So You Had Your Identity Stolen. Now how do you save your credit?

by tylercook on January 21, 2013

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Being deep in debt is a thoroughly unpleasant experience, especially when it is due to other people’s criminal activity, such as identity fraud. People who have experienced overwhelming debt describe it as a “crushing feeling” akin to drowning or asphyxiation. Debt is a major cause of personal stress and marital problems. Even when it’s not explicitly cited as a cause for separation in divorce cases, debt is often one of the proverbial “irreconcilable differences” that end so many marriages.

Once your debts become unmanageable and you’re forced to stop paying your bills, your creditors may sell your debts to debt collection agencies that stay in business by pursuing delinquent borrowers. These professional debt collectors can be aggressive: They may send threatening e-mails, repeatedly call you at home, and visit your workplace in their effort to intimidate you into repaying your debts.

While these efforts aren’t exactly illegal, the Fair Debt Collection Practices Act does entitle you to certain rights that collection agencies routinely ignore. To regain your distance from these folks, you’ll need to write an official letter that reminds them which side of the law you’re on.

First, this letter should begin with an official letterhead that includes both your contact information and that of its recipient. This will immediately prove that you’re playing for keeps. Next, remind your recipient of the date of their last correspondence and assure them that you’re not refusing to pay your bill outright. Follow this up with an official request for “validation” of the agency’s right to collect on the debt in question under the Fair Debt Collection Practices Act .

Remind your recipient that this request involves several distinct parts. The collection agency will need to provide information about the debt’s original creditor, the necessary licensing and authorization information proving that the agency is permitted to collect debts in your jurisdiction, and a copy of the original debt judgment against you. The agency should also provide an official reckoning of the debt.

Once you’ve laid out these parameters, request that the agency cease all future verbal and in-person communications. Inform its principals that they have 30 days to respond to your request before their attempt to collect can be considered harassment. Finally, threaten to sue if the agency does not comply with your requests. Sign your letter and send it via certified mail.

Once you’ve dispatched your debt collectors with this no-nonsense correspondence, investigate your debt profile further by taking advantage of a new federal law that permits you to obtain one free credit report per year from each of the three major credit reporting agencies. You’ll be able to review and compare each of these reports to learn more about your credit history. Pay special attention to inconsistencies between these reports. If two of the three reports peg your credit score at around 730 and the other reports it as 640, you’ll need to do some digging.

Such a discrepancy may be the result of an inaccurately-reported credit event. Since credit reporting agencies regularly fail to update their reports, this is commonplace.

Every blemish on your credit report is destined to expire or “roll off” your record. Some mistakes take longer to disappear than others: For instance, bankruptcy may linger on your report for seven years or more whereas a missed credit card payment may vanish in just three years. If your annual credit report review finds that a particular blemish has outlasted its welcome on your record, you’ll need to take steps to accelerate its departure.

This can generally be accomplished with a polite but forceful letter to the offending credit bureau. Artificially-depressed credit scores are no joke: Your unattractive financial record may prevent you from securing a home loan, car note or credit card. Even if you’re approved for a particular credit facility, you may be asked to pay an unreasonably high interest rate for the privilege. You may even be asked to put up valuable assets as collateral.

Your letter should include a few key features. First, top it with the same official letterhead that graced your collection-agency letter. Next, promptly state that you are lodging an “official complaint” on the grounds that your recipient included erroneous information in your most recent credit report. Note that this is technically illegal under current fair credit reporting laws and demand that corrective action be taken as early as practicably possible.

Your letter should include two additional parts. First, include a sentence or two demonstrating that your recipient’s oversight had negative consequences. Give at least one example of a specific situation in which you were denied credit due to the erroneous information in your report. Next, back up your overarching assertion with hard proof. If they exist, provide hard financial records like cancelled checks or up-to-date loan statements that show the information in question to be false.

Like your collection-agency script, you must keep this important document short and to the point. Also, remember to send it to the credit bureau via certified mail.

Collection agencies and credit bureaus perform necessary functions in today’s high-risk lending industry. In their zeal to uphold the rules of the financial realm, they can also overstep their bounds and become a serious nuisance. If you find yourself in a credit bind, you’ll need to keep these powerful forces in check by holding them accountable for their mistakes and wrongdoings. In an age of electronic communication and 24-hour connectivity, the accepted means of getting your point across hasn’t changed: It’s still best to write a letter.

Byline:  Tyler once had to write a credit repair letter when his credit tanked due to someone having stolen his bank card.




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