One of the common misunderstandings we discovered is that derogatory information in the credit bureau file (credit report) can be removed either by the consumer or with the help of a credit repair company without paying or otherwise satisfying the underlying account. This turns out to be the exception rather then the rule. To remove derogatory credit history the accounts almost always need to be satisfied. We are unsure where this misunderstanding arose: perhaps wishful thinking on the part of the consumer or over-aggressive sales pitches used by credit repair companies.
However we did find that derogatory accounts are commonly removed in certain instances without ever being paid:
- Credit bureau deletes the derogatory information upon dispute by a consumer (or credit repair company) and the subscriber (creditor) fails to verify within 30 days.
Under this circumstance derogatory credit history can be deleted from the credit report - even while the debt remains unpaid. It is also true that these listings stand a good chance of reappearing on the credit file sooner or later when later verified or re-reported by the subscriber (creditor) that reported the derogatory information to the credit bureau in the first place. This "re-reporting" also occurs in the case of older collection accounts that are assigned, sold or otherwise transferred from one collection agency to another and the new collector reports the item to the credit bureau as a derogatory trade-line. - Credit bureau deletes the derogatory information automatically, upon dispute by a consumer (or credit repair company) because the information is over seven years old and therefore obsolete.
According to the Fair Credit Reporting Act, once the derogatory information in the credit bureau file is over 7 years old, it must be deleted by the credit bureau from the report as obsolete. However this does not always happen as planned and it seems usually to be due to simple credit bureau failure to delete the item or, because the creditors or collectors misreport the "last activity" date to the credit bureau (i.e. when a collector takes over the account and reports the derogatory information to the credit bureau, the collector updates "last activity" with the date they took possession of the derogatory account).
