Understanding
the Fair Credit Reporting Act (FCRA) |
Your Credit is Your
Financial Reputation | Keeping
Your Credit Score High |
Disputing Credit Report Errors |
The 3 Major Credit Bureaus
Fair Credit Reporting Act (FCRA) -
Designed to promote accuracy and ensure the privacy of the information used
in consumer reports, the FCRA ensures that consumer reporting agencies (CRAs),
such as credit bureaus, furnish correct and complete information to
businesses for use when evaluating your application.
According to the FCRA you have a
right to receive a copy of your credit report for a small fee - the copy of
your report must contain all of the information in your file at the time of
your request.
You have a right to know the name of anyone who received your credit report
in the last year, 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 a right to receive 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 can 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 the right to add a
summary explanation to your credit report - when a dispute is not resolved
to your satisfaction.
Outdated information cannot be reported - In most cases, negative
information that is more than seven years old can not be reported (ten years
for bankruptcies.)
Access to your file is limited - only businesses with a legitimate need to
review your file may receive information about you. Your consent is required
for reports that are provided to employers, or reports that contain medical
information.
You may choose to exclude your name from CRA lists for unsolicited credit
and insurance offers.
Recent amendments to the Act expand your rights and place additional
requirements on CRAs and businesses that use consumer reports. Note that you
may have additional rights under state laws.
Equal Credit Opportunity Act (ECOA) - prohibits credit discrimination based
on sex, race, marital status, religion, national origin, age, or receipt of
public assistance.
According to the ECOA:
Credit cannot be denied based on race, sex, marital status, religion, age,
national origin, or receipt of public assistance.
Reliable public assistance must be considered in the same manner as other
income.
You have a legal right to know the reasons behind any denial of credit.
Fair Credit Billing Act (FCBA); Electronic Fund Transfer Act (EFTA) -
establishes guidelines for resolving mistakes on credit billing and
electronic fund transfer account statements.
The FCBA and EFTA guidelines
include:
Charges or electronic fund transfers
that you have not made or authorized anyone to make
Charges or electronic fund transfers that show the wrong amount or date or
are identified incorrectly Computation errors
Failure to show payments, credits, or electronic fund transfers correctly
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
Explanations or documentation you request, due to possible errors, regarding
charges or electronic fund.
The FCBA generally applies only to credit accounts such as credit cards,
department store accounts, and overdraft checking accounts. It does not
apply to loans or credit sales paid on a fixed schedule, such as an
automobile loan. The EFTA applies to electronic fund transfers, such as ATM
transactions, point-of-sale debit transactions, and other electronic banking
transactions.
Fair Debt Collection Practices Act (FDCPA) - prohibits debt collectors from
engaging in unfair, deceptive, or abusive practices while collecting these
debts. This applies to personal, family, and household debts, and includes
money owed for the purchase of a car, for medical care, or for charge
accounts.
According to the FDCPA, debt collectors:
May contact you only between 8 a.m. and 9 p.m. May not contact you at work
if they know your employer disapproves.
May not harass, oppress, or abuse you.
May not lie when collecting debts, such as falsely implying that you have
committed a crime.
Must identify themselves to you on the phone.
Must stop contacting you if you ask them to in writing.
For more information - for further information regarding these laws and
other consumer and credit-related rights, visit the Federal Trade
Commission's web site at www.ftc.gov.
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In simple terms, your credit is your
reputation for repaying debts on time. If you have good credit, companies
and lenders will be more willing to lend money, issue credit cards, hire
you, rent to you, or provide more favorable terms on goods and services.
Your credit history doesn't have to be perfect to qualify as "good", but
once you establish a negative credit history - it can be very difficult to
escape. The surest path to building a good credit history is responsible
financial behavior. Likewise, the best cure for bad credit is responsible
financial behavior, and, unfortunately, time.
Credit Bureaus
A credit bureau is a company that
gathers information about consumers' credit histories, including information
about identity, payment habits, and public records. Credit bureaus sell
credit reports to potential creditors (banks, finance companies, retailers,
etc.) who will then use credit reports to determine a potential customer's
creditworthiness.
Credit bureaus gather information regarding identity and credit from
creditors (banks, retailers, collection agencies, etc.) Public record
information is obtained directly from the court systems.
There are three major credit bureaus in the United States:
Equifax: (800) 685-1111 Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
Your Credit Report
A credit report is a compilation of
personal and financial data for an individual, which has been gathered and
maintained by 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 report contains a history of your past and current credit
transactions, including any accounts with banks, retailers, credit card
companies, and other lenders. It will also include information such as your
current and previous mailing addresses, your Social Security Number, your
birth year, your spouse's name, and information about your employer. Your
report may also contain public record information, such as bankruptcies, tax
liens, or any monetary judgments against you.
There are federal laws and regulations regarding how your credit file is
used, and who can use the information contained in your credit report. Only
companies with a legitimate need to view your credit information (such as
banks, mortgage lenders, etc.) are entitled to access this data. Potential
employers can access your credit report only with your express permission.
Inaccuracies are bound to occur, due to the shear volume of information
processed by the credit bureaus. Any discrepancies on your report may easily
lead to denial of credit, so it's important to review your credit report
regularly. By detecting and disputing discrepancies, you can help prevent
any delays or denials in receiving credit.
Your Credit Score
Credit scoring is a system creditors
use to help determine whether to give you credit. After collecting
information from your credit application and your credit report, creditors
use a statistical program to compare this information to the profiles of
similar consumers. Credit scoring systems award points for each factor that
helps predict your creditworthiness, or how likely it is that you will repay
the loan.
Credit scoring systems vary from company to company, but some common areas
of consideration include: your payment history, the amount of debt you owe,
the length or "maturity" of your credit history, types of credit in use, and
the number of recent credit inquiries on your file.
If you wish to improve your credit score, the best approach is to pay your
bills on time, pay outstanding balances, and refrain from taking on new
debt. Improving your credit score significantly will probably take some
time, so be patient.
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Creditors use a system called credit
scoring to help determine your creditworthiness. Utilizing information
collected from your credit application and your credit report, creditors use
statistical programs to compare your information to the profiles of similar
consumers. These scoring systems award points for every factor that helps
predict your creditworthiness, or how likely it is that you will repay the
loan.
Companies may use a variety of credit scoring systems, but
common factors they may consider include: your payment history, the total
amount of debt you owe, the "maturity" or length of your credit history, the
types of credit in use, and the number of recent credit inquiries on your
file.
The best way to improve your credit score is to pay your bills on time, pay
off any outstanding balances, and not acquire any new debt. Improving your
credit score takes some time, so be patient.
Why should you stay informed about your credit?
Your credit history and credit score
might affect decisions regarding loans, interest rates, and employment.
You can ensure the accuracy of your credit file and dispute any inaccuracies
which may be damaging your credit score.
At any time your credit history may change, resulting in changes to your
credit score. Discrepencies in your credit report may provide early warning
signs of identity theft.
You're the most qualified person to detect and contest inaccuracies, or
verify the accuracy of your report.
How can you improve your credit worthiness?
Pay your bills on time, all the time
This proves your responsibility and
assures creditors that you are a consistent and reliable consumer.
Watch your amount of
outstanding debt
Optimally, your account balances
should be below 75% of your available credit.
Watch your amount of
available credit
Many accounts with high credit
limits may concern lenders, who believe that access to too much credit could
result in debt problems in the future.
Keep credit inquiries to a
minimum
Excessive inquiries imply that you
have been seeking credit with various lenders, and may give potential
lenders the impression that you are experiencing financial difficulties.
Know what your credit report
says about you
Regularly check your credit report
and dispute any inaccuracies.
Be patient
It will take time to improve your
credit history.
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Your credit report--a type of
consumer report--contains information about where you work and live and how
you pay your bills. It also may show whether you've been sued or arrested or
have filed for bankruptcy. Companies called consumer reporting agencies (CRAs)
or credit bureaus compile and sell your credit report to businesses. Because
businesses use this information to evaluate your applications for credit,
insurance, employment, and other purposes allowed by the Fair Credit
Reporting Act (FCRA), it's important that the information in your report is
complete and accurate.
Some financial advisors suggest that you periodically
review your credit report for inaccuracies or omissions. This could be
especially important if you're considering making a major purchase, such as
buying a home. Checking in advance on the accuracy of information in your
credit file could speed the credit-granting process.
Getting Your Credit Report
If you've been denied credit,
insurance, or employment because of information supplied by a CRA, the FCRA
says the company you applied to must give you the CRA's name, address, and
telephone number. If you contact the agency for a copy of your report within
60 days of receiving a denial notice, the report is free. In addition,
you're entitled to one free copy of your report a year if you certify in
writing that (1) you're unemployed and plan to look for a job within 60
days, (2) you're on welfare, or (3) your report is inaccurate because of
fraud. Otherwise, a CRA may charge you up to $9.00 for a copy of your
report.
If you simply want a copy of your report, call the CRAs listed in the Yellow
Pages under "credit" or "credit rating and reporting." Call each credit
bureau listed since more than one agency may have a file on you, some with
different information. The three major national credit bureaus are:
Equifax, P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111. Experian
(formerly TRW), P.O. Box 2002, Allen, TX 75013; (888) EXPERIAN (397-3742).
Trans Union, P.O. Box 1000, Chester, PA 19022; (800) 916-8800.
Correcting Errors
Under the FCRA, both the CRA and the
organization that provided the information to the CRA, such as a bank or
credit card company, have responsibilities for correcting inaccurate or
incomplete information in your report. To protect all your rights under the
law, contact both the CRA and the information provider.
First, tell the CRA in writing what information you believe is inaccurate.
Include copies (NOT originals) of documents that support your position. In
addition to providing your complete name and address, your letter should
clearly identify each item in your report you dispute, state the facts and
explain why you dispute the information, and request deletion or correction.
You may want to enclose a copy of your report with the items in question
circled. Your letter may look something like the sample below. Send your
letter by certified mail, return receipt requested, so you can document what
the CRA received. Keep copies of your dispute letter and enclosures.
CRAs must reinvestigate the items in question--usually within 30
days--unless they consider your dispute frivolous. They also must forward
all relevant data you provide about the dispute to the information provider.
After the information provider receives notice of a dispute from the CRA, it
must investigate, review all relevant information provided by the CRA, and
report the results to the CRA. If the information provider finds the
disputed information to be inaccurate, it must notify all nationwide CRAs so
they can correct this information in your file.Disputed information that
cannot be verified must be deleted from your file.
- If your report contains erroneous information, the CRA must correct it.
- If an item is incomplete, the CRA must complete it. For example, if your
file showed that you were late making payments, but failed to show that you
were no longer delinquent, the CRA must show that you're current.
- If your file shows an account that belongs only to another person, the CRA
must delete it.
When the reinvestigation is complete, the CRA must give you the written
results and a free copy of your report if the dispute results in a change.
If an item is changed or removed, the CRA cannot put the disputed
information back in your file unless the information provider verifies its
accuracy and completeness, and the CRA gives you a written notice that
includes the name, address, and phone number of the provider.
Also, if you request, the CRA must send notices of corrections to anyone who
received your report in the past six months. Job applicants can have a
corrected copy of their report sent to anyone who received a copy during the
past two years for employment purposes. If a reinvestigation does not
resolve your dispute, ask the CRA to include your statement of the dispute
in your file and in future reports.
Second, in addition to writing to the CRA, tell the creditor or other
information provider in writing that you dispute an item. Again, include
copies (NOT originals) of documents that support your position. Many
providers specify an address for disputes. If the provider then reports the
item to any CRA, it must include a notice of your dispute. In addition, if
you are correct-that is, if the disputed information is not accurate-the
information provider may not use it again. Accurate Negative Information
When negative information in your report is accurate, only the passage of
time can assure its removal. Accurate negative information can generally
stay on your report for 7 years.
There are certain exceptions:
- Information about criminal convictions may be reported without any time
limitation.
- Bankruptcy information may be reported for 10 years. Credit information
reported in response to an application for a job with a salary of more than
$75,000 has no time limit.
- Credit information reported because of an application for more than
$150,000 worth of credit or life insurance has no time limit.
- Information about a lawsuit or an unpaid judgment against you can be
reported for seven years or until the statute of limitations runs out,
whichever is longer. Criminal convictions can be reported without any time
limit.
Adding Accounts to Your File
Your credit file may not reflect all
your credit accounts. Although most national department store and
all-purpose bank credit card accounts will be included in your file, not all
creditors supply information to CRAs: Some travel, entertainment, gasoline
card companies, local retailers, and credit unions are among those creditors
that don't. If you've been told you were denied credit because of an
"insufficient credit file" or "no credit file" and you have accounts with
creditors that don't appear in your credit file, ask the CRA to add this
information to future reports. Although they are not required to do so, many
CRAs will add verifiable accounts for a fee. You should, however, understand
that if these creditors do not report to the CRA on a regular basis, these
added items will not be updated in your file.
Sample Dispute Letter
Date
Your Name
Your Address
Your City, State, Zip Code
Complaint Department
Name of Credit Reporting Agency
Address
City, State, Zip Code
Dear Sir or Madam:
I am writing to dispute the following information in my file. The items I
dispute are also encircled on the attached copy of the report I received.
(Identify item(s) disputed by name of source, such as creditors or tax
court, and identify type of item, such as credit account, judgment, etc.)
This item is (inaccurate or incomplete) because (describe what is inaccurate
or incomplete and why). I am requesting that the item be deleted (or request
another specific change) to correct the information.
Enclosed are copies of (use this sentence if applicable and describe any
enclosed documentation, such as payment records, court documents) supporting
my position. Please reinvestigate this (these) matter(s) and (delete or
correct) the disputed item(s) as soon as possible.
Sincerely,
Enclosures: (List what you are enclosing)
For More Information
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop, and
avoid them. To file a complaint or to get free information on consumer
issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP
(1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet,
telemarketing, identity theft, and other fraud-related complaints into
Consumer Sentinel, a secure, online database available to hundreds of civil
and criminal law enforcement agencies in the U.S. and abroad.
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There are three major credit bureaus
who provide ratings or "credit scores" to merchants and lenders when you
apply for credit with them. Experts recommend that you should periodically
contact them to find out your own credit record.
Here's how to contact the three major credit bureaus to
ask about or obtain your credit report or credit score, alert creditors to a
possible fraud using your name, or for any other reason:
Equifax:
800-685-1111 (general) or
800-525-6285 (fraud)
P.O. Box 740241
Atlanta, GA 30374
www.equifax.com
Experian:
888-397-3742 (general and fraud)
PO Box 2002
Allen, TX 75013
www.experian.com.
TransUnion:
800-888-4213 (general) or
800-680-7289 (fraud)
P.O. Box 2000
Chester, PA 19022
www.transunion.com.
Note: To "opt out" or remove your name and address from mailing lists
provided by these three credit bureaus and another nationwide company (Innovis)
to marketers, call toll-free 888-567-8688.
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