Errors on your credit report can lead to higher interest rates.
Consumer debt is something most Americans are familiar with. Credit use is part of every day life for many people. Unpaid debt, however, can end up in the hands of collection agencies. To protect consumers, the Fair Debt Collection Practices Act (FDCPA) regulates the behavior of collection agencies and outlines consumer's rights when it comes to debt collection. A collector cannot arbitrarily report information to the credit bureaus without providing validation that the debt is legitimate. Here are the steps you can take to keep, or stop, a collection agency from reporting erroneous information to the credit bureaus.
Instructions
1. Read the collection letter received from the collection agency. Under the Fair Debt Collection Practices Act (FDCPA), bill collectors are required to send you a letter of initial contact within five days of making phone contact with you. The letter must state the name of the collection agency, their address and inform you of the amount owed. It must also inform you that the letter is part of an attempt to collect a debt, and any information you provide may be used for that purpose.
2. Send a Debt Validation (DV) letter to the collection agency. Under the FDCPA, a debt collector must prove that the debt belongs to you. This is not an option for the collection agency, it is a requirement. You have 30 days from the date of the collection letter to request validation. Send the letter via certified mail to the address listed on the collection letter. Once the agency receives your request, the collection agency must cease contacting you until they provide validation to you, which should include the name of the original creditor, the address of the original creditor, the billing statements from the original creditor and the signed contract, if applicable. Also, the collection agency is prohibited from reporting an unvalidated debt to the credit bureaus.
3. Order your credit report while you're awaiting debt validation. In 2003, Congress enacted the Fair and Accurate Credit Transaction Act (FACTA) that gives consumers the right to receive one free report every year from the three major credit bureaus: TransUnion, Experian and Equifax. To order your report, visit the credit bureau's website or www.annualcreditreport.com, the website Congress set up in order to facilitate credit report orders. Alternatively, you can order your report by phone or mail.
4. Read your report carefully. Check for errors. Pay special attention to the "personal information" section. You want to ensure that your credit file hasn't merged with that of another consumer. Also check the "collections" section, which lists any collection agencies that are reporting information to the credit bureaus.
5. File a dispute with the credit bureaus to have the collection account removed if it appears on your report. The credit bureau will remove unvalidated debt because under the Fair Credit Reporting Act (FCRA), only accurate information may appear on your report. This is especially important when it comes to zombie debt, or debt that is beyond the statute of limitations. Some collection agencies will buy old debt in an attempt to collect on it and in the process, place it on your credit report as a new account when it's not. Debt validation keeps unverifiable collection accounts off your credit report.
6. Await a response from the credit bureau. The FCRA gives credit bureaus up to 30 days to remove inaccurate information. The credit bureau will send the investigation results to you, including a new copy of your credit report which shows the deletion of the collection account.
