This report from 60 Minutes, “Is your credit report accurate?” illustrates that.
There are three credit reporting agencies (CRAs) commonly used by potential creditors to check your credit; Equifax, Experian and TransUnion.
Your credit rating is calculated from your history compiled from each of these CRAs. The rating is in the form if a FICO score. According to Wikipedia, FICO is the acronym for FICO Corporation, a publicly-traded corporation (under the symbol “FIC”) that created the best-known and most widely used credit score model in the United States. The FICO score is calculated statistically, with information from a consumer’s credit files. The FICO score is primarily used in credit decisions made by banks and other providers of secured and unsecured credit. Banks and other institutions using such scores as a factor in their lending decisions may deny credit, charge higher interest rates, demand more collateral, or require extensive income and asset verification if the applicant’s FICO credit score is low.
Banks and other lenders sometimes look at the details of your credit history reported by one or more of these CRAs. Have you had any bad debts charged off by other creditors? Do you have a history of late payments? Do you have a bankruptcy or judgment in your past, and so forth.
A bad debt can stay on your credit history for no longer than seven years, plus 180 days from its initial delinquency.
When settling a credit card debt, what gets reported to the CRAs needs to be part of the debt settlement negotiation. A less negative mark on your credit history is worth money to you in future lower interest rates.
Above and beyond the negative consequences of unpaid credit card debt on your credit report, credit reporting agencies can simply be reporting wrong negative information about your past credit history that you need to aware of that.
After going through a period of non-payment and account balance charge off, many credit card debtors have been successful in cleaning up what is reported on their credit histories by these CRAs. The original creditor reports are the hardest to remove, but many times they sell the debt and stop going to the trouble of continuing to report it to the CRAs. Collection agencies and junk debt buyers are easier to get off your credit history. If you have written CMRRR to them asking them to validate the date and cease all collection activities after they sent you a mini-Miranda statement, then they cannot report the alleged debt to the CRAs. Doing so constitutes ongoing collection activity and is in violation of the Fair Debt Collection Practices Act. (I cover credit repair in more detail in the last ebook of my package.)
You are entitled to a free credit report from each of the CRAs once a year. Here is a link to the Federal Trade Commission showing you how to avoid being scammed by third parties offering supposed free credit reports, as well as a link to the Fair Credit Reporting Act.
Beyond that you can subscribe to services that compile the three reports monthly for you. Most credit repair wags prefer the original reports that have more detail than the three CRA compilations. You can purchase a report from each agency for about $10.
To get out of credit card debt keep track of what the banks and debt collectors are putting on your credit report. Read this post on the dangers of credit repair organizations.