I Beat the Credit Bureaus

We frequently tell you to stay on top of your credit score: Take steps to ensure it's as high as possible and take advantage of the law that allows you to get free reports once a year. So two years ago, I decided to practice what we preach.

I had always paid my bills on time and had been approved for credit cards and loans with no problem. But when I got my reports from the three major credit bureaus, two of them mentioned an unpaid balance of $38 from a water company dating back to my college days -- four years earlier -- at the University of North Carolina. I assumed there had been a mistake, and set out to correct it.

At first glance, the rules for fixing an error seem simple enough. But because lenders don't necessarily report to all three credit bureaus, a mistake might appear on one, two or all three of your reports, and you must dispute each one separately. Plus, challenging an error doesn't mean the credit bureau will send Sherlock Holmes to investigate. The law requires the bureaus to verify the disputed information with the data provider, but that means the credit agencies are simply validating the information they already have. "The bureau considers you to be guilty until you can prove yourself otherwise," says John Ulzheimer, president of consumer education for Credit.com.

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After spending countless hours over two years trying to fix my credit, I learned a few lessons that can help should you ever be in the position of trying to correct your credit history.

Lesson #1: You're on your own. When you spot an error, the first step is to go to the source -- the lender -- to investigate. So I called the Orange Water and Sewer Authority (Owasa) in Carboro, N.C., and was told that the outstanding amount was listed as delinquent in February 2003. I had moved by then, so, I thought, it couldn't be my bill. And because it appeared to be an error, I assumed that the credit bureaus could set the record straight.

In August 2007, I submitted an online dispute with Equifax. By January -- way past the 45 days the law gives the bureau to respond to a dispute -- I hadn't heard back. So this time I called to start another challenge (no way was I risking the online process again). And I realized I had overlooked the same error on my Experian report (the Trans-Union report was clean). I tried to call Experian but got stuck in a phone tree that never offered a human voice. So I submitted an online dispute with Experian, too. The very next day, Experian sent me an e-mail saying the item had been "verified as accurate." Accurate? And the bureau found this out in less than 24 hours?

Lesson #2: Don't take the easy road. I made another round of phone calls, and a nice lady at the utility gave me more details. Owasa had never received my request to cancel serv-ice, so the company continued to issue bills in my name. In addition, Owasa was aware that new tenants had moved in and were paying the bills (apparently in my name).

So what would happen if I just paid the delinquent amount to make it go away? Both Owasa and Credit Financial Services, the collection agency my bill had been sent to, noted that it would be marked as paid. But my credit report would still show that a bill had been sent to collection. I wasn't about to pay up if it wasn't going to improve my score.

Lesson #3: Keep trying. The 45 days that Equifax had to respond to my second challenge passed. Calling back to complain wasn't even an option because the bureaus frequently change their toll-free numbers, and they typically allow only people with current reports to talk to representatives. So I purchased another report and credit score, then picked up the phone. The rep told me that Equifax had no evidence of either of my previous disputes (even though I had a confirmation number for my conversation in January). I demanded to speak with a supervisor. Amazingly, the supervisor said the disputed account could be removed in three to five days. One day later, I was notified that the account had been taken off my report. One down, one to go.

Lesson #4: Enlist help. I called some credit experts, who suggested reaching out to the North Carolina utilities commission and perhaps the state attorney general. My correspondence yielded one fact: Water and sewer authorities in North Carolina aren't governed by anyone. But the letter from the attorney general's office suggested I contact the board members of Owasa.

I ordered another round of reports and scores to use as supporting documents for my letter to the board members. The good news was that my Equifax score had bounced up nearly 80 points (to 780) since the delinquent account had been removed. I started a second protest with Experian, this time via phone, and began to gather more evidence to support my innocence.

I got a copy of my lease from the company that managed my college rental. It showed that I did not live at the address with the outstanding Owasa bill in February 2003. Finally, the proof I needed!

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Once again, Experian determined that the black mark would remain. So I mailed a letter explaining why I believed the bill wasn't mine, plus a copy of my lease and the page of my credit report showing the disputed account, to Owasa, to two of its board members and to Experian. I sent each letter via registered mail so that I would know each addressee had received it. It might sound old-fashioned, but using the Postal Service can be more effective than disputing problems online or over the phone.

Two weeks later, I got an e-mail from the director of customer service at Owasa. My letters to the board members had found their way to his desk. He had investigated my account and found that the bill actually originated just before I moved out. (I never received the bill, even though I had all my mail forwarded for the summer.) But in light of my good payment history up to that date, he offered a solution -- I'd pay what I owed, and he'd recall the bill from the collection agency, which would get it off my credit report.

Lesson #5: And try again. I called him while reaching for my checkbook. He apologized that the process had been so "protracted" and noted that he had to "dig a little deeper" into my file to understand what happened. At the end of the month, I got a letter from the collection agency noting that it had requested that all three bureaus remove the account from my credit file.

I checked my reports for the final time in February. The blemish on my Experian report remained, as did my poor score. I angrily logged another online challenge. This yielded an immediate answer -- we've already verified that this item is correct; if you have new information, mail it to us.

I called and gave the representative an earful. I explained that the collection agency had recalled the account and demanded that Experian fix my report. He said Experian would start the inquiry, but added that I should send the supporting documents -- which I did that day. Two days later, Experian sent me an e-mail stating that the account had been deleted. And just like that, it was over.

I was chagrined to learn that I had been fighting a legitimate bill all those months. Even so, I was appalled at the ineptitude of the credit bureaus.

Experian was correct at the outset in not removing the stain on my account -- but then it ignored the collection agency's request to fix my report until after I'd started a third challenge. And because the bill was legit, Equifax actually screwed up when it removed the ding from my report. Besides the hours spent peeling off layer after layer of red tape, I paid more than $100 in fees to order credit reports (a new one for each new challenge), then check and recheck for errors. I'm happy to have sterling credit scores again, but I'm exhausted. Isn't there a better way?

KIP TIP: Disputing a credit error

You can get a free copy of your credit reports at the three major credit bureaus -- Equifax, Experian and TransUnion -- once a year at AnnualCreditReport.com. You can also get a free report if you've been denied credit based on information in your report.

Start at the source. As long as the credit bureaus comply with the Fair Credit Reporting Act and verify that they're correctly reporting the information they received from a lender, they consider their job to be done. So your first call should be to the lender. When you have enough information from the lender to correct the mistake, start your challenge.

Pick your weapon. Each credit report has a phone number as well as an address to start a dispute, or you can do so online at www.transunion.com, www.equifax.com or www.experian.com. However, if the report is more than 60 days old, you'll likely have to get a new one to begin a protest -- and the phone number on the report may no longer work. Also, if you got your report from a third-party site rather than directly from the credit bureau, you may have to get a report from the bureau to begin your challenge (but it's supposed to be free).

Wait for answers. Bureaus typically have 30 to 45 days to "resolve" your dispute. If it's a simple factual error that is acknowledged by the lender, it could take as little as two weeks. You will be notified of the bureau's decision via regular mail or e-mail.