You recall a few years ago when you had a dispute with that car finance company? The one that said you owed more money than you thought when you didn't pay your late fee? After several months of bickering you finally got it resolved, although in the end you still paid the fee.

Like any good consumer, you wrote a letter to the credit bureaus explaining your side of the story. If there was any question about the dispute, all a potential lender needed to do was read your letter. Now though, you're finding that those late payments are affecting your credit score and it's hurting your chances to buy a house. But what about your letter? They don't mean anything anymore. Nobody reads them.

Part of the Fair Credit Reporting Act, or FCRA, explains your rights as a consumer, and one of those rights is to include a letter from you explaining your version of a credit dispute you might have had. If you feel you were taken advantage of, all you needed to do was compose a letter and send it in. The new Fair and Accurate Transactions Act of 2003, or FACTA (that's probably one of the coolest acronyms the government has come out with, don't you think?) doesn't eliminate this consumer protection tool, but it doesn't really mention it either. We've all gone high tech.

But writing an explanation letter is all that's needed, right? Not really. Lenders rarely manually peruse a credit report. Instead they look at your scores and for any public records such as judgments or bankruptcies. Just a few years ago, sure, every lender pored through a credit report adding this and counting that, and looking to see if there were any negative items. The lender would also look to see if there was a consumer letter in the file disputing the bad stuff. That sort of credit review doesn't happen any longer. In most cases, that is. Some situations can require a manual credit review if the consumer is applying for sub-prime credit or a lender is trying to justify a tight loan decision. But in general, reading reports went out the window when credit scoring flew in.

If you've got a credit dispute with a credit company you either have to document the information verifying that the creditor is wrong or maybe even go to court to have the mistake cleared up. But writing to the credit agency and ignoring it won't help. Credit scores don't read letters. They read data, and if you had some late payments in the past, no letter in the world is going to help your scores. And while the consumer can indeed make their case in a credit dispute by providing a written story of their situation the fact is that credit letters just don't matter much anymore.

Published: January 23, 2004

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, a veteran Mortgage Banker, successful Real Estate Consultant and author of Your Guide to VA Loans, Mortgages 101: Quick Answers to Over 250 Critical Questions About Your Home Loan, Who Says You Can't Buy a Home!, and Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You, is a former columnist and Contributing Editor with San Diego-based Mortgage Originator Magazine. Reed is President of CD Reed Mortgage Bankers, Austin, TX and is a Past President of the Austin Mortgage Bankers Association.