Skip to Main Content

How to correct a credit report

Stressed woman pinching bridge of nose | Tetra Images/Getty Images

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Dear Debt Adviser,
After losing my job and suffering a reduction in income, I did not pay my real estate taxes because I could not afford to. I made every attempt to try and pay, but in the end I was told that I owe more in mortgages than what my house is worth. My lenders did not help.

The 1st & 2nd lien holders on my home were sent numerous correspondence about the tax sale, but neither appeared in court the final day.

The judge let the property go and said neither of the banks was present to redeem their interest and forfeited their rights.

The funny thing is that now even after 3 years, the 1st mortgage lender is still reporting me delinquent on the monthly payment each and every month. The 2nd lien holder charged off the loan and sends me “settlement offer” letters each year.

My question is: What can I do to “correct” my credit report with the erroneous information being reported?

Thank you!

— Debbie

Dear Debbie,
What a mess! The mortgage industry problems from years ago still haunt many borrowers today. Yours is a rare and unique example of lender negligence.  Much pain, suffering and money could have been spared if only the lender had been more actively involved.

2 lenders and delinquent debt

Your current issue as I understand it is with the 2 lenders and the way they are reporting your credit to the credit bureaus. I can see why you would question the continuing delinquency reporting.

Here’s why this is happening:

You borrowed money for your home from 2 lenders. Regardless of all that has happened, the loans have not been repaid. So, from the lenders’ point of view, you still owe the money and are delinquent.

Chances are that they will continue to report the delinquency for a 7-year period from the time you first stopped making payments.

When debt falls off your credit report

In about 4 years, the delinquencies will no longer show up on your credit reports. From a credit scoring standpoint, the real damage has already been done by the 2nd mortgagee reporting an unpaid charge-off, and even repaying the mortgages will not materially help your credit score.

Their offer to show your account as paid most likely means they will report your loan as a paid charge-off, not actually a “paid as agreed” account.

However, your problem may not be over yet. Two things may happen in the future. First, the lenders could pursue collection actions to recover their money. If it hasn’t happened by now, it may not, but the possibility is still there. Should this happen, you may want to see a bankruptcy specialist and get legal advice.

Forgiven debt counted as income

Second, the lenders could forgive your debts. This would create a situation where you’d be sent an IRS 1099 form for the forgiven debt, and the amount would be counted as income.

If this happens, you should be able to avoid income taxes under the Mortgage Forgiveness Debt Relief Act of 2007, which has been extended through Dec. 31, 2016. It may be extended in subsequent years.

So, unfortunately, your mortgage delinquency is being properly reported but should resolve itself in 4 more years, when the accounts turn 7 years old and drop off your credit report.

Be sure to check at that time to make sure it happens. If it doesn’t, you can dispute the entries, and they should be removed.

Good luck!

Ask the adviser

To ask a question of the Debt Adviser, go to the “Ask the Experts” page and select “Debt” as the topic. Read more Debt Adviser columns and more stories about debt management.

Bankrate’s content, including the guidance of its advice-and-expert columns and this web site, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this web site is governed by Bankrate’s Terms of Use.

Written by
Steve Bucci
Credit and Debt Expert Contributor
Steve Bucci has been helping people decode and master personal finance issues for more than 20 years. He is the author of “Credit Management Kit For Dummies,” “Credit Repair Kit For Dummies,” “Barnes and Noble Debt Management,” co-author of “Managing Your Money All-In-One For Dummies” and “Debt Repair Kit For Dummies” (Australia). Steve is an experienced expert witness in identity theft, credit scoring, and debt-related cases. He has been a presenter at the FICO InterACT Global Conference, the Federal Reserve and the International Credit Symposium at Cambridge University in the UK.