Q. Can a bill in dispute affect your credit score? And is there any way to minimize the damage incurred from a delinquent payment?
A. It all depends on who you’re arguing with and what you’re arguing about.
According to Ken Lin, CEO of Credit Karma.com, if you are disputing a specific merchant charge, most credit card companies will exclude that item from payment until the issue is resolved. However, those disputing a specific credit card bill or fee imposed by a credit card company should tread carefully, especially once the payment is overdue by 30 days or more.
“Chances are, after 30 days, the creditor will report the late payment as exactly that and it is definitely going to affect your credit score,” Craig Watts, spokesperson for FICO, the company behind America’s current credit scoring model, tells MainStreet.
Both Lin and Watts suggest anyone disputing a specific credit bill pay the minimum while they wait for the dispute to be settled.
“If you prevail, virtually all lenders will reimburse you for the payments made,” Lin says.
Of course, there’s the chance that your score may not be affected at all. John Ulzheimer, president of consumer education for SmartCredit.com, says that when an account is initially disputed by a consumer, the data furnisher, or credit bureau, is required to show that the account is being contested during an investigation.
“The bureaus will note on the credit report that an account is in dispute, and FICO will ignore it for some period of time,” Watts confirms.
So if you can prove that you don’t owe anyone anything, you may be able to escape the dispute with your credit score intact. But don’t try to game the system and falsely dispute a charge that you actually made, you’ll only be delaying the inevitable.
“The bureaus don't arbitrarily remove or change things without permission from their data furnishers unless it's clear the items need to be removed or amended from a legal perspective,” Ulzheimer says, noting that many credit repair companies try to use the FICO dispute clause to (temporarily) salvage a client’s credit score.
“Most disputes are rectified, at least in the mind of the credit bureaus, in a couple of weeks,” Ulzheimer says. “As such, the potential window of abuse is very small.”
Want to know what affects your credit score? E-mail your questions to MainStreet at email@example.com.
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