You can dispute old debts that are no longer due. By doing so, you will raise your credit score.
An old bill collector’s scam is reporting invalid “out of statute” debt as collectible. If you fall into this trap, you will pay money you don’t owe.
Did you know that consumer debt that has been in default for more than four years in California is not collectible? They can’t use any lawsuit or legal process to collect the money. Thus, is not reportable any longer.
Each state has its own statutes of limitations and as a consumer, you need to be aware of them! For this article, I am going to use California as the example throughout.
Be warned though, there is an important exception to that rule. A lawsuit filed within that four-year period (applies to California), you still owe that debt. I’ll explain how this exception applies later in this article.
Many Americans have “out of statute” debts listed on their credit reports.
In these cases, you need to write to the collection bureau that lists the debt and dispute the entry. That way the debt no longer appears on your credit report from that credit reporting bureau.
How do bill collectors get away with this?
Once a debt has been in default (unpaid) for four years, the statute of limitations to collect the debt has expired. The creditor CANNOT file a suit to collect the debt once the debt has reached the statute of limitations.
But, to trick you into thinking that the creditor has more time to collect upon the debt. The creditor will make up a date called the “charged off date.” That “charged off date” will reflect on your credit report as the default date.
That date doesn’t matter. The four years (again, only using California) starts the day the account goes delinquent. The day you stop paying. For credit report reasons, the debt will fall off after 7 years + 180 days.
Dispute Your Credit Report
About 25% of U.S. consumers found errors on their credit reports. This was according to a 2012 study by the Federal Trade Commission. That same study found 20% of consumers still had errors after reporting it to the credit bureau.
An error on your credit reports, will impact your ability to open a new credit account or get a loan.
My credit score sucks. Will Disputing my Credit Report really help?
If your credit has lots of unpaid debts, then disputing a few might not be that helpful. But trying is better than doing nothing!
If your credit is good, make a habit of securing your free credit report each year, and checking it for errors. Even after a bankruptcy filing, you should get in the habit of making an annual review of your credit report. You can get your free credit report at www.annualcreditreport.com.
What should my “out of statute” credit report dispute letter say?
You must send a dispute letter to each of the three credit reporting agencies: Equifax, Transunion, and Experian. Also, I always recommend that you include a copy to the original creditor.
Your letter should contain the following language:
123 Main St.
Anytown, CA 12345
PO Box 2000
Chester, PA 19016
July 12, 2019
To whom it may concern:
I am writing to inform you about an error on my TransUnion credit report (account number 1234-56789).
I am disputing the debt owed to name of company. If I ever owed it, then I defaulted upon this debt on date. The four-year statute of limitations to start a collection lawsuit passed on date.
Today is date. No lawsuit was ever commenced. This debt was erroneously reported on my credit report as a valid and collectible debt having a “charge off date” of date. This entry is thus not accurate because the debt would no longer be collectible under local law as it is an out of statute debt.
I require that you remove any and all reference to this debt from my credit report at once. Please recalculate and amend my credit score without the effect of this debt computed into the calculation.
Please provide me with a copy of the amended credit report within 90 days of the date when this letter was first written as shown above.
Thank you for your help.
(sign your name here)
Where can I send my credit dispute letter?
Here are the addresses for the three major credit bureaus.
PO Box 740256
Atlanta, GA 30374-0256
PO Box 9701
Allen, TX 75013
PO Box 2000
Chester, PA 19016
Make sure to keep copies of any records you send to the credit bureaus and always send via certified mail.
If there’s one hassle you don’t want to deal with, it’s not knowing whether your credit dispute letter has arrived. Especially since you’re expected to include sensitive information in the letter.
What does the credit report dispute process look like?
Bureaucracies have a reputation for moving at a sloth’s pace. Credit bureaus are required to investigate the dispute within 30 days of receiving your letter. Better yet, each bureau is required to wrap up its investigation and notify you of its judgment within 90 days at the latest.
In some cases, the credit bureaus might ask for more information. They may also reject your claim.
“If you don’t get the answer you want the first time, don’t just give up,” says Jason Hamilton, a financial planner and author. “You may need to go back and forth multiple times. And if you know you are correct and can’t get the bureaus to agree with you, don’t be afraid to contact a lawyer.”
Continue to dispute your credit report until its right.
But I always thought “Charged off” means “forgiven”?
Some folks confuse “charged off” as meaning “forgiven”.
Please, don’t make this mistake!
“Charged off” does not mean “forgiven”, “written off” nor “pardoned”. If you see “charged off” on your credit report for a recent debt, do not take comfort!
The debt is still collectible by a lawsuit for four years from the date it went delinquent. Also, for the amount of the debt that you did not pay.
How long can I be pursued for a valid debt?
If a debt is valid—the debt is still due and payable within four years of the date of default. The creditor can file a lawsuit and get a judgment if the lawsuit was in before the four-year period expires.
Once a Judge hands judgment. The creditor has ten years after the date of the judgment to pursue and garnish the debt.
There is even worse news.
After the first 10 year period draws to a close, the creditor can ask the judge to extend the judgment for an additional 10 years (for a total of 20 years!).
The creditor can have up to 20 years to garnish and collect from you.
Dispute Your Credit Report Conclusion
Disputing your credit report can have a dramatic effect on your credit score. Imagine eliminating negative items that are dragging down your credit score?
It would be a huge financial and mental relief. You would save thousands with a lower APR!
Don’t forget to check your credit report annually to make sure everything is accurate. If you want to check your progress more often, you can get a free credit report summary, updated every 7 days from CreditKarma.com.
Be sure you are checking credit reports from all three of the major credit bureaus because the information contained in each may differ. Dispute your credit report if something isn’t right!