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Credit bureaus respond to consumer credit disputes via mail. They will either delete or verify the information. If the item is verified, it means the bureau is keeping that information on your credit file.
The Fair Credit Reporting Act (FCRA) allows you to attach a 100-word essay to your credit report. This is the opportunity to explain the negative information and argue that you deserve new credit.
People often mistakenly use the 100-word statement to explain some situation that led to their bad credit. For example, they may want to justify late payments with the loss of a job or a medical condition.
Be cautious about adding a consumer statement to your credit file.
It may look like the credit bureaus are doing you a favor by adding your consumer statement. However, it is really just another technique the credit bureaus use against you.
People often send in statements like this: “I fell behind on my credit card bills, but I have since caught up. My boss laid me off from my job of 20 years. Even though I could not pay my bills, it was only a temporary situation and now I am current.”
Losing her job due to no fault of her own seems like a rotten reason to give her bad credit.
However, the credit bureaus and creditors read such a consumer statement entirely different. They don’t see a good person who went through some brief and unexpected hard times.
Credit bureaus interpret the situation as somebody who is irresponsible. They see her as a bad credit risk because she does not have enough savings to cover bills then things get tough.
The 100-word statement also has additional hidden dangers. For instance, adding such a statement confirms your guilt. It is direct proof that you were late on those payments. Moreover, you put yourself on perilous footing should you decide to hire a credit correction law firm in the future. The credit bureaus will ignore any future disputes on your behalf because you have already admitted guilt. There is no reason for them to conduct an investigation. Finally, you have put yourself into a category of consumers that potential creditors avoid. Any potential creditor may avoid giving you credit out of fear that you will likewise default on payment should you run into a rough financial patch in the future.
If a creditor does not read your statement, then nobody will. Most applications are reviewed digitally and so the 100-word statement serves no purpose other than a weapon credit bureaus use against you.
To summarize, the 100-word statement is out dated and dangerous. Avoid the temptation to explain bad credit. Instead, use the formal channels to challenge misleading credit information such as dispute letters and creditor interventions.