Resources
A Summary of the Fair Credit Reporting Act
The Federal Fair Credit Reporting Act (FCRA) is designed to promote
accuracy, fairness, and privacy of information in the files of every "consumer
reporting agency" (CRA). Most CRAs are credit bureaus that gather
and sell information about you -- such as if you pay your bills on
time or have filed bankruptcy -- to creditors, employers, landlords,
and other businesses. You can find the complete text of the FCRA,
15 U.S.C. §§1681-1681u, at the FTC's web site. The FCRA
gives you specific rights, as outlined below. You may have additional
rights under state law. You may contact a state or local consumer
protection agency or a state attorney general to learn those rights.
Click to view our frequently asked questions and answers about the
FCRA.
You must be told if information in your file has been used against
you. Anyone who uses information from a CRA to take action against
you -- such as denying an application for credit, insurance, or employment
-- must tell you, and give you the name, address, and phone number
of the CRA that provided the consumer report.
You can find out what is in your file. At your request, a CRA must
give you the information in your file, and a list of everyone who
has requested it recently. There is no charge for the report if a
person has taken action against you because of information supplied
by the CRA, if you request the report within 60 days of receiving
notice of the action. You also are entitled to one free report every
twelve months upon request if you certify that (1) you are unemployed
and plan to seek employment within 60 days, (2) you are on welfare,
or (3) your report is inaccurate due to fraud. Otherwise, a CRA may
charge you up to eight dollars.
You can dispute inaccurate information with the CRA. If you tell
a CRA that your file contains inaccurate information, the CRA must
investigate the items (usually within 30 days) by presenting to its
information source all relevant evidence you submit, unless your
dispute is frivolous. The source must review your evidence and report
its findings to the CRA. (The source also must advise national CRAs
-- to which it has provided the data -- of any error.) The CRA must
give you a written report of the investigation, and a copy of your
report if the investigation results in any change. If the CRA's investigation
does not resolve the dispute, you may add a brief statement to your
file. The CRA must normally include a summary of your statement in
future reports. If an item is deleted or a dispute statement is filed,
you may ask that anyone who has recently received your report be
notified of the change.
Privacy advocates advise consumers to protect themselves from identity
theft and related crimes, by checking their credit reports twice
a year, shredding personal documents before throwing them away and
cleansing wallets of old receipts and printed social security numbers.
Inaccurate information must be corrected or deleted. A CRA must
remove or correct inaccurate or unverified information from its files,
usually within 30 days after you dispute it. However, the CRA is
not required to remove accurate data from your file unless it is
outdated (as described below) or cannot be verified. If your dispute
results in any change to your report, the CRA cannot reinsert into
your file a disputed item unless the information source verifies
its accuracy and completeness. In addition, the CRA must give you
a written notice telling you it has reinserted the item. The notice
must include the name, address and phone number of the information
source.
You can dispute inaccurate items with the source of the information.
If you tell anyone -- such as a creditor who reports to a CRA --
that you dispute an item, they may not then report the information
to a CRA without including a notice of your dispute. In addition,
once you've notified the source of the error in writing, it may not
continue to report the information if it is, in fact, an error.
Outdated information may not be reported. In most cases, a CRA may
not report derogatory information that is more than seven years old;
ten years for bankruptcies.
Access to your file is limited. A CRA may provide information about you only
to people with a need recognized by the FCRA -- usually to consider an application
with a creditor, insurer, employer, landlord, or other business.
Your consent is required for reports that are provided to employers,
or reports that contain medical information. A CRA may not give out
information about you to your employer, or prospective employer,
without your written consent. A CRA may not report medical information
about you to creditors, insurers, or employers without your permission.
You may choose to exclude your name from CRA lists for unsolicited
credit and insurance offers. Creditors and insurers may use file
information as the basis for sending you unsolicited offers of
credit or insurance. Such offers must include a toll-free phone number
for you to call if you want your name and address removed from future
lists. If you call, you must be kept off the lists for two years.
If you request, complete, and return the CRA form provided for
this purpose, you must be taken off the lists indefinitely.
You may seek damages from violators. If a CRA, a user or (in some
cases) a provider of CRA data, violates the FCRA, you may sue them
in state or federal court.
The FCRA gives several different federal agencies authority to enforce
the FCRA.
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Consumer’s Guide to the Fair Debt Collection
Practices Act
If you use credit cards, owe money on a personal
loan, or are paying on a home
mortgage, you are a "debtor." If you fall behind in repaying your
creditors, or an
error is made on your accounts, you may be contacted by a "debt
collector."
You should know that in either situation, the Fair Debt Collection
Practices Act requires that
debt collectors treat you fairly and prohibits certain methods of
debt collection. Of course,
the law does not erase any legitimate debt you owe.
This brochure answers commonly asked questions about your rights
under the Fair Debt
Collection Practices Act.
What debts are covered?
Personal, family, and household debts are covered under the Act.
This includes money owed
for the purchase of an automobile, for medical care, or for charge
accounts.
Who is a debt collector?
A debt collector is any person who regularly collects debts owed to
others. This includes
attorneys who collect debts on a regular basis.
How may a debt collector contact you?
A collector may contact you in person, by mail, telephone, telegram,
or fax. However, a debt
collector may not contact you at inconvenient times or places, such
as before 8 a.m. or after 9
p.m., unless you agree. A debt collector also may not contact you at
work if the collector knows that
your employer disapproves of such contacts.
Can you stop a debt collector from contacting you?
You can stop a debt collector from contacting you by writing a
letter to the collector telling them to
stop. Once the collector receives your letter, they may not contact
you again except to say there
will be no further contact or to notify you that the debt collector
or the creditor intends to take some
specific action. Please note, however, that sending such a letter to
a collector does not make the debt
go away if you actually owe it. You could still be sued by the debt
collector or your original creditor.
May a debt collector contact anyone else about your
debt?
If you have an attorney, the debt collector must contact the
attorney, rather than you. If you do
not have an attorney, a collector may contact other people, but only
to find out where you live,
what your phone number is, and where you work. Collectors usually
are prohibited from contacting
such third parties more than once. In most cases, the collector may
not tell anyone other than you
and your attorney that you owe money.
What must the debt collector tell you about the
debt?
Within five days after you are first contacted, the collector must
send you a written notice telling
you the amount of money you owe; the name of the creditor to whom
you owe the money; and what
action to take if you believe you do not owe the money.
May a debt collector continue to contact you if you
believe you do not owe money?
A collector may not contact you if, within 30 days after you receive
the written notice, you send the
collection agency a letter stating you do not owe money. However, a
collector can renew collection
activities if you are sent proof of the debt, such as a copy of a
bill for the amount owed.
What types of debt collection practices are
prohibited?
Harassment. Debt collectors may not harass, oppress, or abuse you or
any third parties they contact. For example, debt collectors may
not:
· use threats of violence or harm;
· publish a list of consumers who refuse to pay their debts (except
to a credit bureau);
· use obscene or profane language; or
· repeatedly use the telephone to annoy someone.
False statements. Debt collectors may not use any
false or misleading statements when collecting a
debt. For example, debt collectors may not:
· falsely imply that they are attorneys or government
representatives;
· falsely imply that you have committed a crime;
· falsely represent that they operate or work for a credit bureau;
· misrepresent the amount of your debt;
· indicate that papers being sent to you are legal forms when they
are not; or
· indicate that papers being sent to you are not legal forms when
they are.
Debt collectors also may not state that:
· you will be arrested if you do not pay your debt;
· they will seize, garnish, attach, or sell your property or wages,
unless the collection agency or creditor intends to do so, and it is
legal to do so; or
· actions, such as a lawsuit, will be taken against you, when such
action legally may not be taken, or when they do not intend to take
such action.
Debt collectors may not:
· give false credit information about you to anyone, including a
credit bureau;
· send you anything that looks like an official document from a
court or government agency when it is not; or
· use a false name.
Unfair practices. Debt collectors may not engage
in unfair practices when they try to collect a debt.
For example, collectors may not:
· collect any amount greater than your debt,
unless your state law permits such a charge;
· deposit a post-dated check prematurely;
· use deception to make you accept collect
calls or pay for telegrams;
· take or threaten to take your property unless
this can be done legally; or
· contact you by postcard.
What control do you have over
payment of debts?
If you owe more than one debt, any payment you
make must be applied to the debt you indicate.
A debt collector may not apply a payment to any
debt you believe you do not owe.
What can you do if you believe a
debt collector violated the law?
You have the right to sue a collector in a state or
federal court within one year from the date the
law was violated. If you win, you may recover
money for the damages you suffered plus an
additional amount up to $1,000. Court costs and
attorney's fees also can be recovered. A group of
people also may sue a debt collector and recover
money for damages up to $500,000, or one
percent of the collector's net worth, whichever is
less.
Where can you report a debt
collector for an alleged violation?
Report any problems you have with a debt
collector to your state Attorney General's office
and the Federal Trade Commission. Many states
have their own debt collection laws, and your
Attorney General's office can help you determine
your rights.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, call toll-free,
1-877-FTC-HELP
(1-877-382-4357)
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Credit Score Information
What is credit scoring?
Credit scoring is a system creditors use to help determine whether
to give you credit. Information about you and your credit
experiences, such as your bill-paying history, the number and type
of accounts you have, late payments, collection actions, outstanding
debt, and the age of your accounts, is collected from your credit
application and your credit report. Using a statistical
program, creditors compare this information to the credit
performance of consumers with similar profiles. A credit scoring
system awards points for each factor that helps predict who is most
likely to repay a debt. A total number of points - a credit score -
helps predict how creditworthy you are, that is, how likely it is
that you will repay a loan
and make the payments when due. Because your credit report is an
important part of many credit scoring systems, it is very important
to make sure it's accurate before you submit a credit application.
To get copies of your report, contact the three major credit
reporting agencies:
· Equifax: 1-800-685-1111
· Experian: 1-888-EXPERIAN (397-3742)
· Trans Union: 1-800-916-8800
These agencies may charge you up to $9 for your credit report.
Why is credit scoring used?
Credit scoring is based on real data and statistics, so it usually
is more reliable than subjective or judgmental methods. It treats
all applicants objectively. Judgmental methods typically rely on
criteria that are not systematically tested and can vary when
applied by different individuals.
How is a credit scoring model developed?
To develop a model, a creditor selects a random sample of its
customers, or a sample of similar customers if their sample is not
large enough, and analyzes it statistically to identify
characteristics that relate to creditworthiness. Then, each of these
factors is assigned a weight based on how strong a predictor it is
of who would be a good credit risk. Each creditor may use its own
credit scoring model, different scoring models for different types
of credit, or a generic model developed by a credit scoring company.
Under the Equal Credit Opportunity Act, a credit scoring system may
not use certain characteristics - like race, sex, marital status,
national origin, or religion - as factors. However, creditors are
allowed to use age in properly designed scoring systems. But any
scoring system that includes age must give equal treatment to
elderly applicants.
What can I do to improve my score?
Credit scoring models are complex and often vary among creditors and
for different types of credit.
If one factor changes, your score may change - but improvement
generally depends on how that factor relates to other factors
considered by the model. Only the creditor can explain what might
improve your score under the particular model used to evaluate your
credit application. Nevertheless, scoring models generally
evaluate the following types of information in your credit report:
· Have you paid your bills on time?
Payment history typically is a significant factor. It is likely that
your score will be affected negatively if you have paid bills late,
had an account referred to collections, or declared bankruptcy, if
that history is reflected on your credit report.
· What is your outstanding debt?
Many scoring models evaluate the amount of debt you have compared to
your credit limits. If the amount
you owe is close to your credit limit, that is likely to have a
negative effect on your score.
· How long is your credit history?
Generally, models consider the length of your credit track record.
An insufficient credit history may have an effect on your score, but
that can be offset by other factors, such as timely payments and low
balances.
· Have you applied for new credit recently?
Many scoring models consider whether you have applied for credit
recently by looking at "inquiries" on your credit report when you
apply for credit. If you have applied for too many new accounts
recently, that may negatively affect your score. However, not all
inquiries are counted. Inquiries by creditors who are monitoring
your account or looking at credit reports to make "prescreened"
credit offers are not counted.
· How many and what types of credit accounts do you have? Although
it is generally good to have established credit accounts, too many
credit card accounts may have a negative effect on your score. In
addition, many models consider the type of credit accounts you have.
For example, under some scoring
models, loans from finance companies may negatively affect your
credit score. Scoring models may be based on more than just
information in your credit report. For example, the model may
consider information from your credit application as well: your job
or occupation, length of employment, or whether you own a home.
To improve your credit score under most models, concentrate on
paying your bills on time, paying down outstanding balances, and not
taking on new debt. It's likely to take some time to improve your
score significantly.
How reliable is the credit scoring system?
Credit scoring systems enable creditors to evaluate millions of
applicants consistently and impartially on many different
characteristics. But to be statistically valid, credit scoring
systems must be based on a big enough sample. Remember that
these systems generally vary from creditor to creditor.
Although you may think such a system is arbitrary or impersonal, it
can help make decisions faster, more accurately, and more
impartially than individuals when it is properly designed. And many
creditors design their systems so that in marginal cases, applicants
whose scores are not high enough to pass easily or are low enough to
fail absolutely are referred to a credit manager who decides whether
the company or lender will extend credit. This may allow for
discussion and negotiation between the credit manager and the
consumer.
What happens if I am denied credit or don't get the terms I want?
If you are denied credit, the Equal Credit Opportunity Act requires
that the creditor give you a notice that tells you the specific
reasons your application was rejected or the fact that you have the
right to learn the reasons if you ask within 60 days. Indefinite and
vague reasons for denial are illegal, so ask the creditor to be
specific. Acceptable reasons include: "Your income was
low" or "You haven't been employed long enough." Unacceptable
reasons include: "You didn't meet our minimum standards" or
"You didn't receive enough points on our credit scoring system."
If a creditor says you were denied credit because you are too near
your credit limits on your charge cards or you have too many credit
card accounts, you may want to reapply after paying down your
balances or closing some accounts. Credit scoring systems consider
updated information and change over time. Sometimes you can be
denied credit because of information from a credit report. If so,
the Fair Credit Reporting Act requires the creditor to give you the
name, address and phone number of the credit reporting agency that
supplied the information. You should contact that agency to find out
what your report said. This information
is free if you request it within 60 days of being turned down for
credit. The credit reporting agency can tell you what's in your
report, but only the creditor can tell you why your application was
denied. If you've been denied credit, or didn't get the rate
or credit terms you want, ask the creditor if a credit scoring
system was used. If so, ask what characteristics or factors were
used in that system, and the best ways to improve your application.
If you get credit, ask the creditor whether you are getting the best
rate and terms available and, if not, why. If you are not offered
the best rate available because of inaccuracies in your credit
report, be sure to dispute the inaccurate information in your credit
report.
Where can I get more information or file a
complaint?
The Federal Trade Commission 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, 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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Bankruptcy
Personal bankruptcy generally is considered the
debt management option of last resort because the results are
long-lasting and far-reaching. A bankruptcy stays on your credit
report for 10 years, and can make it difficult to obtain credit, buy
a home, get life insurance, or sometimes get a job. Still, it is a
legal procedure that offers a fresh start for people who can't
satisfy their debts. People who follow the bankruptcy rules receive
a discharge - a court order that says they don't have to repay
certain debts.
There are two primary types of personal bankruptcy:
Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy
court. The filing fees run about $185 for Chapter 13 and $200 for
Chapter 7. Attorney fees are additional and can vary. Chapter
13 allows people with a steady income to keep property, like a
mortgaged house or a car, that they otherwise might lose. In Chapter
13, the court approves a repayment plan that allows you to use your
future income to pay off a default during a three-to-five-year
period, rather than surrender any property. After you have made all
the payments under the plan, you receive a discharge of your debts.
Known as straight bankruptcy, Chapter 7 involves liquidation of all
assets that are not exempt. Exempt property may include automobiles,
work-related tools, and basic household furnishings. Some of your
property may be sold by a court-appointed official - a trustee - or
turned over to your creditors. You can receive a discharge of your
debts through Chapter 7 only once every six years.
Both types of bankruptcy may get rid of unsecured debts and stop
foreclosures, repossessions, garnishments, utility shut-offs, and
debt collection activities. Both also provide exemptions that allow
people to keep certain assets, although exemption amounts vary. Note
that personal bankruptcy usually does not erase child support,
alimony, fines, taxes, and some student loan obligations. And unless
you have an acceptable plan to catch up on your debt under Chapter
13, bankruptcy usually does not allow you to keep property when your
creditor has an unpaid mortgage or lien on it.
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