What Is a Credit Dispute and How Does It Work?

What Is a Credit Dispute and How Does It Work?

An alarming study conducted in the past few years found that many Americans aren’t sure what their credit scores were. In fact, it was discovered that many Americans weren’t even really sure what a credit score was for.

Like it or not, credit scores are an important part of adult life. If you’re looking to make any number of big financial moves, from purchasing a car to putting money down on a home, you’re going to need a solid credit score. 

It’s also important to know what a credit dispute is and why you might need to issue one for your current credit score. When your score is a sort of personal currency, it becomes deeply important that it is an accurate reflection of your behavior and history. 

Feel like your current credit score is a mistake? Read on and we’ll walk you through what you need to know and what to do.

Where Does a Credit Score Come From?

Your credit score is a big number that represents to lenders how reliable of a borrower you might be. When you need to borrow money to open a business, buy a home, or make any large financial moves, a strong credit score will be essential in getting you the money you need.

poor credit score can prevent you from being able to borrow funds that you might need.

But where does this score come from? If you think there’s an error in your score or it’s not as strong as it should, you first should ensure there aren’t factors that you might be overlooking.

Your credit score is based on a wide variety of factors. In the most general sense, however, it is based on your previous history of borrowing and returning money. Most people begin to build their credit score by opening a credit card account.

If you use your credit card allowance and pay your bills on time, you begin to build up a positive history of borrowing and returning money on time. The amount of money you borrow, the length of your credit history, and the number of different accounts you have open can all contribute to your final score.

Your score is managed by a few major credit bureaus: Experian, Equifax, and TransUnion.

Your FICO credit score is based on your scores from these bureaus and is used by most major banks and money lenders across the country. If you have an issue with your credit score, a credit bureau is likely the one responsible for the mistake.

Disputing a Credit Report

Let’s say you plan on making a big purchase in the future and so you’re checking in on your current credit score. You want to make sure that your application for whatever it is you’re about to do is solid and strong.

When you get your credit report back, your score is much lower than you assumed it would be. In fact, it’s low enough that you think there is actually a mistake. This is rare but not unheard of it. If you truly think there is an error, you’ll want to dispute the report as soon as possible to get things rectified.

Inaccurate information in your credit report can be harm you and your ability to raise funds and secure certain opportunities. A quick fix is needed if you do think there is an error to avoid this kind of negative impact.

Disputing a Credit Report

Filing a dispute for inaccurate information can be done quickly and easily. Generally speaking, you should be able to dispute your credit score either online or via the mail. 

Either method you take, you’ll be required to offer some proof of identity, whether that be your driver’s license or some other form of identification. You’ll also want to include details of the dispute itself and the evidence you have on your end that proves the information is inaccurate.

If you’re handling your business online, there should be an option to directly upload evidence that you need to make your point.

The issues worth disputing are wide-ranging, from false claims of missed payments to a listing of open accounts that are actually closed. If you notice any of this inaccurate information on your account, and you should move quickly to rectify things through these channels. 

As long as you have the time, it can be well worth reaching out to all three of the major credit bureaus in order to dispute the claim in question. You don’t know which credit bureau the lender you’re going to will check. 

Generally speaking, the bureaus are pretty good about updating one another about such cases. Still, if time is of the essence, you’ll get faster results by handling such a thing on your own.

How Long Might It Take?

How long does it take for a bureau to look into a dispute and decide if they want to update their records? The Fair Credit Reporting Act put into place by the federal government requires the bureaus to look into your dispute within thirty days in most circumstances.

In some rare instances, they may have 45 days in order to make a decision on your dispute.

The nature of your dispute and the evidence you are able to provide will also help speed up the process.

Filing a Credit Dispute

Your credit score is an important part of your standing in the larger financial world. If your current score doesn’t accurately reflect your credit history, you may need to take steps to resolve this issue. The above information can help you determine how best to file a credit dispute.

Need more help in getting your credit score up? Check out my Credit Repair 101 E-Book

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