The Credit Report Dispute Process—Behind the Scenes

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The Credit Report Dispute Process—Behind the Scenes

by Michelle Black,

Did you know that you don’t have to sit back and put up with errors when they appear on your credit reports? If so, congratulations. You are already better informed than most consumers. When credit errors happen, you can and should take action.

Thanks to the Fair Credit Reporting Act (FCRA) you have the right to dispute suspected credit reporting errors directly with the credit reporting agencies (CRAs) Equifax, TransUnion, and Experian. Disputes can be submitted on your own or with the help of a reputable credit repair professional (for a fee).

When you file a dispute with one of the credit reporting agencies, you are entitled to a “reasonable investigation” of your dispute according to the Fair Credit Reporting Act. There is a detailed process which goes on behind the scenes as your dispute is processed, however many people believe that the current dispute process is not reasonable whatsoever. Rather, some believe, the dispute process is designed to favor the CRAs themselves over consumers.

Take is a look at how the dispute process works and decide for yourself whether or not you would define it as “reasonable.”

Phase 1 – Submit Your Dispute.

The dispute process begins when you submit a notice to one of the CRAs informing them that you disagree with or question an item on your credit report. Credit report disputes can be submitted online, via mail, over the phone, and even via fax.

Phase 2 – Credit Bureau Notifies Data Furnisher.

Once a CRA receives your dispute, it is up to that CRA to inform the data furnisher (e.g. your creditor or collection agency) that you are challenging the validity of the account. To begin, the CRA will fill out a form known as an ACDV (Automated Credit Dispute Verification). The ACDV form compresses your eloquently worded dispute down into a simple three digit code.

Even if you write a four page letter detailing the reasons why an account on your credit report is incorrect, your detailed explanation will be shortened down into one of 26 available dispute codes such as “001,” which would be translated as “not his/not hers.” The ACDV form is transmitted electronically to the data furnisher by means of a cloud-based software system, known as e-OSCAR (Online Solution for Complete and Accurate Reporting).

Does leaving out the details of your dispute in exchange for a generic code sound like a reasonable process so far? Unless you work for a CRA or data furnisher you probably just answered that question with a resounding “no way!” Unfortunately, it gets worse.

Phase 3 – Data Furnisher “Investigates.”
The “investigation” of your dispute officially begins once a data furnisher has received a notice of your dispute (in the form of an ACDV) via e-OSCAR. As mentioned above, the FCRA states that a “reasonable investigation” should be conducted whenever you dispute an item on your credit report. However, what actually occurs during the investigation phase of a credit dispute is generally far removed from what the average person would define as reasonable.

In theory a data furnisher should at the very least check their records whenever a dispute is received and verify that the information being reported to the credit bureaus matches up with their records. (In reality a true investigation should be much more thorough.)

However, the e-OSCAR system is reported to provide a systematized method which can be used to violate your rights under the FCRA. Via e-OSCAR data furnishers actually have the capability to respond to a large number of disputes in an automated electronic format. In fact, some reports suggest that data furnishers are allowed to set up automatic responses to disputes, before they are even received or reviewed. Does that sound reasonable?

Phase 4 – Credit Bureau Receives Response.
Once a data furnisher has completed their “investigation,” the CRAs are notified of the result of said investigation electronically. According to some experts, data furnishers may have automatic responses which are pre-populated and potentially sent to the CRAs without the necessity of an actual human even reviewing the dispute.

In most cases the CRA will either modify, delete, or leave the reported item in its original state, based upon the response of the data furnisher and that response alone. There is at least some good news for consumers. If a data furnisher completely fails to respond to your dispute, the item in question would typically be deleted from your credit report as a result of the lack of response.

Phase 5 – Receive Your Results.
Once the CRA has made any required changes to your credit report (if applicable), a letter will be mailed to you containing the results of your dispute investigation. If you submitted an electronic dispute, you would typically receive your results via email. (Side note: you may want to think twice before you dispute your accounts online. You could be agreeing to terms and conditions which do not work in your favor.)
Do-It-Yourself vs. Professional Help

It is important to understand that you absolutely have the right to dispute items on your credit reports completely on your own. However, as you can plainly see from the information above, the dispute process is not nearly as simple for consumers as it is often made out to be.
In truth, most consumers have no idea just how much the deck is stacked against them when they submit a credit report dispute. After all, the CRAs’ primary customers are the companies to whom you owe money—aka your creditors.
When setting out to dispute incorrect items on your credit reports, it can pay to work with a reputable professional who fully understands the process and knows how to help you navigate it. Yes, you have the right to dispute items on your own, but that does not mean that doing so is necessarily in your best interest.
Remember, you also have the right to cut your own hair, repair your own car, or install your own appliances. However, if you choose to do so there is a chance that you might not be as happy with your results as you would have been if you’d hired a pro.

It is also worth noting that, while there are some scam artists and bad apples pretending to offer “credit repair” services, there are also plenty of reputable and trustworthy credit repair companies whom you can hire to help you dispute questionable items on your credit reports. Just because your cousin was burned by a dishonest mechanic does not mean that all mechanics set out to take advantage of people. The same is true of credit repair companies. You would be unwise to write off an entire industry due to a few shady players.
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