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Wednesday, October 22, 2014

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Your Credit Rights

The significance of how much credit you have and how you use it goes far beyond shopping. Whether you have good or poor credit can affect where you live and even where you work, because your credit record may be considered by prospective employers. So it is important to understand how credit is awarded or denied, and what recourse you have if you are treated unfairly. The major laws that regulate credit are outlined in this brochure.

Fair Credit Reporting Act (FCRA)

Promotes the accuracy, and ensures the privacy, of information in consumer credit reports. It requires consumer reporting agencies to maintain correct and complete files.

You have the right to review your credit report and to have erroneous information corrected. This is the essence of the FCRA, which controls the use of credit reports and promotes accuracy, fairness, and privacy of consumers’ credit information.

Issuing Credit Reports

Consumer reporting agencies (CRAs), the institutions that compile and issue credit reports, are required to help you understand your report. Reports can be issued only to those with a legitimate business reason, such as creditors, employers, insurers, and government agencies reviewing your status for licensing or benefit purposes.

Credit Report Errors

If you find an error on your report, you should notify the CRA in writing immediately. The agency is responsible for investigating and modifying or removing any inaccurate data. The source of the error must then notify all CRAs to which the information was sent. If you are not satisfied with the correction, you have the right to add a brief statement about the nature of the dispute.

Denial of Credit

If your credit application is turned down because of information contained in your report, the lender is required to provide the name, address, and telephone number of the credit bureau that issued the report. You then have 60 days to request a free copy from the CRA, which must disclose to you all information in the report, its source, and who has recently received the report.

You have the right to have the CRA reissue corrected reports to lenders who received an erroneous report within the last six months, or to employers who received one in the past two years.

Disclosure

CRAs must provide you access to the information in your credit report, as well as identify those who have requested the information recently. There is no charge for obtaining your report if you have been denied credit.

Limiting Access

You may exclude your name and address from CRA lists used by creditors and insurers to make unsolicited offers of credit and insurance. Requests made by telephone are good for two years. For permanent exclusion from such lists, you must complete a form available from each consumer reporting agency. To request exclusion from Equifax, Experian, and Trans- Union, call (888) 567-8688.

Consumers have the right to sue consumer reporting agencies, users, and providers in state and federal court for violations of the FCRA.

Fair and Accurate Credit Transactions Act (FACT Act)

Combats identity theft, protects privacy, and improves consumer access to (and the overall accuracy of) credit reports. It is an amendment to the FCRA, described above.

Free Credit Reports

Beginning September 1, 2005, all consumers can receive a copy of their credit report free of charge from each of the three main credit reporting agencies (CRAs) once every 12 months. The reports allow consumers to monitor the number of accounts and the amount of credit outstanding, so they can discover and correct errors in their credit records and make sure that accounts have not been fraudulently opened in their names.

You can order one, two, or all three reports at the same time, or you can request these reports at various times throughout the year. Some financial advisors suggest that you review one of your three credit reports every four months. This scheduled review will help you detect errors and monitor changes in your credit profile.

However, a report generated by one of the three main agencies may not contain all of the information pertaining to your credit history. If you want a complete view of your credit record at a particular moment, you must examine your report from each of the three agencies.

Fraud Alerts

Consumers who reasonably suspect that they are victims of identity theft or are military personnel on active duty away from home can place an alert on their credit files. The alert will put potential creditors on notice that they must proceed with caution when granting credit.

Information Available to Victims

Several provisions are aimed at preventing the spread of erroneous credit information and will help consumers recover their credit reputations after they have been victims of identity theft.

  • CRAs must stop reporting allegedly fraudulent account information when a consumer establishes that he or she has been the victim of identity theft.
  • Creditors or businesses are required to provide copies of business records of fraudulent accounts or transactions related to them.
  • Consumers are permitted to report accounts affected by identity theft directly to creditors (in addition to credit reporting agencies) to prevent the spread of erroneous credit information.

Credit Scores

You have the right to ask for a credit score, which is a numerical summary of your creditworthiness based on information from CRAs. You may request a credit score from CRAs that create or distribute scores used in residential real property loans, but you will have to pay for it. In some mortgage transactions, you will receive credit score information for free from the mortgage lender.

Equal Credit Opportunity Act (ECOA)

Ensures that individual creditors apply credit standards in a fair manner so that all consumers are given an equal chance to obtain credit. It does not require all creditors to have the same standards, nor does it guarantee approval of loan applications.

Lenders cannot discriminate on the basis of sex, marital status, color, race, religion, national origin, age, reliance on income from a public assistance program, or exercise of rights under the Consumer Credit Protection Act. Your ability and intent to repay funds borrowed are the only acceptable criteria.

Prohibited Information

Credit applications cannot ask about your sex, race or national origin, marital status, or age unless you are applying for the purchase or refinance of your principal residence. Even then, you are not required to answer such questions. The information is required by the federal government to help prevent discrimination, not for evaluation purposes.

You cannot be asked your marital status if you are applying for individual unsecured credit, such as a credit card. Creditors are also prohibited from asking about childbearing plans.

Credit for Couples

Spouses have the right to have their credit histories listed separately, including the accounts they use jointly. Married women have the option of using their birth name or married name. In the case of couples who jointly established credit but whose credit appears in the name of only one spouse, the other partner has the right to rely on that credit history as well.

Divorced Individuals

You do not have to reveal income from alimony, child support, or separate maintenance unless you want it considered by the creditor in the review of your application.

Age

Creditors may ask how old you are, to be certain you have reached legal age to enter into contracts, and may consider your age in estimating how long you will continue to work. However, age may not be used to deny credit to those 62 or older or because the applicant’s age exceeds that required for credit insurance.

Changed Circumstances

The terms of your credit may not be changed simply because your life circumstances do. That is, the length, interest, or other features of loans may not be changed, you may not be forced to reapply, and you may not be terminated because you change your name or marital status, reach a certain age, or retire.

Applicant Notification

Lenders must notify credit applicants of their decision within 30 days of receiving a completed application. If credit is denied, the creditor must provide a written statement of the action taken, the reason for denial (or how to request it), the applicant’s rights under the ECOA, the name and address of the enforcing federal agency, and the name and address of the creditor. If you believe that discrimination has taken place, you have the right to file suit. Creditors found to have discriminated unfairly can be held liable for actual damages and punitive damages up to $10,000.

Fair Credit Billing Act

Provides for the prompt correction of errors on open-end credit accounts (department store credit accounts, for example) and protects consumers’ credit ratings while they are settling disputes.

Creditors are prohibited from reporting as delinquent consumers who dispute a charge under this law, which applies to open-end credit instruments, such as credit cards, revolving charge accounts, and overdraft checking. Consumers who question the accuracy of an item on a periodic statement are responsible for notifying the creditor in writing within 60 days of receiving the bill. The creditor is then obligated to mail or deliver written acknowledgment within 30 days and may not do anything to damage the consumer’s credit rating while the item is in dispute. The creditor must resolve the dispute within two billing cycles (but not later than 90 days) after receiving a billing-error notice from the consumer.

Fair Debt Collection Practices Act

Promotes the fair treatment of consumers by prohibiting debt collectors from engaging in unfair, deceptive, or abusive practices.

This act applies to professional debt collectors who collect on loans they have not originated. Though it technically does not apply to banks, department stores, and other lenders who collect their own debts, no reputable lender is permitted to engage in such practices. Debt collectors are:

  • Permitted to contact persons other than the debtor only to locate the debtor, or make a reasonable effort to communicate with the debtor about the debt.
  • Required to send written notice after making contact, informing the debtor of the amount of the debt, the name of the creditor, and the fact that the debt will be considered valid unless disputed within 30 days.
  • Prohibited from harassing, oppressing, or being abusive in collecting a debt, using threats or obscene language, publicizing the debt, and making annoying or anonymous telephone calls. Debt collectors may not misrepresent the identity of the collector, the status of the debt, and the consequences if it is not paid unless those consequences are lawful and intended to be taken.

Consumers can sue for actual and punitive damages against debt collectors who violate the Fair Debt Collection Practices Act.

To Obtain Free Credit Reports

The credit reporting agencies (Equifax, Experian, and TransUnion) have established a single website and toll-free telephone number for requesting a free credit report once every 12 months:

www.annualcreditreport.com External Link
Toll-free number: 1–877–322–8228

Annual Credit Report Request Service
P.O. Box 105283
Atlanta, GA 30348-5283

Credit Reporting Agencies

Equifax - www.equifax.com External Link

Equifax Credit Information Services, Inc.
P.O. Box 740241
Atlanta, GA 30374

Equifax Fraud Division
P.O. Box 740256
Atlanta, GA 30374
888-766-0008

To place a fraud alert on your credit report, call 1-888-766-0008

Experian - www.experian.com External Link

Experian National Consumers Assistance
888-397-3742

TransUnion - www.transunion.com External Link

TransUnion Consumer Solutions
Post Office Box 2000
Chester, PA 19022

TransUnion Fraud Victim’s Assistance Dept.
P.O. Box 6790
Fullerton, CA 92834
800-680-7289

Additional Information on Credit

Federal Trade Commission
www.ftc.gov/credit External Link

Consumer Response Center
Federal Trade Commission
CRC-240
Washington, DC 20580
(877) FTC-HELP (382-4357)

Questions?

Questions and concerns about consumer reporting agencies can be directed to:

Federal Trade Commission External Link
Consumer Response Center
600 Pennsylvania Avenue, NW
Washington, D.C. 20580
(877) FTC-HELP (382-4357)

Credit Counselers

Consumer Credit Counseling Service of Delaware Valley, Inc. (Philadelphia Area) External Link
1515 Market Street
Suite 1325
Philadelphia, PA 19102
(215) 563-5665 or
(800) 989-2227

National Foundation for Credit Counseling External Link
801 Roeder Rd., Suite 900
Silver Spring, MD 20910
(301) 589-5600
Fax: (301) 495-5623
Member Agency Locator:
(800) 388-2227

For More Information

The Federal Reserve Bank of Philadelphia has three other brochures on credit: