Who knew accounting could be so dramatic?

December 7, 2011 11:05 AM

I am so very aware of the robust good health of my credit score, thanks to having refinanced our mortgage in October. But last month, I was declined for a credit card. Turns out my former mortgage servicing company has wrongly reported late payments to the credit bureaus, and disputing this efficiently is slightly complicated, because my former mortgage servicing company is insane.

The first issue is our July payment, which was received on time but applied to the mortgage at a later date. So, it "looks" late on a very superficial scan of the account history, perhaps, but I have it in writing that our July payment was not received late, and that we have never been +30 on the account. (There was a long, boring, complicated accounting kerfuffle, but in brief, we paid what we were told by them to pay, and then I subsequently found out that their statements were incorrect and that we had to make up a BIG difference, which we did, but they had to untangle the accounting.) This letter affirming our account status is from September.

When I got the credit card denial letter, I obtained my report with the credit bureau named in the notice, and found out that the mortgage servicing company had apparently changed the status of the July payment with the credit bureaus in mid-October. I initiated an online dispute (oh gods I wish I'd done this by mail) and in the process, found out that the October payment had also JUST been reported that day as +30.

Um, fascinating. The refi closed at the end of October. The October payment was included in the payoff amount. The mortgage servicing company sent me written confirmation in early November that my account was paid in full. They returned surplus funds. And THEN reported my October payment as late. I disputed that item as well.

Now, how do I fix it with the rest of the credit bureaus? I apparently can't submit a dispute unless I obtain a report first, which I can't get for free unless THAT bureau is named in a denial of credit letter? Is that right? Because that seems asinine. (I already used my free annual report for the year, I checked them before before beginning the refi process so that I could correct errors if needed.)

Why don't I just insist that the mortgage servicing company correct it? Oh, because they can't see any account information for me, because my mortgage was paid off. [facepalm]

posted by desuetude to work & money (6 answers total)

You'll find invaluable credit information here.

It's extensive. Plan on taking 5 to 10 hours to begin to understand what to do and how to do it.

The short story is:
1. You can , by law, compel the credit reporting agencies to fully verify with your mortgage agency your late payments.

2. If the agencies can not verify this according to the letter of the law than you can compel the reporting agencies to remove the records from your credit report.

3. If your mortgage agency incorrectly verifies late payments to the credit reporting agency you can file a small claims suit for substantial damages which will likely compel the mortgage agency to correct it's report to the credit agency.

4. All of this will take you from 3 to 6 months to do (closer to 6 most likely) and there is no way around it. It will also take from 50 to 100 person-hours of your time all told. No way around that either.

5. You do have rights and they can be enforced but it will take time and effort on your part to get them enforced.

I do NOT recommend a credit repair agency that will claim to do this all for you for a fee. 99.9% of them are scams and I do not know of nor have heard of any legitimate agency to do this. You can hire your own lawyer to do this but he will charge you 20 hours time give or take to do so (at 200 to 300 an hour)
posted by Poet_Lariat at 11:57 AM on December 7, 2011

IAAL. IANYL. TILNA. I would find an attorney in your area that specializes in consumer law. There are various federal and state laws that may apply to your situation, and working your way through them is complex and complicated.

And, contrary to what Poet_Lariat says above, you cannot both "file a small claims suit" and receive "substantial damages." In fact, small claims may be out of the realm of possibility, because many small claims courts cannot act in equity. I do not know your jurisdiction, so I cannot say for certain.

What you can do before seeing an attorney is gather all of the documentation you need, including all payments from your refi, any documents from your old mortgage company, and all credit information. Good luck.
posted by China Grover at 12:10 PM on December 7, 2011

And, contrary to what Poet_Lariat says above, you cannot both "file a small claims suit" and receive "substantial damages." In fact, small claims may be out of the realm of possibility, because many small claims courts cannot act in equity.

In point of fact, the FCRA allows damages of over $1000 statutory damages PLUS punitive damages per incident for incorrect reporting. It's all indicated at the link that I posted but you do have to put in the work of reading that link and going through the voluminous information. So there is no "equity" damages - these are hard limits as set by law. Small claims is quite effective and (again, as indicated by the personal accounts at the link) just the filing of the papers often results in the outcome that you want. But long before you can file suit you must jump through several required hoops that , by law, will take you several months of time .

Read the information. I did . It took me many hours and I am in the middle of correcting some information as we speak.

You absolutely DO NOT NEED an attorney to do this. But you do need the time and the will to make the effort involved.
posted by Poet_Lariat at 12:27 PM on December 7, 2011

No worries, not going to use a credit-fixer company, egads.

Can I proactively dispute this with the other credit bureaus, though? I have written documentation from the mortgage servicing company to back up that neither payment is late. I can sort of see how the very confusing July thing could have gone through. I can even imagine that it was incompetence rather than malice. Though it is a little suspicious that they changed the rating after they knew I was refinancing.

But the Oct payment, what the hell, how can they report it as +30 when the loan was paid off prior to Oct 30?!
posted by desuetude at 4:08 PM on December 7, 2011

I found this link for the FTC which indicates that the Bureaus will provide you a copy of their reports for up to $11 each. It also has phone numbers for filing complaints with the FTC.

Good luck!
posted by China Grover at 5:01 PM on December 7, 2011

Follow the instructions from Poet Lariat above, ignore all other advice.
posted by hamsterdam at 9:16 PM on December 7, 2011