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Repairing Credit Problems

Credit problems can affect eligibility for the PLUS Loan. Under federal rules, the borrower of a PLUS Loan cannot have an adverse credit history. An adverse credit history can occur because of inaccurate and/or incomplete information in the borrower’s credit history. It can also occur because of correct information in the borrower’s credit history.

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Obtain a Free Credit Report

The first step in trying to repair credit problems is for the borrower to obtain a recent copy of his or her credit report.

Consumers are entitled to a free copy of their credit report from each of the major credit bureaus (Equifax, Experian and Transunion) once every 12 months, by visiting or by calling 1-877-322-8228. Free copies of credit reports may also be requested by mail by sending the Annual Credit Report Request Form to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Beware of lookalike web sites that charge a fee for a copy of the consumer’s credit reports or those that offer a free initial copy of the credit report and then charge a monthly monitoring fee.

Some consumers request copies of their credit reports from each of the three major credit bureaus at the same time. Others stagger the requests, asking for a copy of their credit reports from one credit bureau every four months.

Consumers who are denied credit, insurance or employment on the basis of information found in a credit report are entitled to a free copy of the credit report from the credit reporting company that provided the report if requested within 60 days of the denial.

Consumers who are unemployed and will be seeking a job within 60 days are also entitled to a free copy of their credit reports once during any 12-month period. Welfare recipients are also entitled to a free copy of their credit reports. Consumers may also obtain a copy of their credit reports if they are victims of identity theft.

Disputing Inaccurate Information

Consumers can dispute errors on their credit reports on their own, for free. There is no need to pay a credit repair company to dispute the errors on the consumer’s behalf.

If there is any inaccurate or obsolete information on the credit report, the consumer should dispute the incorrect information in writing. The dispute should be filed with the credit bureau and with the creditor that reported the inaccurate or obsolete information to the credit bureau. All three credit bureaus accept disputes that are submitted online.

The letter should clearly identify the inaccurate information that appears in the credit report, provide the consumer’s name and address, state the correct information, and ask that the incorrect information be corrected or removed. Include a copy of the credit report with the incorrect information highlighted or circled. It is helpful to include copies of documentation that support the consumer’s claim that the information is inaccurate, such as copies of account statements and letters received from the creditor. Keep a copy of the letter and documentation. Send the letter and documentation by certified mail, return receipt requested, so that there is proof that it was received.

Common examples of inaccurate information include:

  • Credit report mentions an old delinquency but does not mention that the account is now current
  • Credit report includes inaccurate address information
  • Credit report includes one or more accounts that do not belong to the consumer (e.g., due to misreporting information from someone with a similar name or due to identity theft)
  • Credit report includes inaccurate information about one of the consumer's accounts

The credit bureau and the creditor are each responsible for correcting errors in the consumer’s credit report.

Credit bureaus must investigate the dispute within 30 days and respond to the consumer in writing. If the disputed information cannot be verified, it must be deleted, usually within the 30-day period. The 30-day period may be extended by up to 15 days if the consumer provides additional information during the 30-day period that is relevant to the investigation. If there is a change in the information in the credit report as a result of the investigation, the credit bureau must also provide the consumer with a free copy of the credit report. This free copy of the credit report is in addition to the free copy the consumer is entitled to during any 12-month period. The consumer can ask to have the corrected credit report sent to any organization who received a copy of the credit report within the last 6 months (2 years for employment purposes).

If the credit bureau and/or creditor verifies that the disputed information is accurate and complete, the consumer has the right to have a statement added to future credit reports.

Fixing Accurately Reported Problems

Accurately reported information may remain on the consumer’s credit report for at least 7 years. Bankruptcy discharges may be reported for up to 10 years. Some information may remain on the credit report indefinitely, including information about criminal convictions, information reported in response to a job application for a job that pays more than $75,000 a year and information reported in response to an application for more than $150,000 of credit or life insurance.

Most credit problems that lead to a denial of a PLUS Loan can be cured by the passage of time. For example, a bankruptcy discharge, foreclosure and repossession will affect the borrower’s eligibility for a PLUS Loan for five years.

Some problems can be cured sooner. For example, if a borrower has an adverse credit history because of a current delinquency of 90 or more days, bringing that account current may enable the borrower to qualify for a PLUS Loan. Borrowers can also bring accounts that are in collections or charged off below the $2,085 federal threshold that results in an adverse credit history determination.

Borrowers who are experiencing financial difficulty may want to seek help from a non-profit credit counseling organization.

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