A good credit rating is very important. Businesses inspect
your credit history when they evaluate your applications
for credit, insurance, employment, and even leases. Based
on your credit payment history, businesses can choose
to grant or deny you credit provided you receive fair
and equal treatment. Sometimes, things happen that can
cause credit problems: a temporary loss of income, an
illness, even a computer error. Solving credit problems
may take time and patience, but it doesn’t have to be
an ordeal.
The Federal Trade Commission (FTC) enforces credit laws
that protect your right to obtain, use, and maintain credit.
These laws do not guarantee that everyone will receive
credit. Instead, the credit laws protect your rights by
requiring businesses to give all consumers a fair and
equal opportunity to receive credit and to resolve disputes
over credit errors. This article explains your rights
under these laws and offers practical tips to help you
solve credit problems.
Your Credit
Report
Your credit payment history is recorded in a file or report.
These files or reports are maintained and sold by "consumer
reporting agencies" (CRAs). One type of CRA is commonly
known as a credit bureau. You have a credit record on
file at a credit bureau if you have ever applied for a
credit or charge account, a personal loan, insurance,
or a job. Your credit record contains information about
your income, debts, and credit payment history. It also
indicates whether you have been sued, arrested, or have
filed for bankruptcy.
The Fair Credit Reporting Act (FCRA) is designed
to help ensure that CRAs furnish correct and complete
information to businesses to use when evaluating your
application.
Your rights under the Fair Credit Reporting Act:
- You have the right to receive a copy of your credit
report. The copy of your report must contain all of
the information in your file at the time of your request.
- You have the right to know the name of anyone who
received your credit report in the last year for most
purposes or in the last two years for employment purposes.
- Any company that denies your application must supply
the name and address of the CRA they contacted, provided
the denial was based on information given by the CRA.
- You have the right to a free copy of your credit
report when your application is denied because of information
supplied by the CRA. Your request must be made within
60 days of receiving your denial notice.
- If you contest the completeness or accuracy of information
in your report, you should file a dispute with the CRA
and with the company that furnished the information
to the CRA. Both the CRA and the furnisher of information
are legally obligated to reinvestigate your dispute.
You have a right to add a summary explanation to your
credit report if your dispute is not resolved to your
satisfaction.
Your Credit
Application
When creditors evaluate a credit application, they
cannot lawfully engage in discriminatory practices.
The Equal Credit Opportunity Act (ECOA) prohibits
credit discrimination on the basis of sex, race, marital
status, religion, national origin, age, or receipt of
public assistance. Creditors may ask for this information
(except religion) in certain situations, but may not use
it to discriminate when deciding whether to grant you
credit.
The ECOA protects consumers who deal with companies that
regularly extend credit, including banks, small loan and
finance companies, retail and department stores, credit
card companies, and credit unions. Everyone who participates
in the decision to grant credit, including real estate
brokers who arrange financing, must follow this law. Businesses
applying for credit also are protected by this law.
Your rights under the Equal Credit Opportunity Act:
- You cannot be denied credit based on your race, sex,
marital status, religion, age, national origin, or receipt
of public assistance.
- You have the right to have reliable public assistance
considered in the same manner as other income.
- If you are denied credit, you have a legal right to
know why.
Your Credit
Billing and Electronic Fund Transfer Statements
It is important to check credit billing and electronic
fund transfer account statements regularly. These documents
may contain mistakes that could damage your credit status
or reflect improper charges or transfers. If you find
an error or discrepancy, notify the company and contest
the error immediately. The Fair Credit Billing Act
(FCBA) and Electronic Fund Transfer Act (EFTA)
establish procedures for resolving mistakes on credit
billing and electronic fund transfer account statements,
including:
- charges or electronic fund transfers that you — or
anyone you have authorized to use your account — have
not made;
- charges or electronic fund transfers that are incorrectly
identified or show the wrong amount or date;
- computation or similar errors;
- failure to reflect payments, credits, or electronic
fund transfers properly;
- not mailing or delivering credit billing statements
to your current address, as long as that address was
received by the creditor in writing at least 20 days
before the billing period ended;
- charges or electronic fund transfers for which you
request an explanation or documentation, due to a possible
error.
The FCBA generally applies only to "open end" credit
accounts — credit cards, revolving charge accounts (such
as department store accounts), and overdraft checking
accounts. It does not apply to loans or credit sales that
are paid according to a fixed schedule until the entire
amount is paid back, such as an automobile loan. The EFTA
applies to electronic fund transfers, such as those involving
automatic teller machines (ATMs), point-of-sale debit
transactions, and other electronic banking transactions.
Your Debts
and Debt Collectors
You are responsible for your debts. If you fall
behind in paying your creditors or an error is made on
your account, you may be contacted by a "debt collector."
A debt collector is any person, other than the creditor,
who regularly collects debts owed to others. This includes
lawyers who collect debts on a regular basis. You have
the right to be treated fairly by debt collectors.
The Fair Debt Collection Practices Act (FDCPA)
applies to personal, family, and household debts. This
includes money owed for the purchase of a car, for medical
care, or for charge accounts. The FDCPA prohibits debt
collectors from engaging in unfair, deceptive, or abusive
practices while collecting these debts.
Your rights under the Fair Debt Collection Practices
Act:
- Debt collectors may contact you only between 8 a.m.
and 9 p.m.
- Debt collectors may not contact you at work if they
know your employer disapproves.
- Debt collectors may not harass, oppress, or abuse
you.
- Debt collectors may not lie when collecting debts,
such as falsely implying that you have committed a crime.
- Debt collectors must identify themselves to you on
the phone.
- Debt collectors must stop contacting you if you ask
them to in writing.
Solving Your
Credit Problems
Your credit report influences your purchasing power,
as well as your chances to get a job, rent or buy an apartment
or a house, and buy insurance. A history of timely credit
payments helps you get additional credit. Accurate
negative information can stay on your report for seven
years. A bankruptcy can stay on your report for 10 years.
If you are having problems paying your bills, contact
your creditors at once. Try to work out a modified payment
plan with them that reduces your payments to a more manageable
level. Don't wait until your account has been turned over
to a debt collector.
Here are some additional tips for solving credit problems:
- If you want to contest a credit report, bill or credit
denial, contact the appropriate company in writing and
send it "return receipt requested."
- When you contest a billing error, include your name,
account number, the dollar amount in question, and the
reason you believe the bill is wrong.
- If in doubt, request written verification of a debt.
- Keep all your original documents, especially receipts,
sales slips, and billing statements. You will need them
if you dispute a credit bill or report. Send copies
only. It may take more than one letter to correct problems.
- Be skeptical of businesses that offer instant solutions
to credit problems.
- Be persistent. Resolving credit problems can take
time and effort.
- There is nothing that a credit repair company
can do for you — for a fee — that you cannot do for
yourself for little or no cost.
If you can't resolve your credit problems yourself or
if you need help, you may want to contact a credit counseling
service. Nonprofit organizations in every state counsel
consumers in debt. Counselors try to arrange repayment
plans that are acceptable to you and your creditors. They
also can help you set up a realistic budget. These services
usually are offered at little or no cost.
Universities, military bases, credit unions, and housing
authorities also may offer low- or no-cost credit counseling
programs. Check the white pages of your telephone directory
for a service near you.
