Credit Score Articles

Disputes with Lenders Can Damage Credit Score

Disputes with credit card companies over charges are occasionally unavoidable, but not paying a bill is hardly the best way to deal with it.

Not paying the entire credit card bill over one or two disputed charges will ultimately accomplish nothing but severe damage to a credit score, according to a Bankrate.com article. While there are legal protections in place for the consumer that wants to dispute a charge, there are also certain steps that must be taken to keep the credit score protected.

The article states that under the Fair Credit Billing Act, a consumer must send a letter disputing any charge they feel is in error to the credit card company's address for billing inquiries within 60 days of the disputed charge first showing up on a statement. From there the issuer has 30 days to acknowledge the dispute in writing and 90 days, or two billing cycles, to investigate and resolve the claim.

During the investigation, the article says, a consumer is allowed to withhold payment only on the portion of the statement that is being disputed, which the lender cannot report as delinquent, unpaid debt. The consumer must still pay at least the minimum amount or face a number of fees, a penalty interest rate hike and delinquencies on their credit report. The latter is what will negatively impact the consumer's credit score.

However, the article cites a government website which states that, if the bank determines its has made a mistake, then it must correct the error, credit the account with the disputed amount and any other fees or other charges incurred on it while it was being disputed. It must also issue a correction notice.

Even if the lender investigation rules against the consumer, it must still send an explanation, the article said.

The article also notes that there are steps to protect consumers if the lender breaks the rules, most notably that they can be reported to a number of government regulators. Consumers may also take the lenders to a private arbitrator or judge.

A recent article in the New York Times highlighted a new government database website that hosts the terms and agreements of more than 300 credit card issuers to help consumers know just what they've agreed to and to help them work out whether or not they have the grounds to begin a dispute.