Dear Liz: I always thought I had good credit. I pay my bills on time and don't carry credit-card balances. But when I moved into my current apartment, the landlord ran a credit check on me. It wasn't horrible -- my credit score was 683 -- but certainly wasn't as good as I had imagined.
A few things on the report caught my attention. First, the report has Fresno as one of the cities where I used to live. Not only have I never lived in California, but I have never even set foot in the state. Second, it appears that I am in collections for some long-distance phone charges when in fact I have never had an account with the company that's listed. How can I get these errors cleared off my record?
Answer: Collection agencies have become increasingly aggressive about seeking payment on old debts, and some of them aren't too picky about making sure they're going after the right people. The result is that someone else's collection account can land on your credit report, as apparently happened here.
Start by pulling your credit reports from all three major credit bureaus: Equifax, Experian and TransUnion. You're entitled to free reports from each of the bureaus once a year under federal law by calling (877) 322-8228 or visiting the bureaus' central Web site. (If you've already had your free look for the year, you can order copies individually from the bureaus, typically for $8 to $9, or you can order your reports and FICO scores from all three bureaus for about $45 from Myfico.com.)
With your reports, you'll be given instructions on how to dispute errors. With any luck, the erroneous entries will disappear. If not, you'll have to take your fight directly to the collection agency. Send a letter, certified mail, return receipt requested, informing the agency that this is not your debt and demanding that it "validate" the account -- which means the agency must provide proof that you owe the money and that it is entitled to collect the debt. If it's not your debt, the collection agency won't be able to provide such proof and the entry should disappear.
It's also possible, although less likely, that you're the victim of identity theft. In that case you might want to check out the Identity Theft Resources Center. Typically, an identity thief will open more than one bogus account and you would find plenty of other errors, collections and delinquencies in your report.
Don't rest until you've resolved this issue. A 683 score may not seem all that bad, but more than half of American adults have FICO scores over 700, and you typically need a score of 720 or above to get the best rates and terms. The score you have now could cost you thousands of dollars of unnecessary interest should you need a loan.
Dealing with a sneaky collection agencyDear Liz: Eight years ago we incurred credit-card debt and were not able to pay it. This is something that we've been very ashamed of because before that we had excellent credit. Recently, a debt collection agency called us and offered to pay one-half of our debt if we paid them the other half by the end of the month. Should we take them up on their offer?
Answer: You need to know a little bit about how debts are collected, because this agency is trying to snow you.Six months after you stopped paying your credit-card bill, the lender "charged off" the account as a bad debt. "Charging off" is an accounting term that essentially means the creditor doesn't believe you're going to pay and plans to write off the loss for accounting and tax purposes.
The creditor may have turned your debt over to in-house collectors for a while, but at some point your account was sold to an outside collection agency, typically for pennies on the dollar. This agency may have sold it to another, which could have sold it to another, and so on. The older the debt, the less the agencies typically had to pay for it.
In case it's not obvious by now, the agency that's trying to collect isn't going to "pay half" of anything. It has already paid all it is going to pay for your debt, which might have been $1 or less for every $100 you originally owed. If it can get you to pay $50, that's quite a tidy profit.
It would be nice if you could go back to the original creditor and pay your bill, but typically that's impossible. Once the debt is sold, most lenders won't accept further payments.
If you want to negotiate with the collection agency, proceed with caution. A collector that would use this kind of deception will probably use others, so you might want to consult an attorney for help.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.