Cleaning up credit report can be limited

Legally, accurate information does not have to be removed

I heard from a mother the other day who wanted to know if there was any way her daughter could get rid of some bad blemishes on her credit report.

Could you ask creditors if they’d remove such items, she wondered?

This mom is certainly not alone in her worries. But we’re not talking about negotiating your way to a better grade-school report card.

Many younger consumers are trying to figure out how to clean up their credit — particularly if they want to jump into the market for bargainprice homes and super-low mortgage rates. The depth of the recession has left others in credit-challenged spots, too.

“It’s a really serious problem in economic hard times like this,” says Susan Grant, director of consumer protection for the Consumer Federation of America.

Are there ways to get those bad marks removed?

“No guaranteed ways, but there are ways,” suggests Gerri Detweiler, director of consumer education for Credit.com.

Detweiler says that in some limited cases, it can work to try to negotiate on your own behalf with creditors to get items removed.

“It’s a negotiation like anything else. You may or may not get it,” Detweiler acknowledges. “You’re really trying to ask them to do you a favor.”

“Favor” is the operative word, as many credit experts say it’s extremely tough to get anything legitimate removed from a credit report.

If an item on a report is accurate, generally you’re out of luck and won’t be able to negotiate it off a report.

“If it’s accurate, legally it doesn’t have to be removed,” Grant said.

Where might a consumer have some negotiating room?

Perhaps, Detweiler said, if a consumer has an overall good report but missed a bill during a vacation or lost a bill during a move to a new home.

Detweiler said a creditor would be more likely to remove a single late payment that appears to be an isolated incident.

The consumer might request a “goodwill adjustment,” pointing out they otherwise had a perfect payment history for several years, she said. But a consumer could have to make repeated requests — including e-mails, faxes and phone calls — before getting an adjustment.

What if you want to barter with a collection agency? Detweiler said it’s worth trying. “You have to get it in writing,” she said. “If you don’t get it in writing, you don’t have an agreement.”

Don’t bet on this strategy working, though, according to other credit experts. More often, you’re going to be out of luck if you offer to pay a collec- tor and demand that an item be removed from a credit report in exchange for money. Credit-reporting agencies, such as Experian, frown on this.

Plenty of consumers try to make a deal, particularly if a negative entry is standing in the way of buying a car or refinancing a mortgage, said James Angelo, president of J.J. Marshall & Associates, a collection agency in Shelby Township, Mich. But he said it doesn’t work. It’s an issue of fairness — and integrity of reporting.

“How fair is it to the guy who pays his debts?” Angelo said. A paid collec- tions account would be reported as paid but not deleted from a credit report.

Consumers, of course, need to steer clear of costly gimmicks.

The Federal Trade Commission late last month took action involving a credit repair CD titled “Credit Solutions.”

The FTC is mailing 831 checks of $13.70 each to consumers who allegedly were charged an illegal advance fee for that CD, which had information on how to repair your credit. Warning signs of a scam include: a guarantee to erase bad credit; claims that you can create a credit identity; and requiring money upfront to repair your credit.

As some people have returned to work in Michigan, there is more focus on paying off bills and rebuilding credit, says Kathryn Moore, financial counselor for GreenPath Debt Solutions, a nationwide, non-profit financial counseling group based in Farmington Hills, Mich.

“If you owe the debt, the best thing to do is figure out a plan to pay it back,” she says. Typically, most accurate items, including late payments, can remain on a credit report for seven years, and bankruptcy information can remain for 10 years.

What consumers don’t understand is that some information — such as late payments — can gradually take on less importance a couple of years after an event, even if it’s still listed on a credit report.

One way to build up a positive score is to actively pay future bills on time and hold down borrowing.

To build a better credit score, you can do such things as making sure to use a small percentage of the available credit on a card.

John Ulzheimer, president of consumer education at SmartCredit.com in Atlanta, said consumers can certainly dispute wrong items with lenders and collection agencies, too.

By law, the lender and collection agency are required to perform a reasonable investigation.

But disputing an item does not mean that you’re necessarily going to have it removed from a credit report.

“If the item is correct, then contacting the lender isn’t going to lead to a removal,” Ulzheimer said.