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 report errors. The following information, which is not legal advice and should not be relied upon by consumers without consultation with an attorney, may help to explain your rights under these laws and may offer practical tips to help you resolve credit problems.
Your Credit Report
Details about your credit payment history and identification information are contained in your personal credit report. These reports are maintained and sold by "consumer reporting agencies" (CRAs), sometimes called “credit bureaus.” The three national CRAs are Trans Union, Experian and Equifax. CRAs maintain information about you if the reports, if you have ever applied for a credit or charge account, or if there is a personal judgment filed against you or if you have filed for bankruptcy.
How long information may remain on a credit report is governed by the Fair Credit Reporting Act (FCRA). Derogatory information can typically stay on your report for seven years. Bankruptcy information can remain on your credit report up to 10 years. Unpaid tax liens and records of criminal convictions can remain on your report indefinitely. Active positive credit information may also remain on your report indefinitely.
Typically, there are four types of information contained in your report: public record information; credit information; requests by others to view your credit history; and identifying information.
Public record information includes judgments and other records of court proceedings as well as bankruptcies. In some states, it may also include overdue child support.
Credit information includes specific credit account information, such as the date opened, credit limit or loan amount, balance and monthly payment. The report also states whether anyone besides you (a joint account holder or cosigner, for example) is responsible for paying the account.
Your report will also indicate requests by others to view your credit report and who was given your name in connection with a firm offer of credit or insurance made to you, as well as the date when the inquiry was made.
Identifying information can include your name, current and previous addresses, telephone number, your Social Security number, date of birth and current and previous employers.
"Statements of dispute" are statements you can add to your credit report if you don’t agree with some information in your credit report after you have disputed it with the credit bureau, the credit bureau reinvestigated the information and the results of the reinvestigation did not satisfy you.
What Businesses and CRA’s must do
The FCRA, as amended by the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), is a federal law designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application. First enacted in 1970 and substantially amended in 1996 and again in 2003, the FCRA restricts who has access to your credit report and how the report can be used.
The FCRA is complex and not all of its provisions are discussed here. Among other things, the FCRA requires businesses to have one of the listed “permissible purposes” before obtaining a credit report. In the case of a credit application, credit grantors do not require your prior consent to obtain your credit report, only the existence of a credit transaction. Prior to obtaining a credit report for employment purposes, however, the employer must obtain a proper release and authorization from each job applicant. Further, prior to requesting a credit report, a business must identify itself, certify each permissible purpose for which the credit report will be used and certify that the report will be used for no other purpose. Companies must also take all reasonable precautions to ensure that the credit reports will be held in strict confidence, disclosed only to those of its employees whose duties reasonably relate to the legitimate business purpose for which the report was requested and not disclose it to any other person unless required by valid subpoena or court order.
Your rights under the FCRA, among others, are:
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, color, marital status, religion, national origin, age, receipt of public assistance or exercise of rights under the consumer protection statutes like the ECOA. 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. This law also protects businesses applying for credit.
Your rights under the ECOA, among others, are:
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, but not limited to:
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 FDCPA, among others, are:
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 in helping to resolve credit problems: