What Is a Direct Dispute?

The Difference Between Direct and Indirect Disputes

There are two types of credit report disputes defined by the FCRA: direct and indirect. Both are free to the consumer, but the disputing paths differ.

• Direct disputes occur when a consumer directly contacts the source of the information, also called the data furnisher, that provided what they believe to be incorrect information to the credit reporting company. For example, if a late payment for your ABC Bank credit card appears on your credit reports but you know you've made all your payments on time, you can contact the bank directly to notify them of the inaccuracy and ask that they contact the credit reporting companies and correct the information. This same scenario is applicable for any aspect of your account, like balances or dates, and any form of credit, such as mortgages, auto loans, personal loans and student loans.
• Indirect disputes occur when a consumer contacts a credit reporting company to dispute information being reported by a lender or other source. It's "indirect" because you are submitting your dispute to the credit reporting company, which then contacts the data furnisher—normally a financial services company or debt collector—and asks them to investigate the claim of inaccurate credit reporting.

Some consumers may choose to contact both the data furnisher and the credit reporting company. If you feel a lender has reported information incorrectly, you may wish to contact them directly first and discuss the issue before filing a dispute with the credit reporting agencies. If the lender agrees with you, they can contact the credit reporting company and have the information corrected.

Whether you contact the lender first or contact only the credit reporting company to initiate a dispute, the goal, of course, is to ensure the information on your credit reports is accurate. Either way, the lender will receive notice that you are disputing the information so they can investigate whether there has been an error. If the disputed information that appears on your credit report is deemed to be inaccurate, the lender will correct it or have it removed from your report.

In certain circumstances, the credit reporting company may be able to update the account information if you have documentation showing that a change should be made. For example, if you provide a letter from your lender stating that a loan has been paid off, you can submit that documentation to the credit reporting agencies, including Experian. Upon review, the reporting agency may be able to use the documentation to update the account right away.

Similarly, if a consumer claims one of their debts has been discharged in bankruptcy and provides a copy of their bankruptcy discharge paperwork and schedule of debtors, the credit reporting company may be able to simply update the consumer's credit report accordingly.

Why Are Direct Disputes Sometimes More Effective?

If you feel that an account is being reported incorrectly, consider contacting the creditor to discuss the issue first. Going directly to the furnishing party before filing a dispute with the credit reporting company might actually result in a faster resolution since you have a contractual relationship with them. In some cases, your lender may advise you that they will issue a correction without you having to do anything further.

Another thing to keep in mind is the credit reporting company isn't the arbiter regarding whether you're liable for a debt, if you made a payment on time or what your current balance may be. The information about your loans and credit cards that appears on your credit reports always originates with your lenders. They are the ones who will decide whether or not an item should be updated or deleted.

Filing your dispute with the credit reporting companies is also a good option. The systems the companies use to process consumer disputes are very sophisticated and allow you to choose the nature of your dispute and even attach documentary evidence to support your claim. Most disputes are completed within 30 days, and many much sooner than that.

How Do I File a Direct Dispute?

Unlike indirect disputes, where there are websites, addresses and phone numbers set up to accept your dispute, the same process does not exist when you contact the lender directly. However, that doesn't mean you won't be able to correct the information with your lender or a debt collector. In fact, the process is relatively simple. Follow these steps:

1. Contact your lender or debt collector. The fastest way to do this is by simply picking up the phone and calling them. It's not difficult to get a representative on the phone from either a lender or a debt collector.
2. Tell them you disagree with the information they reported to the credit reporting agencies, identify what you believe to be incorrect, and why. This can be as simple as, "The balance you've reported on my credit reports is incorrect and I'd like you to correct it."
3. Once you've communicated your dispute, the data furnisher must perform a reasonable investigation into your claim. That investigation will vary based on your dispute. For example, if you claim the balance is being reported incorrectly, the lender will likely check their records for payments relative to the principal balance. If you claim a late payment is incorrect, the lender will likely check your payment record against due dates. The process will take no longer than 30 days and in most cases will take much less time.
4. Once the lender has completed the investigation into your claims, they will request changes or deletions to the credit reporting companies, as warranted. Your lender is required to change incorrect information with all the credit reporting companies where the information appears. The updated information may take a couple of billing cycles to appear in your credit report. If the information you disputed is accurate, however, it's not likely that your credit report will be changed.

Keep in mind that there are certain items on your credit reports that are not subject to the dispute process. For example, your credit score isn't a disputable item.

How Do Disputes Impact Credit Scores?

If you dispute information on your credit report with either the lender, the credit reporting company or both and it results in information being modified or removed from your credit reports, your credit scores can be impacted. Because disputes are typically made to correct negative information that appears on a credit report, your scores could increase depending on the outcome of the investigation.

For example, if you disputed a derogatory entry and that entry was removed once the investigation was completed, your credit scores could benefit. Or if you disputed the balance of a credit card account and the balance was changed to a lower amount, your credit scores could also improve because you will have lowered your revolving credit utilization ratio.

Not all dispute outcomes have a big positive impact on credit scores, however. For example, if you had several collections on your credit reports and you were able to have one removed during the dispute process, you should not expect your credit scores to improve significantly because of the prevalence of remaining derogatory information. Similarly, if you dispute an open credit card account as closed and the account is updated accordingly, it may cause your utilization rate to increase, which could in turn cause your scores to dip.