Many people don’t have knowledge of all the other agencies that report consumer habits other than the major 3 credit bureaus. Below is a short list of some of the additional reports and agencies that consumers are unaware they are reporting and selling various data points about their personal business.
The following is a list of major and non-major consumer reporting agencies (also known as credit bureaus or credit reporting agencies) in the United States:
1. Experian: Experian is one of the largest credit reporting agencies globally. It collects and maintains credit information on individuals and businesses.
2. Equifax: Equifax is another prominent credit reporting agency that gathers and provides credit data, including credit reports and scores, to lenders, businesses, and individuals.
3. TransUnion: TransUnion is a leading credit reporting agency that compiles credit information and provides credit reports and scores to businesses and consumers.
4. Innovis: Innovis is a consumer credit reporting agency that provides credit information to businesses, similar to the other major credit bureaus.
5. SageStream: SageStream (formerly known as ID Analytics) is a specialty credit reporting agency that focuses on providing alternative credit data and risk assessment solutions.
6. Clarity Services: Clarity Services specializes in providing credit data and risk management solutions for underbanked consumers and alternative financial services.
7. ChexSystems: ChexSystems is a consumer reporting agency that focuses on banking and checking account history. It provides information to financial institutions to help assess risk related to opening new accounts.
8. National Consumer Telecom & Utilities Exchange (NCTUE): NCTUE is a credit reporting agency that collects and shares consumer data related to telecommunications and utility accounts.
9. LexisNexis Risk Solutions: LexisNexis is a data and analytics company that provides various risk management and fraud prevention services to businesses, including identity verification and credit risk assessment.
10. CoreLogic Credco: CoreLogic Credco provides specialized credit reporting services for the mortgage industry, offering solutions such as credit reports, fraud detection, and identity verification.
11. MicroBilt: MicroBilt offers a range of data and risk management solutions, including credit reports, background checks, and alternative credit data, to assist businesses in making informed decisions.
12. Certegy Check Services: Certegy Check Services focuses on check verification and risk assessment for businesses that accept checks as payment.
13. TeleCheck: TeleCheck is a consumer reporting agency that provides risk assessment and check verification services to retailers and businesses that accept checks.
14. Rental History Reports: Rental History Reports specializes in collecting and providing rental history information to property management companies and landlords to assess prospective tenants.
15. AutoCheck: AutoCheck is a consumer reporting agency that provides vehicle history reports, including information about a vehicle's title, registration, accidents, and other relevant details.
16. Medical Information Bureau (MIB): MIB is a specialized consumer reporting agency that collects and shares medical information to help insurers assess risk and underwrite health and life insurance policies.
It's important to note that while these agencies collect and report data on consumers, their specific focus and scope may vary. Consumers should be aware of their rights under the Fair Credit Reporting Act (FCRA) and can request their reports from these agencies, dispute inaccurate information, and take steps to protect their credit and personal information.
Consumers have the right to request free annual credit reports from each of the three major credit bureaus (Experian, Equifax, and TransUnion) through AnnualCreditReport.com, as mandated by the Fair Credit Reporting Act (FCRA).
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Having good credit saves you money over the span of your lifetime vs Bad credit which cost you more over your lifetime.
Example:
Person A (Good Credit):
Person A has a strong credit history and a high credit score, which enables them to secure favorable interest rates on loans.
Person A Car Loan:
Person A decides to purchase a car valued at $30,000 and obtains a car loan with an interest rate of 3% for a term of 5 years.
Monthly Payment: $536
Total Interest Paid over 5 years: $1,160
Total Cost of the Car: $31,160
Person A Home Loan:
Person A is looking to buy a home valued at $300,000 and obtains a mortgage with an interest rate of 4% for a term of 30 years.
Monthly Payment: $1,432
Total Interest Paid over 30 years: $172,801
Total Cost of the Home: $472,801
Person B (Low Credit):
Person B, on the other hand, has a low credit score and a less favorable credit history, resulting in higher interest rates on loans.
Person B Car Loan:
Person B also wants to purchase a car valued at $30,000 but is only eligible for a car loan with an interest rate of 10% for a term of 5 years.
Monthly Payment: $637
Total Interest Paid over 5 years: $11,220
Total Cost of the Car: $41,220
Person B Home Loan:
Person B is in the market for a home valued at $300,000 but due to their low credit, they only qualify for a mortgage with an interest rate of 6% for a term of 30 years.
Monthly Payment: $1,798
Total Interest Paid over 30 years: $347,515
Total Cost of the Home: $647,515
As you can see from the comparison, Person A, with good credit, enjoys significantly lower interest rates on both the car loan and the home loan.
Now you can see the silent robbery that bad credit commits on your finances over time right? Over time, these lower interest rates result in substantial savings for people with better credit.
Car Loan Savings: Person A saves $10,060 in interest compared to Person B because they had good credit.
Home Loan Savings: Person A saves $174,714 in interest compared to Person B because they had good credit.
These savings are a direct result of Person A's good credit, as they are able to secure more favorable interest rates. Having low credit, Person B ends up paying significantly more in interest over the life of both loans, increasing the overall cost of the car and home.
This example highlights the financial impact of creditworthiness on major purchases. It underscores the importance of maintaining good credit to access lower interest rates, ultimately leading to substantial savings over time. Having favorable credit can not only open up access to more money it can also save you money in the long run.
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The quality of your credit has a lot to do with your mix of credit. Having a well-rounded credit profile is indeed important for a healthy credit history, as it demonstrates responsible credit management and financial stability. Underwriters, who assess creditworthiness, typically look for a good mix of credit accounts and consider the age of those accounts. Here are various types of credit accounts that contribute to a diversified credit portfolio:
1. Revolving Credit Accounts: These include credit cards and lines of credit where you can borrow up to a certain limit and make regular payments based on your outstanding balance.
2. Installment Loans: This category encompasses loans with fixed payments over a specific period, such as auto loans, student loans, personal loans, and mortgages.
3. Retail Accounts: Store credit cards or financing options offered by retailers fall into this category. They are typically used for making purchases at specific stores or online.
4. Charge Cards: These are credit cards that require the balance to be paid in full each month. They do not have a pre-set spending limit but require timely full payment.
5. Service Credit: Accounts related to utility bills, mobile phone bills, internet services, and other service providers can also contribute to your credit profile, although they are not always reported to all credit bureaus.
6. Secured Credit: This involves credit accounts that are backed by collateral, such as a secured credit card where you provide a cash deposit as security.
When evaluating a credit profile, underwriters consider the following factors related to credit mix and age:
A. Variety of Accounts: A diverse credit mix demonstrates your ability to manage different types of credit responsibly. It shows that you can handle both revolving credit and installment loans effectively.
B. Length of Credit History: The age of your credit accounts is important because it provides a track record of your credit management. Accounts with a longer history demonstrate stability and responsible credit behavior over time.
It is worth noting that credit scoring models, such as FICO and VantageScore, also consider credit mix and length of credit history in their algorithms. A study by FICO indicated that credit mix accounts for around 10% of the FICO Score calculation, while length of credit history accounts for approximately 15% of the score calculation.
While there is no specific formula for an ideal credit mix or age, maintaining a good mix of credit accounts and having a history of responsible credit management can positively impact your creditworthiness.
It's important to keep in mind that the ultimate goal is not just to have high credit scores but to establish a well-rounded credit profile that reflects your ability to manage different types of credit responsibly.
Please note that the specific weights and scoring criteria of credit scoring models may vary over time and across different lenders. The following is an example breakdown of the components that typically make up a credit score, along with their approximate weightings:
1. Payment History: Approximately 35% of your credit score. This factor assesses your track record of making on-time payments, including any late payments or delinquencies. Treat late pays like a felony. Under no circumstances do you want a felony so see late pays as something that is forbidden for you and your financial plan. Late pays drastically lower scores.
2. Credit Utilization: Around 30% of your credit score. This refers to the amount of credit you are currently using compared to your total available credit limits. Maintaining a low credit utilization ratio is generally favorable for your score. It is ideal to keep utilization below 10% of your available balance. Some schools of thought will say 30% utilization is good however the differences between good and great is 20% so here at ANCLG we advocate for only 10% max utilization because it has shown to improve the quality of a person’s overall credit profile.
3. Length of Credit History: Approximately 15% of your credit score. This factor considers the age of your credit accounts, including the average age of your open accounts and the age of your oldest account. Ideally, you want to have your youngest account to be 5-7 years old. The older the account, the higher available balance and the lower the utilization means the higher positive impact that item will have on your credit.
4. Credit Mix: Around 10% of your credit score. Lenders prefer to see a mix of different types of credit accounts, such as credit cards, loans, and mortgages, to demonstrate your ability to manage various forms of credit responsibly.
5. New Credit Inquiries: Approximately 10% of your credit score. This factor takes into account the number of recent credit inquiries and new accounts opened. Multiple hard inquiries within a short period of time may negatively impact your score. Typically, the strongest credit profiles in America have 2 or less inquiries.
More on Utilization:
Because utilization is a factor of your credit that really exposes your spending habits it is imperative to have a full understanding of what it is about.
Maintaining a low credit utilization ratio is key to rebuilding your credit and improving your financial standing. Credit utilization, which is the percentage of your available credit that you are currently using, plays a significant role in determining your credit score.
Credit reporting agencies consider lower utilization to be a positive sign because it suggests that you are effectively managing your credit and debt. By keeping your utilization rate low, you demonstrate responsible credit behavior and financial discipline.
When you have a high credit utilization ratio, it can negatively impact your credit score. Lenders may perceive you as being more reliant on credit and potentially at a higher risk of default. On the other hand, a low utilization ratio shows that you have a good balance between the credit you have available and the credit you are using.
To illustrate, let's consider an example. If you have a credit limit of $20,000 and you currently have $10,000 outstanding balances, your credit utilization ratio would be 50%. However, if you can reduce your balances and lower your utilization to, let's say, 20%, it will positively affect your credit score.
By keeping your credit utilization ratio low, you demonstrate your ability to effectively manage your available credit. This responsible credit behavior can lead to improved creditworthiness and make you a more attractive candidate for future credit opportunities, such as loans or credit cards.
Remember, it is essential to monitor and manage your credit utilization regularly. By keeping it within a reasonable range, such as below 30% or even lower, you can maximize the positive impact on your credit score and enhance your overall credit profile.
In conclusion, maintaining a low credit utilization ratio is a fundamental aspect of rebuilding your credit. By responsibly managing your available credit and keeping your utilization rate low, you can establish a solid credit foundation and improve your access to capital through creditworthiness.
Please note things can vary depending on the credit scoring model used by different lenders. It's important to understand that credit scoring models and their specific calculations may differ among credit bureaus and lenders.
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About the differences between scoring models.
FICO Score:
The FICO Score is one of the most widely used credit scoring systems in the United States. It was developed by the Fair Isaac Corporation and has become the industry standard for assessing creditworthiness. FICO Scores range from 300 to 850, with higher scores indicating better creditworthiness. The FICO scoring model considers various factors, including payment history, credit utilization, length of credit history, types of credit used, and new credit inquiries. Lenders from different industries, such as mortgage lenders, auto lenders, and credit card issuers, commonly rely on FICO Scores to make lending decisions.
VantageScore:
VantageScore is another credit scoring system that was jointly developed by the three major credit bureaus (Equifax, Experian, and TransUnion). It was introduced as an alternative to the FICO Score and has gained significant traction in the lending industry. VantageScores also range from 300 to 850, with higher scores indicating better creditworthiness. Similar to the FICO Score, VantageScore considers factors such as payment history, credit utilization, credit mix, length of credit history, and new credit applications. However, the specific algorithms and weightings used by VantageScore may differ from those of the FICO Score.
Key Differences:
1. Development and Ownership:
FICO Scores are developed and owned by the Fair Isaac Corporation, an independent analytics company. On the other hand, VantageScore is a collaborative effort among the three major credit bureaus, making it a credit scoring model jointly owned by these bureaus.
2. Scoring Model:
While both FICO Score and VantageScore assess creditworthiness, they use different algorithms and methodologies to calculate scores. The specific factors and their relative importance in determining scores may vary between the two models. However, they generally consider similar aspects, such as payment history, credit utilization, and credit history length.
3. Industry Adoption:
FICO Scores have been widely adopted by lenders across various industries, including mortgage, auto, and credit card lenders. VantageScore, although gaining popularity, may still be less commonly used by certain lenders. Therefore, it's important to be aware of which scoring model a particular lender utilizes when assessing creditworthiness.
4. Version Updates:
Both FICO Score and VantageScore periodically release updated versions to enhance their scoring models. These updates may incorporate refinements, new data, or changes in consumer credit behavior. As a result, there may be variations in credit scores obtained from different versions of the same scoring model.
In conclusion, while FICO Score remains the dominant credit scoring system, VantageScore has emerged as a reputable alternative. Although there are differences in their development, ownership, and scoring models, both aim to assess creditworthiness and help lenders make informed decisions. It's essential to understand which scoring model a lender uses to ensure you have a clear understanding of how your creditworthiness is being evaluated.
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Different Lenders and Their Preferred Credit Reports:
When it comes to credit reports and FICO scores, lenders have varying preferences and practices. Here's a breakdown of who typically pulls credit reports and who pulls FICO scores:
Credit Reports:
1. Traditional Banks and Credit Unions: These lenders commonly rely on credit reports from the three major credit bureaus (Equifax, Experian, TransUnion) to assess creditworthiness for loans, lines of credit, and other financial products.
2. Mortgage Companies: Mortgage lenders often pull credit reports from all three major credit bureaus to evaluate an applicant's credit history and determine mortgage eligibility.
3. Auto Lenders: Auto lenders generally pull credit reports from the major credit bureaus to assess creditworthiness and determine loan terms for car loans.
4. Retail Store Credit: When applying for store credit cards or financing options offered by retail stores, they often pull credit reports from one of the major credit bureaus.
5. Online Lenders and Fintech Companies: Online lenders and fintech companies may use credit reports from the major credit bureaus as well as alternative data sources to assess creditworthiness for loans and lines of credit.
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FICO Scores:
1. Traditional Banks and Credit Unions: While they primarily rely on credit reports, some lenders also obtain FICO scores to gain additional insights into an applicant's creditworthiness.
2. Mortgage Companies: Mortgage lenders may utilize FICO scores in conjunction with credit reports to evaluate an applicant's mortgage eligibility and determine loan terms.
3. Auto Lenders: Auto lenders may consider FICO scores along with credit reports to assess creditworthiness and determine interest rates for car loans.
4. Online Lenders and Fintech Companies: These lenders often utilize FICO scores, in addition to credit reports and alternative data sources, to assess creditworthiness for online loans and lines of credit.
It's important to note that while credit reports provide detailed credit history information, FICO scores are numerical representations of an individual's creditworthiness based on the data in their credit reports. Lenders may consider both credit reports and FICO scores to make informed lending decisions.
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Did you know there are automated systems determining your credit worthiness? It is impossible for a machine to consider your entire situation.
The E-Oscar system and the PACER system are two separate systems used in the United States that have implications for consumers in different ways. Here's an informative report on both systems and their usage against consumers:
E-Oscar System:
The E-Oscar (Electronic Online Solution for Complete and Accurate Reporting) system is a centralized automated system used by the three major credit reporting agencies in the U.S. (Equifax, Experian, and TransUnion) to process consumer credit dispute information. When a consumer disputes an item on their credit report, the credit bureaus use the E-Oscar system to communicate with the furnishers of the disputed information, such as creditors or collection agencies.
While the E-Oscar system is intended to streamline the dispute resolution process, there have been concerns raised about its effectiveness and potential drawbacks for consumers. Critics argue that the system favors speed and automation over accuracy and thorough investigation. The system may result in a "reinvestigation" process where the credit bureaus forward the consumer's dispute to the data furnisher, who then verifies the information without conducting a comprehensive review. This could potentially lead to incomplete investigations and the persistence of inaccurate information on consumers' credit reports.
PACER System:
The Public Access to Court Electronic Records (PACER) system is an online database maintained by the Administrative Office of the U.S. Courts. It provides public access to electronic case records, including filings and docket information, from federal courts across the country. PACER is used by attorneys, researchers, journalists, and the general public to access court documents and monitor ongoing cases.
Regarding its impact on consumers, the PACER system indirectly affects individuals involved in legal proceedings. Information related to debt collection lawsuits, bankruptcies, foreclosures, and other legal actions can be accessed through PACER. This means that creditors, debt collectors, and potential employers may use the information available on PACER to assess an individual's financial history and legal disputes. Consumers should be aware that their personal and financial information may become public record through court proceedings, and it can potentially impact their creditworthiness and reputation.
It is important to note that both the E-Oscar and PACER systems are tools used within the existing legal framework. Their impact on consumers depends on how effectively they are used by credit bureaus, data furnishers, and individuals accessing court records. While these systems have potential implications for consumer rights and privacy, it is crucial for individuals to understand their rights under the Fair Credit Reporting Act (FCRA) and other relevant laws when dealing with credit reporting and legal proceedings.
It is recommended that consumers regularly monitor their credit reports, dispute inaccurate information through proper channels by leveraging what’s inside of your copper membership.
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Credit reporting and data furnishing by credit bureaus in the United States are also governed by specific sections of the United States Code (U.S.C.). Some relevant U.S.C. sections include:
15 U.S.C. § 1681s-2: This section outlines the responsibilities of furnishers of information to credit reporting agencies. It requires that furnishers provide accurate and complete information and investigate consumer disputes regarding the accuracy of the information they provide.
15 U.S.C. § 1681i: This section focuses on the procedures that credit reporting agencies must follow when handling consumer disputes. It specifies the time frames for investigating and responding to disputes and the obligation to provide consumers with a free copy of their credit report once every 12 months upon request.
15 U.S.C. § 1681e: This section sets forth the requirement that credit reporting agencies maintain reasonable procedures to ensure the maximum possible accuracy of the information they include in consumer reports.
15 U.S.C. § 1681g: This section pertains to the disclosure of credit information to consumers. It outlines the requirements for providing consumers with access to their credit reports and the process for disputing inaccurate information.
15 U.S.C. § 1681c: This section outlines the permissible purposes for which consumer reports can be obtained and used. It restricts access to consumer reports to those with a valid need, such as for credit decisions, employment purposes, insurance underwriting, and legitimate business transactions.
15 U.S.C. § 1681j: This section addresses the responsibilities of users of consumer reports. It requires that users certify their permissible purpose for obtaining a consumer report and establishes requirements for providing adverse action notices to consumers based on information contained in the report.
15 U.S.C. § 1681m: This section pertains to the duties of furnishers of information to correct and update inaccurate or incomplete information. It requires prompt investigation and correction of disputed information by furnishers.
15 U.S.C. § 1681n and § 1681o: These sections establish civil liability for willful noncompliance and negligent noncompliance with the provisions of the Fair Credit Reporting Act (FCRA). They allow consumers to seek damages in case of violations by credit reporting agencies, furnishers, or users of consumer reports.
15 U.S.C. § 1681s-3: This section relates to the duties of resellers of consumer reports. Resellers are entities that obtain consumer reports from credit reporting agencies and resell them to other parties. It establishes requirements for resellers to maintain reasonable procedures to ensure the accuracy of the information they provide.
These are additional U.S. codes that are relevant to credit reporting, data furnishing, and credit bureaus. It's important to consult the specific language of these provisions and refer to legal resources such as the copper membership for a comprehensive understanding of the legal framework governing credit reporting in the United States.
In addition to the laws related to credit reporting, there are specific laws that protect consumers against debt collectors and regulate the buying and selling of debt. Here are some key laws in this area:
While I can provide you with some key laws that are relevant in cases involving negative credit reporting, it's important to note that case law and specific outcomes can vary depending on the jurisdiction and the facts of each individual case. Here are some laws commonly used by lawyers in disputes with credit bureaus or data furnishers.
Truth in Lending Act (TILA):
TILA promotes the informed use of consumer credit by requiring lenders to disclose key terms and costs associated with credit transactions. It provides remedies for violations, including the right to rescind certain types of loans. The Truth in Lending Act (TILA) is a federal law in the United States that aims to promote the informed use of consumer credit by requiring lenders to disclose key terms and costs associated with borrowing. While I cannot provide specific case law enforcement examples, I can give you a brief overview of TILA and its enforcement mechanisms.
TILA provides consumers with certain rights and protections when entering into credit transactions, such as mortgages, credit cards, and personal loans. Some key provisions of TILA include:
1. Disclosure Requirements: Lenders are required to provide clear and accurate disclosures of loan terms, including interest rates, fees, and repayment terms. Failure to provide these disclosures or providing inaccurate information may be a violation of TILA.
2. Right of Rescission: TILA provides borrowers with the right to rescind certain types of loans within a specified period. This allows borrowers to cancel the loan transaction without penalty if they change their mind or discover discrepancies in the disclosures.
3. Remedies for Violations: TILA provides consumers with remedies if a lender violates the law. These remedies may include actual damages, statutory damages, and attorney's fees.
Enforcement of TILA is primarily carried out by regulatory agencies such as the Consumer Financial Protection Bureau (CFPB). The CFPB is responsible for enforcing TILA and has the authority to take legal action against lenders who violate the law. Additionally, individual consumers can also file lawsuits against lenders for TILA violations and seek damages.
Fair Debt Collection Practices Act (FDCPA):
The FDCPA, found in 15 U.S.C. § 1692 et seq., is a federal law that governs the behavior of third-party debt collectors who are attempting to collect debts on behalf of others. It prohibits abusive, deceptive, and unfair practices in debt collection, and it provides consumers with certain rights, including the right to dispute the debt and request validation, the right to cease communication, and the right to be free from harassment or false representations. The FDCPA applies to debt collectors and governs their behavior when collecting debts. It prohibits abusive, deceptive, and unfair practices and provides consumers with remedies for violations, including statutory damages.
Consumer Financial Protection Act (CFPA):
The CFPA, established under the Dodd-Frank Wall Street Reform and Consumer Protection Act, grants the Consumer Financial Protection Bureau (CFPB) authority to regulate the consumer financial industry, including debt collectors. The CFPB has the power to enforce laws and implement rules to protect consumers from unfair, deceptive, or abusive practices in debt collection. The CFPA empowers the Consumer Financial Protection Bureau (CFPB) to enforce federal consumer financial laws. It grants the CFPB authority to take action against unfair, deceptive, or abusive acts or practices by credit bureaus and data furnishers.
Fair Credit Reporting Act (FCRA):
While primarily focused on credit reporting, the FCRA also contains provisions related to debt collection. It requires debt collectors to provide accurate and complete information to credit reporting agencies and imposes obligations on credit reporting agencies to ensure the accuracy of the information they report. The FCRA regulates the collection, dissemination, and use of consumer credit information. It establishes consumer rights, obligations of credit reporting agencies, and procedures for disputing inaccurate information on credit reports. It also allows consumers to seek damages for violations of the Act.
Uniform Commercial Code (UCC):
The UCC, adopted by most states with some variations, provides rules governing commercial transactions, including the buying and selling of debt. It establishes standards for the sale and assignment of debts and addresses issues such as the transfer of rights, warranties, and obligations of parties involved in debt sales.
State Debt Collection Laws:
In addition to federal laws, each state has its own set of laws governing debt collection practices. These laws can vary from state to state and may provide additional protections for consumers. It is important to be aware of the specific laws in your state.
These laws work together to protect consumers from abusive and unfair debt collection practices and provide avenues for consumers to address issues and disputes related to debt collection. It is recommended that consumers familiarize themselves with these laws and their rights under them to ensure they are treated fairly by debt collectors and those involved in the buying and selling of debt.
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Extra Tips:
Tip #1
Preserving Your Credit History is More Important Than You May Know
Maintaining a long history of credit usage is crucial for enhancing your credit file and FICO score. The true importance of responsible card usage over extended periods of time plays a critical role in improving credit.
Frequent opening and closing of credit cards can lead to significant problems. Instead, strive to keep a single card for as long as possible and use it exclusively. The average age of your credit accounts holds significant weight in your credit score, contributing around 15% to your credit score. Any account openings or closures result in changes to the age of your credit history, which can adversely affect this aspect of your score.
Tip #2
Below is a link to an authority on delivering info on the best cards of the year for building and/or reestablishing credit in 2023.
https://thesmartinvestor.com/c redit-cards/compare-cards/top- cards-to-build-credit/
*Validating The Debt Validating your debt is an important tool that can help you possibly avoid a lawsuit with a collection agency. You can validate your debt by sending an official validation letter requesting written proof of your debt to the collector in question. This letter should be sent as Certified Mail.
Debt validation is an important tool in avoiding a lawsuit from a collection agency over a debt. Lack of proper validation gives you grounds to have the debt removed from your credit report and successfully fight a lawsuit, should one be levied against you. The Fair Debt Collection Practices Act, or FDCPA, allows consumers to request a debt validation at any time. You are only allowed to request debt validation from a third party debt collector. If your debt is still owned by the original creditor, even if it has been assigned to the collections department, debt validation cannot help you.
Explore the 30-Day Notice
Disregard the notice on your credit report giving you 30 days to dispute the debt before the debt will be considered valid. This does not mean that the debt will be considered valid by the credit bureaus and the courts if you do not file a timely dispute. It simply means that the collection agency will wait 30 days for a response from you and if one does not arrive, the agency will assume that the debt is valid and begin collection activity in earnest. You may legally dispute a debt at any time.
Prepare a Letter Type up your debt validation letter. In your letter, request written proof that the debt belongs to you, the name of the original creditor, and proof that the collection agency is licensed to collect in your state. Do not state that you are refusing to pay the debt. This will be interpreted as an acknowledgment that the debt belongs to you and kept in a file to be used in court if the collection agency ever decides to sue you.
Don't Volunteer Information Avoid including identifying information such as your Social Security number or signature in your debt validation letter. Collection agencies commonly have no information on a debtor outside of the debtor’s name and address. Any information you volunteer that the collection agency does not already have will be used to validate the debt — whether it is yours or not. Including a signature is particularly dangerous, since signatures can easily be moved to other documents.
Send Your Letter Send your validation letter by Certified Mail: Return Receipt Requested. You will be asked to fill out a small green card with your name and address. The recipient will have to sign for the letter. The signature and date are recorded on the card, which is then sent back to you. Keep your receipt as proof that your debt validation letter was delivered in the event you do not receive a response.
WAIT FOR A RESPONSE
According to the FDCPA, a collection agency must validate your debt before resuming collection activity. Collection activity includes, but is not limited to: sending letters, calling you on the telephone, and updating your credit file.
Evaluate the Response
Evaluate the validation if and when it arrives. The majority of collection agencies will simply mail you a printout containing your name and the amount of the debt. This does not constitute validation, since any name and amount may be typed out and mailed to a debtor. If this occurs, you must send a second validation letter requesting proper proof in the form of copies of your signed contract with the original creditor, or the collection agency’s contract with the original creditor to collect on the debt.
