The worst mistake you can make when starting a credit repair effort, is to imagine that a derogatory account is accurate just because you recognize it. Recognition alone is not a valid test of accuracy – and the mistake could ruin your score.
Knowing the Rules Pays Off
Credit reporting accuracy is a matter of compliance with reporting rules. The credit bureaus, often blamed for our problems, are actually quite good at compliance. The vast majority of reporting errors originate with reporting entities (original creditors, collectors, etc.) The credit bureaus report the data they are given, and if a reporting entity provides out-of-date or otherwise erroneous information the bureaus include it in their reporting – at least until you challenge it.
Time Will Not Cure Your Ills
It is up to you to police the accuracy of your own reports. Credit repair requires a realistic and proactive effort. The passage of time will not cure your ills. Reporting errors, if ignored, are more likely to compound than they are to correct. Even the seven year reporting limit is likely to be a meaningless mile-marker for most errors which have a way of living on for decades.
John Defaults on a Credit Card
If you have ever looked at your credit report and seen more than one collector reporting the same debt, you are not alone. Here is an example of a typical sequence of events that affects millions of consumers:
John defaults on a credit card. Six months later the credit card issuer (the original creditor) charged off the debt and sold the account to Collector “A”. Six months later Collector “A” re-sold the account to Collector “B”. Four months later Collector “B” re-sold the account to Collector “C”.
Fourteen months after the charge-off, the credit card issuer (the original creditor) is reporting a past due balance, Collector “A” is reporting the collection, Collector “B” is reporting the collection, and Collector “C” is reporting the collection. Here is how it looks:
- Original Creditor: Charge Off with balance reporting as past due
- Collector “A”: Collection with balance reporting
- Collector “B”: Collection with balance reporting
- Collector “C”: Collection with balance reporting
John’s credit score is 150 points lower than it would be if the reporting entities were in compliance with reporting rules. To be in compliance, the Original Creditor would have updated the past due balance to zero when they sold the account to Collector “A”. And Collector “A” and “B” would have withdrawn their reporting entirely when they sold the debt. Here is how John’s credit report should look:
- Original Creditor: Charge Off with zero balance
- Collector “C”: Collection with full balance reporting
The correct version eliminates the past due balance with the Original Creditor and two of the collection accounts in their entirety. A world of difference.