they make money selling NEGATIVE information. In fact, some lenders deliberately buy lists of consumers who have bad credit.

And why would they target the "high risk" borrowers? To put it simply...INTEREST RATES! Lenders know they can charge exorbitant interest rates to people with bad credit, and that they have little choice but to pay those rates or forgo credit altogether.

3. Even accurate information on your credit report must be removed if it is not verified

As mentioned above, the FCRA gives consumers the legal right to dispute negative information on their credit report, and if the credit bureau doesn't verify that information with the creditor "within a reasonable period of time" (established by subsequent ruling to be 30 days) the bureau must "promptly delete such information."

Now you may have read somewhere that "information that can be verified cannot be removed." But this statement is misleading. Just because information "CAN" be verified, doesn't necessarily mean it will be!

Under the FCRA, ANY information (accurate or otherwise) that isn't verified within 30 days FOR WHATEVER REASON, must be removed. Maybe the credit bureau was too slow in contacting the creditor, the creditor too slow (or too busy) to reply...or maybe an employee was having a bad day and neglected to perform his duties in a timely manner. It doesn't matter. The information must be verified or deleted within 30 days regardless.

4. Credit bureaus must re-investigate a disputed item every time you challenge it

By law credit bureaus must investigate any item you dispute EACH and EVERY TIME you dispute it, regardless of whether you've disputed that same item in the past.

Sometimes, after disputing an item a number of time, a bureau will attempt to weasel their way out of further investigation. They'll send you a letter telling you they have already investigated on a prior date. The proper reply is to remind the bureau that under the FCRA, they must re-investigate, and threaten to involve your state Attorney General if they do not.

5. It's perfectly legal to get credit repair help

There are agencies (called "credit repair agencies") whose business is to help consumers get negative items removed from their credit report. Needless to say, the credit bureaus won't be thrilled if you hire such help in your credit repair efforts.

If they even suspect you're getting help, you may receive a nasty letter telling you that it's illegal. DON'T BELIEVE IT! It's a lie! In fact there are laws that govern such agencies. How could this be the case if it were illegal?

Don't let them scare you. Remember, improving your credit history in YOUR best interest, but NOT theirs! If you get such a letter, the only thing that need concern you is whether to pitch it in the trash can or the recycling bin.

6. Disputing online is NOT in your best interest

The bureaus will encourage you to dispute your negative items on the Internet instead of by snail mail. After all, it's faster, easier, doesn't waste paper and resolves your dispute faster.

All true...only problem is, it's more likely to resolve the dispute in THEIR favor, NOT yours!

Verifying negative information costs the credit bureaus time, manpower, and money. And since they have 30 days to investigate your dispute, time is on YOUR side. Unless you happen to be the CEO of the credit bureau, what reason would you have to tip the odds in their favor by disputing online?

7. You are not required to use the credit bureaus' preformatted forms

After your first dispute, the credit bureau may send you a preformatted form to fill out. NEVER use their forms. The purpose of the form is to make their job easier and faster...and to (you guessed it!) make it easier to verify negative information.

Always write your letters on blank paper. Include your name, SS# and address along with the items you're disputing. Use the account names and numbers on your credit report. NEVER use the credit bureaus' reference numbers.

As for their form? Pitch it!

It's the nature of the powerful and arrogant to try to bully and intimidate the "little guy" with misinformation, especially if the "little guy" is uninformed and susceptible to scare tactics.

But you needn't be either. If you learn nothing else form this report, learn this...you CAN fight the credit bureaus, and armed with the proper knowledge, YOU CAN WIN!

First go to http://www.annualcreditreport.com/ and get a free copy of your credit report. Then get a good book on "Credit Repair" or hire a credit repair agency, and begin disputing negative information on your report.

And don't feel guilty if your efforts to improve you credit costs the bureaus some extra time and money. Considering how much they're making selling YOUR information, they're not likely to go "belly up" anytime soon!

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About the Author

Jim Eastman is the support contact for ErasingBadCredit.com. Anyone wanting to repair their own credit can get valuable free advice by signing up for a FREE Credit Repair mini-course at ErasingBadCredit.com