When to add a consumer statement to your credit report
By Susan Johnston Taylor
May 28, 2015
Maybe your ex welched on a payment your divorce decree stipulated that he should pay. Or maybe your credit file shows late payments that you know you made on time. Either way, there is recourse.
If you have negative marks on your credit report, adding a consumer statement gives you the chance to explain your point of view to lenders and others reviewing your credit report.
Under the Fair Credit Reporting Act, consumers have the option to add a statement to their credit report of up to 100 words (200 words for Maine residents). These statements come in a few different flavors, according to Rod Griffin, director of public education at the credit bureau Experian.
- Statement of dispute: “If you dispute an item [on your credit report] because you believe it’s inaccurate and the source of that information comes back and says it should continue to be reported as it is, you can add a statement of dispute saying why you disagree,” Griffin says. For instance, if your lender reports a late payment that you believe was always paid on time, your statement might say that the late payment is inaccurate.
- General statement: You can also add a general statement that’s not tied to a specific item you disputed. Griffin also calls this a “statement of excuse” and discourages consumers from exercising this option. For instance, “‘we went on vacation to Tahiti and forgot to mail the payment’ is not something we would encourage you to put on a credit report,” he says.
But do lenders actually review consumer statements or do they rely on computer-automated underwriting? Nessa Feddis, senior vice president at the American Bankers Association, says it depends on the individual lender and the loan product. “On a mortgage application, because it’s a much larger loan, they probably would be more likely to look at a statement,” she says.
Another case when a lender might be inclined to read a consumer statement is when the loan applicant’s credit score is borderline and an explanation of the issue could sway the lender one way or the other. “It’s something that would give the opportunity for the creditor to inquire a little further or reconsider,” Feddis says.
“Statements might be of use to prospective employers, landlords, insurance agents or others who look at the report for something other than lending.”
–Kevin Weeks, FCAA
“Statements can explain mitigating circumstances that a lender may or may not know,” says Kevin Weeks, president of the Financial Counseling Association of America, a national association representing nonprofit credit counseling companies. “One example might be in the case of a divorce when an ex is late or doesn’t make a payment they were responsible for on an account that both are on.”
Of course, even if a potential lender doesn’t actually read your statement, it could serve you in other ways. “Statements might be of use to prospective employers, landlords, insurance agents or others who look at the report for something other than lending,” Weeks says.
Here are some tips to follow if you decide to go this route.
1. Know the contents of your credit report
Check your credit reports for free once a year at AnnualCreditReport.com to make sure they have no errors. “Our goal is to ensure that everything in the credit report accurately reflects what consumer believes to be true,” Griffin says. “We encourage you to be engaged in the process. Your engagement as a consumer helps ensure that the information is accurate.”
2. Keep your statement short and factual
In most cases, you only have 100 words to share your side of the story, so make every word count and stick to the facts of the situation, not the emotions behind it. A lender doesn’t need to read a description of your lying, cheating ex-spouse, but rather whether or not your ex failed to pay the credit card bill as outlined in your divorce decree.
Each credit bureau has its own process, and it may require that your statement be listed in conjunction with a dispute you’ve filed. Visit each credit bureau’s website for more information: Equifax, TransUnion and Experian.
3. Remove the statement when it stops being relevant
You have the ability to remove or edit your statement at any time by contacting the credit bureau. Otherwise, statements of dispute remain on your credit report for seven years and general statements remain for two years, according to Griffin. However, Weeks suggests removing the statement before then. “The statement could draw negative attention later on, after it no longer affects a credit score,” he says.
Adding a consumer statement may not help you in all cases — and if you’re giving an excuse such as “I forgot to mail a check before leaving on vacation,” it could even work against you. But if you feel information is inaccurate and your dispute failed to remove it or you feel your side of the story has legitimacy, then a consumer statement is a valid option.
Think about how lenders might view your point of view and exercise this option judiciously.