The Fair and Accurate Credit Transactions Act (FACTA) of 2003 made sweeping changes to the Fair Credit Reporting Act (FCRA). On the surface some of these changes seemed like a win for consumers. Take the ANNUAL FREE CREDIT REPORT clause for example. Wow! The Credit Bureaus are actually giving away free credit reports! What a deal! Big win for us consumers, right? Wrong.



If something looks to good to be true it usually is. Your free credit report is anything but free. The fee in this case is time. In exchange for consumers receiving a free credit report the credit bureaus receive an additional fifteen days (for a total of forty-five days) in which to investigate disputes derived from these reports. In contrast, if you obtain a credit report from your loan agent or for a fee online or even for free through a promotion and you dispute an item the bureaus are bound by the thirty day deadline to verify or delete the item in question.

You must remember what drives the credit reporting agencies...profits. And where are these profits derived from? They are derived from the credit industry. And how does the credit industry make money? By charging you interest. And what leads to them receiving higher rates of interest and therefore bigger profits? I think you may get the picture by now. This new legislation is a trade-off and the bureaus and credit industry are getting the Lion's share of the benefit.

Think about it for a second. The thirty day deadline to investigate disputes puts a great deal of pressure on the system. The second the consumer dispute hits their desk the clock starts ticking. They must contact the creditor or creditors, inform them of the disputed information and receive a response within the thirty day period or by law the item must be deleted. By increasing the deadline by 33% would it be safe to assume that a comparable percentage of disputed items that would otherwise have been deleted will remain on the consumer credit report? Yes.

When you consider that millions of derogatory items are disputed on a monthly basis it is probably safe to assume that with this new legislation millions of items that would otherwise be removed from the bureaus will now remain. One late payment on your credit report could mean the difference between an A paper loan and a Sub-Prime loan. Depending on the situation this could equate to hundreds and sometimes over a thousand dollars per month in the form of an increased mortgage payment. If you move and happen to overlook a utility bill from your previous residence, cancel Christmas. Your credit score could plummet fifty to one hundred points from this simple mistake. And guess what, according to the bureaus you are stuck with the wreckage for seven years.

I am not some anti-government, anti-credit industry nut out to overhaul the system. So if you are a banking industry executive or FTC official please take note. In the grand scheme the system provides stability and security for our economy. There is no denying this. However, and this is a big however, the system is oppressive to consumers in its current state. Should someone be penalized thousands of dollars in increased interest for seven years because of an inadvertent mistake? I think not. Should the loss of a job, identity theft, an injury or the death of someone dear result in seven to ten years of oppressive discrimination? In my opinion it should not. Life happens and good people should not be made to suffer for a decade because of it. If you see legislation promoting the reduction of the time derogatory credit may be reported, support it.

Your right to dispute derogatory credit is the only edge you have in this big game. If you are serious about your credit rating you must adopt a proactive approach to maintaining it or improving it. Credit monitoring is a step in the right direction and usually comes with a free all bureau credit report and score. Remember, requesting your annual free credit report from the bureaus may put you at a disadvantage when it comes time to clean up your report.