Negative accounts on your credit report affect your purchasing power, employment, and even housing. Debt removal is a relief, but it can reappear after removal. If this happens, it’s important to understand your rights and what to do next.
Before diving into the details of debt removal and its possible reappearance, it’s important to know about the Fair Credit Reporting Act (FCRA). It was enacted on October 26, 1970, as one of the first data privacy laws passed in the Information Age. The FCRA exists to keep information private in the files of consumer reporting agencies. It also advances the accuracy and fairness of that information. The Act provides every consumer with certain rights, including:
Not every debt qualifies for removal. Debt removal occurs when the debt is erroneous and disputed or paid and a quicker removal gets requested.
To remove a negative account, you’ll need to gather and present evidence on your behalf. When it comes to an error, dispute the account. This can be done by:
Debt collection companies are permitted by the FCRA to report debts that are in collections for up to 7 years plus 180 days following the date of the initial delinquency. This is also the statute of limitations surrounding the debt. Afterward, they can no longer take you to court and receive a judgment forcing you to pay a debt.
If the debt is too old, it is the credit bureau’s error. In this case, you can file a dispute.
If there is an account that is showing up as unpaid when it has been paid, or there is an account that you do not recognize, you should file a dispute with the evidence showing the error. When the debt has been already paid, you can ask for a goodwill deletion.
Circumstances arise when the debt collector, versus the credit bureau, makes an error. If this is the case, you can ask the collector to validate the debt. Validating debt is a process that ensures the debt belongs to you. You have 30 days to dispute debt validity after contact with the collector. If the collector cannot validate the debt, it comes off of your reports.
Keep the thirty-day window in mind after a dispute. Claims must be addressed within this time. Pulling your reports after to make sure changes were made is an important step.
There are a few reasons that a negative account will get reinserted on your credit report.
Disputed debts get removed if the creditors fail to verify the debt within 30-45 days. However, if the creditor responds within five days of the allowable period’s end, the bureau can reinsert the debt into your credit file.
A removed item can also get reinserted after the removal if it is re-reported. The creditor can re-report the item the following month as part of its update. In that case, reporting agencies can reinstate the negative account.
Regardless of the situation, credit bureaus are required to notify consumers within five business days of reinstating an item. This does not always happen, which is why monitoring your credit report is important in the months after a dispute.
Old debts can get acquired by a debt buyer or collection agency. They may report it even if it's past the seven-year limit. In this case, you can dispute it.
Credit bureaus can also mistakenly reinsert an item even if the creditor never responds. This is why monitoring your report is critical.
In some cases, wrongful activity can signify identity theft. Anyone running credit in your name negatively impacts your score, even though it isn’t you. In this case, you’ll need to file a claim with the Internal Revenue Service (IRS) and open an investigation. You must also report it to the Federal Trade Commission (FTC).
Wherever the identity theft occurred, you have the right to the records relevant to your case. Any businesses involved must provide this. The investigation can take some time, but it clears your reputation and you can freeze everything in the interim.
When a collection agency updates your debt's delinquency date to make it appear newer, this is called debt re-aging. This is an illegal workaround to the 7 years and 180-day timeframe. Collectors take this action to pressure debt payment.
If you found that a negative account reappeared, there are a few action items you can take.
When it comes to the credit bureau versus the creditor, sometimes, working with the creditor can yield faster results. If you are unsuccessful in resolving the dispute and the creditor is a bank, you can file a complaint. Banks fall under federal regulation. If the institution is unresponsive, federal agencies can step in to help.
If old items are getting inserted by the credit bureaus, you can contact them. Opening new contact and correspondence serves as a new dispute. As with the first dispute, be sure to have new evidence to back up your claim.
Consumer and bankruptcy attorneys help clients navigate situations like these. They generally offer a free consultation where you can see what your best plan of action could be. Banks are regulated by federal agencies.
Debt collectors attempting to re-age debt or violate any other rights can get reported to the Federal Trade Commission, the Consumer Financial Protection Bureau, or your state attorney general. Attorneys can help you get answers, deal with excessive collectors, or help file a lawsuit or complaint if needed.