Credit bureaus respond to consumer credit disputes via mail. They will either delete or verify the information. If the item is verified, it means the bureau is keeping that information on your credit file.
The Fair Credit Reporting Act (FCRA) allows you to attach a 100-word essay to your credit report. This is the opportunity to explain the negative information and argue that you deserve new credit.
People often mistakenly use the 100-word statement to explain some situation that led to their bad credit. For example, they may want to justify late payments with the loss of a job or a medical condition. Be cautious about adding a consumer statement to your credit file.
This "concession" by the credit bureaus is not a concession at all. In fact, the 100-word statement will only make matters worse for you. People often send in statements like this: "I fell behind on my credit card bills, but I have since caught up. My boss laid me off from my job of 20 years. Even though I could not pay my bills, it was only a temporary situation and now I am current. "
The unexpected loss of employment may sound like a reasonable explanation to be late once or twice on a credit card bill. Plus, I would give that person credit for catching up on her bills and staying current since the bad financial spell. However, the credit bureaus and creditors read such a consumer statement entirely different. They don't see a good person who went through some brief and unexpected hard times. Her inability to make payments is seen as a sign of weakness and / or irresponsibility. They believe that she should have emergency money to pay bills during times of emergency.
Writing a 100-word statement can damage your credit for three more reasons. First, such a statement only cements the fact that you paid your bill late. Second, the credit bureaus already have confirmation that the late payments are accurate. Thus, you should dispute the items in the future, the credit bureaus will ignore that dispute or deem it "frivolous." Third, any future creditor will expect you not to pay them should you run into another financial emergency.
As you can see, there is no benefit to the consumer when they attach the consumer statement. In fact, the purpose of the statement is so old and out-dated that it probably should be simply abolished. It was part of the original Fair Credit Reporting Act enacted by Congress in the 1970's. The statement has no purpose nowadays since most credit applications are reviewed electronically.
Nowadays applications for new credit such as a credit card or car loan are based upon your score – not your statement. Therefore, the statement is only a weapon that the bureaus can use to ignore your credit report disputes.
In sum, ignore the temptation to tell your side of the story. Resist the urge to "justify" your being late on that credit card bill or car payment. Steer clear of adding the deadly 100-word consumer statement.