Credit dispute letters: When are they a good idea?

Everything you know to know about credit dispute letters and whether you need one or not.

Did you know that 25% of U.S. consumers have found some error in their credit reports? According to a 2012 study by the Federal Trade Commission, “five percent of consumers had (significant) errors on one of their three major credit reports that could lead to them paying more for products such as auto loans and insurance.”

In other words, there were a lot of minor errors found, but a much smaller number of errors led to a significant reduction in credit scores. 

The study also noted:

• One in four consumers identified errors on their credit reports that might affect their credit scores
• One in five consumers had an error that was corrected by a credit reporting agency (CRA) after it was disputed, on at least one of their three credit reports
• Four out of five consumers who filed disputes experienced some modification to their credit report;
• Slightly more than one in 10 consumers saw a change in their credit score after the CRAs modified errors on their credit report; and
• Approximately one in 20 consumers had a maximum score change of more than 25 points and only one in 250 consumers had a maximum score change of more than 100 points.

What should you do if you find an error on your credit report? That’s where credit dispute letters come into place.

What are credit dispute letters?

According to Credit Karma, “a credit dispute letter is a document you can send to the credit bureaus to point out inaccuracies on your credit reports and to request the removal of the errors. In the letter, you can explain why you believe the items are inaccurate and provide any supporting documents. If your dispute is resolved in your favor, the credit reporting company should remove the erroneous items in your file and update your report,” they explain on their website.

In short, a credit dispute letter is a way for you to let credit bureaus and furnishers that a mistake has been made.

What can I dispute in my credit report?

A few things you can dispute are collections, late payments, bankruptcies that haven’t been removed after seven to 10 years and foreclosures that haven’t been removed after seven years.

Where do I submit a dispute letter?

You can submit a credit dispute letter to the three main credit bureaus in the United States, Equifax, TransUnion or Experian online or by mail. It’s also recommended that you keep copies of any letters or documentation that you send and that if you send it by mail, you use certified mail with a return receipt. You should receive an update within 30 to 35 days from the original dispute date.

Keep in mind that filing a report with one of the three credit bureaus will not necessarily update the others, so if you find inaccuracies through all companies, you must submit three difference dispute documents to see changes across credit bureaus.

In addition to reaching out to the credit bureaus, you should also reach out to the furnisher, which is the company who provided the information to the credit bureau and ask them to correct the reporting mistake. This will save you time and make the process much more efficient.

Click on this CreditCards.com article to learn more about what mistakes to avoid when disputing credit card report errors.

Can disputing your credit reports hurt your credit score?

Depending on your individual financial situation, a disputed account could ultimately help or hurt your credit score as an entire erroneous account could be removed from your credit history.

Another thing to consider when disputing an error is whether you’re in the middle of a big financial decision. A good example is buying a house, as the process might be delayed until the dispute is over if you’re in the middle of a mortgage approval.

What if my credit dispute doesn’t work?

As Credit Karma explains, if your dispute doesn’t work there are a few more steps you could follow to ensure that your credit report is completely accurate.