How to dispute a debt you know isn’t yours and improve your credit

A couple of years ago, I got a disturbing call from a debt collector.

According to them, I owed several thousands of dollars in back taxes to the City of Los Angeles. I knew this was not the case and had proof. In this situation, I had to dispute the debt.

If you find yourself in a similar situation, here’s what you can do to dispute your debt.

How to dispute a debt

1. Get the facts

Before disputing the debt, make sure to get all the facts. How much is the amount of debt you are disputing? Who is the creditor in question?

When the debt collector called me, they let me know they were calling on behalf of the City of Los Angeles to collect taxes that I owed. I asked them how much I owed and it was several thousand dollars. The debt collector was very persistent, attempting to get me to make a payment. I said I knew that I didn’t owe any back taxes and that I’d figure it out directly with City of LA.

To make sure you can dispute the debt properly, get as much information as you can including:

• The creditor
• The amount(s)
• The dates in question

You want to have all that information available so when it’s time to dispute you have everything you need at your disposal.

2. Know your rights

If you have a debt to dispute, it can seem overwhelming. If you have debt collectors hounding you, this only adds to the stress. It’s key to understand your rights.

If you’re contacted by a debt collector, they are ordered by law to include the amount that you owe, the name of the creditor, the fact that you can dispute the debt within 30 days and that the debt collector will verify it if you do so, and to offer the name and address of creditor if requested.

In other words, don’t make any payments or make any moves until you get all of the information you’re eligible to receive from the debt collector.

3. Check your credit report

Checking your credit report can also help you find out who the creditor is and how much debt you “owe” and need to dispute. Your credit report shows all outstanding loans and has a comprehensive view of your credit history.

You can access your credit report for free at AnnualCreditReport.com (it’s the only authorized, free resource to get your report — you should never have to pay). Be sure to get a credit report from all three of the credit bureaus.

If you do find errors that you need to dispute, you can take action with the Federal Trade Commission (FTC) and use their sample letter to send to the credit bureaus. Your credit report directly impacts your credit score, so getting this fixed is a crucial step in the process. If you don’t, you may end up getting higher interest rates on credit cards, car loans, etc.

Step 4: Fill out a dispute letter

Timing is important when it comes to disputing a debt. According to the Consumer Financial Protection Bureau (CFPB) you have 30 days to dispute a debt when you get the notification from a debt collector.

If you don’t respond within 30 days, the debt collectors will assume the debt is valid. In that 30-day period, debt collectors will cease activity until the verification is complete.

While you don’t have to use a paid service to dispute your debts and clean up your credit, they do exist. CreditRepair.com, for example, will walk you through the process if you want guidance.

Step 5: Send the dispute letter

You’ll want to send the dispute letter within 30 days. The CFPB has sample letters to send for a variety of situations. You can choose the “I do not owe this debt” template and fill it out with your personal information and send it to the debt collector. Be sure to send it via certified mail so you can keep track of it.

In my situation, I was able to send a dispute letter directly to the creditor, which was the City of Los Angeles, after getting the contact info from the debt collector. What happened was that I made a minor error on an administrative form that made them believe I started my business earlier than I did, which triggered a notification of owing back taxes. I sent them documentation outlining the error and illustrating that I paid my taxes on time.

Step 6: Get a written confirmation

After you send your dispute letter, you’ll want to make sure the debt collector processes your claim. You’ll want to get it in writing from either the debt collector or the original creditor that you no longer owe that debt.

When I submitted my paperwork to the City of Los Angeles to prove that I’d paid my taxes, I made sure to get a signed document on letterhead that stated I did not owe anything for my records.

The key to disputing a debt is to take action quickly and get everything in writing. Once everything is cleared, keep good records and monitor your credit so that the debt is removed from your credit profiles.