By Guy Benjamin

AS WE SLOWLY TRUDGE OUR WAY OUT OF perhaps one of the greatest economic setbacks in history, it seems quite apparent to me that many have not escaped the Great Recession with their sterling credit intact.

In my experience working with folks trying to buy or refinance properties, there seems to be no shortage of people who have what I like to call credit challenges.

What is most alarming to me is not the number of folks who are credit challenged, but the number of folks who have information in their credit files that is being inaccurately reported. If I was a bit more cynical, I might even be compelled to think that some of the big banks are purposely misreporting creditors’ information.

But I am not yet that cynical, so for now we’ll just call it bad computers.

Way back in 1970, a law went into effect to protect consumers from being damaged by the misuse of credit files or inaccurate reporting of credit histories. This law, known as the Fair Credit Reporting Act, gives consumers many protections and rights.

Among the rights consumers have is the right to dispute inaccurate information contained in their credit files. If a consumer has a valid reason to believe that information in his credit file is inaccurate, he can dispute that information through a process with the credit reporting agency reporting the inaccurate information. The agency must remove any inaccurate, incomplete or unverifiable information within 30 days of the consumer filing the dispute.

They may, however, continue to report the information if they have verified that it is accurate.

The dispute process is the vehicle that credit repair companies use to help consumers clean up their credit histories.

Legitimate credit repair folks essentially automate the process, allowing consumers to clean up their credit files in a painless process in exchange for a fee. Unfortunately, the majority of companies I have encountered in this business are unscrupulous, and they often prey upon folks, leaving them with the same bad credit and a lot less money.

What these guys promise is to remove legitimate derogatory information from a consumer’s credit file. A word of advice: If you are looking to clean up a messy credit history but the information in your report is accurate, beware of someone promising to get legitimate information removed.

What really bugs me right now is the frequency and number of borrowers I encounter who are essentially being held in credit jail by lenders that settled their accounts years ago either through short sale or foreclosure.

I was recently asked by a local Realtor to assist a young couple in their preparations for purchasing a home. This couple was forced to sell their home through the short sale process a few years back.

At the time they sold their home, the same bank held both a first and second mortgage on their home. The bank had agreed to take a short payoff on the two loans and settle this couple’s accounts.

Now some time later, their fortunes have improved, and they would like to once again become homeowners. The problem is that the bank is still reporting their old second mortgage as an open charge-off.

This is inaccurate reporting, as the account should have reported as settled back when the home was sold.

Easy fix, I thought: I have a rapid rescoring tool available and should be able to get this erroneous information corrected in a few days. Imagine my surprise when I learned that since the bank is reporting this as a charge-off, the credit reporting agencies will refuse to correct this erroneous information until the bank makes the correction.

Essentially, this is holding this young couple in credit jail — putting them at the mercy of the same big bank that was so cooperative when they found themselves in trouble. The same bank that is now paying out billions in dollars to settle claims of foreclosure abuses.

It bugs me that after all the grief this couple went through in losing their home, they now must revisit that grief in order to move on with their lives.

On a happier note, if you are reading this on Thursday, tonight is the grand opening celebration for RPM Mortgage.

We’ve timed this to coincide with the Farmers Market, as our offices are located on First Street at the entrance on the corner of West D Street. Stop by and say hello, and have a beverage and some great appetizers provided by 907 Grill.

Guy Benjamin (DRE License #01014834) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or gbenjamin@rpm-mtg.com.