Saturday, April 30, 2011

Reasons to Save Copies of Your Credit Report

In my last posting I mentioned saving copies of your credit report. The reason it is imperative to save copies of your credit report by printing them out is because the credit report is not a static document. It is completely variable, a liquid document, it is only as good as the information currently reported, so things can change. The information contained in a credit report is the information reported by the creditor, there is no formal verification process by the three credit bureaus (Experian, TransUnion, and Equifax). Which means it is up to the consumer to keep tabs for incorrect information and any changes that result in discrepancies.

Since the credit report is only as good as the information being reported at this moment, saving your old credit reports will give you solid documentation as to the dates of occurrence for anything negative. The reason these dates are so critical is because it is tied to your recovery period. The more time that passes the less impact negative items have. Think of it this way:

Most negative items come off the credit report entirely after seven years (one exception is Chapter 7 bankruptcy, which is 10 years) because of the Fair Credit Reporting Act. Seven years breaks down to seven 12-month periods, think of the first 12-month period as the worst for the credit, but once it passes we start to see more improvement. Generally after 2 to 3 years the credit scores are at or above average after a major financial hardship. Each 12-month period that passes is in the rearview mirror, we are improving until the negative event is completely gone, finished, no trace or reference of the short sale on the credit report. This applies to any type of derogatory account falling under the seven year rule.

The problem is manipulation of the credit report. The FTC went after NCO Group for reporting collection accounts using later-than-actual delinquency dates. In changing the date of delinquency it could cause a debt to be reported beyond the seven year limit allowed. For example, if the original debt was reported delinquent in 12/08 and changed to 12/10 it would extend the reporting of the debt for another two years beyond what is legally allowed. To settle the charges NCO Group had to pay $1,500,000. According to NCO Group it had obtained bad information about the age of the debts from a creditor. NCO Group is no small operation, it is one of the largest debt collectors out there, presumably with good systems, but mistakes do happen. What if it wasn’t a mistake, what if it was just an attempt to plague debtors longer in an attempt to negotiate a settlement of the defaulted amount? When situations such as this arise, it shows us why it is important to save paperwork and keep copies of your past credit reports. You may have to prove dates are being reported incorrectly at some point. It is impossible to know what the future holds and what issues may come about. I will post more about the bad debt market soon.

Any documentation you receive regarding debts should be saved as an important document. You never know when you will need to prove something down the road. Since the power of reporting is in the hands of the creditor, it is a smart move to be able to back up any future disputes you may have to make.

In summary:

1. Save your credit reports because they are not static, they are a liquid document that can be manipulated, and can be prone to mistakes.
2. Save all documentation received regarding debts, especially debts going into default, the more documentation you have of dates the better just in case you need it in the future for disputing.

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