Over the past several months we’ve covered what happens when you file a dispute with the credit reporting companies (CRCs) because of a fraudulent entry in your file, a confused or “mixed” credit file, identity theft or if you’ve filed a dispute via a credit repair organization. And although it’s certainly important to understand your rights and the chronology of events that take place under each of these aforementioned dispute scenarios, they are not the most common type of dispute received by the credit reporting companies.
The most common type of dispute is instead one that involves a non-complex credit report error, such as an incorrect balance on an account, a misreported late payment, or some other simple, straightforward inaccuracy. No fraud is alleged, and no credit-repair organizations are involved: It is just a basic error correction.
To provide you with some perspective on the reasons why these disputes occur: Each year, the CRCs receive billions of pieces of credit-related information from well over 10,000 data furnishers—which is credit speak for lenders, card issuers and other companies that supply the CRCs with credit data. The CRCs do an excellent job of maintaining credit file accuracy but, given the volumes involved, mistakes can still happen.
The Fair Credit Reporting Act (FCRA) gives everyone the right to challenge the information in their credit files.
Initiating a garden-variety credit dispute, such as challenging an incorrect balance, triggers a series of events:
First, the CRC opens an investigation and contacts the credit furnisher that provided the contested information. An erroneous balance in a credit file entry is one of several errors typically attributable to inaccurate reporting by financial institutions or collections agencies.
The CRC informs the furnishing party of the nature of your dispute and asks it to confirm the information in question. This is done by means of a standardized electronic form called an Automated Consumer/Credit Dispute Verification form “ACDV.”
Upon receipt of the ACDV, the furnisher performs its part of the investigation, typically by checking internal records to determine whether the contested figure is correct. If the furnisher concludes, for instance, that a disputed balance was reported correctly, it will “confirm” the accuracy of the account information it provided the CRC, using the same ACDV form it received from the CRC. Conversely, if the furnisher concludes that the balance was reported incorrectly, it will use the ACDV to provide a corrected balance amount.
Once the CRC receives the ACDV back from the furnisher, it either changes the balance (in the case of a correction) or leaves it unchanged (per a confirmation). The CRC then closes its investigation and notifies you, the consumer, of its outcome. Under the FCRA, this entire process is free to the consumer and must be completed in no longer than 30 to 45 days.