Credit Card Dispute: How to manage credit score fallout of disputed credit card transactions

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February 04, 2020 1:37 PM

Recently on Twitter, a person explained in great detail how his pristine credit history was besmirched by a single, disputed credit card transaction. Here's how disputed credit card transactions need to be handled.

credit card dispute, credit score, credit card, disputed credit card transactions, Twitter, Bank Ombudsman, consumer courtIf you notice an unauthorised transaction on your credit card account, report it immediately to your card provider through the fastest available channel.

Recently on Twitter, a person explained in great detail how his pristine credit history was besmirched by a single, disputed credit card transaction. The person said that though he’d had a clean credit history with all previous dues paid on time, his credit score fell from the high 800s to the low 600s after a credit card mishap. He says he had reported the transaction and got it reversed. But the merchant disputed the reversal and the bank had to reinstate it. When the card holder disputed it and refused to pay the charge, the bank added interest to it, and later marked the account as having defaulted.

This begs the question as to how disputed credit card transactions need to be handled. Here are some steps to take.

Report The Transaction

If you notice an unauthorised transaction on your credit card account, report it immediately to your card provider through the fastest available channel, be it phone, email, social media, or a visit to your card’s branch office. Ensure that the complaint has been registered and acknowledged, and that a reference ID has been generated for it. This will help as well as the card provider track the complaint.

Settle Matter With Merchant In Case Of Disputed Transaction

In some cases, both you and the merchant may dispute a transaction. You may want to settle this dispute first with the merchant through the means available to you. Without a clear settlement, the transaction will remain disputed, and your bank will be unable to refund you. If there’s a case of fraud, you may want to legally escalate the matter with local law enforcement.

Small Amount? Pay It Now, Contest It Next

The key is to not allow one transaction to become a multi-pronged battle you will fight against the merchant, the bank, as well as your credit bureau. If the disputed transaction involves a small amount, it is in your interest to settle it and then follow through with the dispute resolution process with the bank. But if you keep the charge pending, the bank will add interest and applicable penalties to it. Credit card debt is expensive, and soon the small charge will snowball into a large debt. Missed payments on unsecured debt can crush your credit score, and in 90 days, your account may be marked as being in default. From there, it could be a long haul to fixing your credit score. Therefore, to avoid these complexities, you should settle the dues for now to minimise the conflict.

Keep An Eye On Credit Score

As a borrower, you should always be aware of your credit score and never allow it to take you by surprise. If you use a credit card or are servicing a loan, make sure you avail your free credit reports at least once a quarter. If you have been through a phase of problematic debt, you should access your credit reports once a month to know where your score is and whether your corrective actions are helping. Credit reports are updated monthly, and you can get your report free on third party websites or directly from the websites of credit bureaus.

Initiate Dispute Resolution Online

Suppose there are errors in your credit report which are bringing down your score. All credit bureaus allow you to flag these errors. They are normally of two kinds. One – errors in personal details such as name, address, phone number etc. Two – errors in the credit data reported by your lender. For example, a timely payment may be reported as a late payment by your bank. You can use the credit bureau’s online reporting mechanism to initiate the resolution process. The bureau will then follow up with the lender about the dispute, and your credit report will be updated accordingly. The typical turnaround time is 30 days.

Take Legal Help Or Approach Bank Ombudsman

In case you’re not satisfied with your bank’s response, you can escalate the matter of the banking ombudsman by filing your complaint in writing. If the ombudsman’s decision is unfavourable, you can escalate it by approaching the appellate authority. If you’re still dissatisfied with the appellate authority’s decision, you could appeal against it in a consumer court.

Avoid Making Credit Applications Unless You’re Really Buying

When you apply for a credit card or loan, the lender initiates a check into your credit history. This is known as a “hard” query. The history of such queries will reflect in your credit report. Too many hard queries in quick succession can lower your credit score as it reflects a credit-hungriness on your behalf. Therefore, apply for any credit product only after you’ve done your research, are convinced about it, and fully intend to buy it. However, if unauthorised hard checks appear on your credit report, it may mean that someone has fraudulently attempted to open an account in your name. You must take this up with the lending institution as well as the credit bureau.

Know The Risks Of Being Involved With Someone Else’s Debt

If you as a primary credit card holder have handed add-on cards to your family members, you are responsible for clearing their dues as well. If you have been asked to be a guarantor on a friend’s loan, you may be responsible for repaying the friend’s debt. If they default, and you fail to make good on your guarantee, your credit score will plummet. Therefore, if you’re going to be involved with another person’s debt, make sure you fully understand the risks.

Credit should be used with great care. And if you find yourself in a quagmire despite exercising great care, there are plenty of ways to seek resolution. However, avoid skipping credit card debt in protest because of all the complexities it can create.

(The writer is CEO,

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