Is It Legal for a Bank to Remove a Derogatory Item From a Credit Report?

Customers who delve into the specifics of credit reporting probably know that lenders, such as banks, control the majority of the information reported by the major credit agencies. This also means banks can remove negative items at will. Banks and other lenders are unlikely to remove negative items out of the kindness of their heart, but it is possible.

Identification

Banks can legally remove a negative item, but the credit bureaus probably do not support this action if the negative is legitimate. However, a bank might change a late payment to "paid as agreed" for a valued customer who has a long history with the company. Customers should not expect this because you never know when or which bank will agree to this.

Considerations

Removing a derogatory item or account from a credit report is a common tactic used by attorneys when negotiating a debt settlement. Most consumers pay less than the original balance when the creditor agrees to a debt settlement, but offering to pay the full balance in return for deleting the delinquent account could entice the lender. Again, this is never a guarantee, and such a tactic might backfire. Dangling a full payment lets the lender know that the consumer has the resources to pay the balance, which the creditor might recover through a lawsuit.

Late Fee vs. Derogatory Report

Lending institutions sometimes give customers a gift they might not notice. This often happens when a customer pays his bill a month late, but the creditor reports the account as never late. Instead, the creditor charges a late fee. Customers should never assume that banks will do this, even if the bank "forgot" to report a late payment in the past.

Tip

The only way to guarantee that a bank removes a negative item is when it makes an error in an update. Federal law requires credit bureaus and creditors to report accurate information and investigate any claim by the consumer of a mistake. The first step to disputing a mistake is using an online form from one of the agencies or sending a certified letter stating the error and a request to correct it, along with identifying information and copies of documents to prove your case. You could go to the bank itself and give it the same dispute package.